Chapter # 3 : Planning and Control

Planning Planning: Planning involves making choices between alternatives and is primarily a decision making activity 2 approaches to planning: Top-down approach means strategic management starts from top management and flows down the structure. Bottom-up approach means information is accumulated at lower level and presented to top management along with summary and options available. Planning cycle 1. Identify objectives 2. Identify available strategies 3. Evaluate each strategy 4. Choose strategy (course of action) 5. Implement long-term plan in the form of annual budgets Risk factors in planning: Types of risks: Physical Economical Political Financial Business Product lifecycle Accounting for Risk: Required rate of return, adjusted by Return %age Payback period Finance (strict rules of financing i.e. out of profits) Quantification risk: Rule of Thumb (best estimate of value within worst to best possible range) Probability Theory (likelihood of occurrence of a forecast result) Standard Deviation (calculate Standard Deviation of Expected Value, the higher it is the higher risk is) Budgetary Control Control: Control is comparing actual results with planned performance and taking appropriate actions Control Cycle 1. Actual results are recorded and analyzed for each responsibility center. 2. Feedback is reported to management. 3. Management compares actual results with plans or targets. 4. Do one of three things i. Decide to do nothing ii. Take control actions iii. Alter the plan or target Feedback: The process of reporting back control information to management and the control information itself It may be Single Loop or Double Loop. It may be Positive or Negative. Feed forward Control: Control actions taken in advance. Actual results are compared with Budgeted (i.e. adjusted by past results)

Well organized system of control should have: Hierarchy of budget center. Clearly defined responsibilities. Responsibilities for Cost, Revenue, and Capital Employed. Budget Center: Each section of the organization for which budget is prepared Objectives of budgeted planning and control: 1. Motivates employees 2. Establish system of control 3. Responsibility accounting 4. Achievement of goals 5. Communication 6. Coordination 7. Compel planning Responsibility Accounting: Each manager has a clearly defined area of responsibility and authority to make decisions within that area. No uncertainty as to who is responsible for what (sometimes dual responsibility exists). There are 3 different areas of responsibility. Type of responsibility center Manager has control over Cost Center Controllable cost Profit Center Controllable cost Sales Price Sales volume Investment Center Controllable cost Sales prices Sales volume Investment in fixed and current assets Return on investment and residual income

Principal measures

performance

Variance analysis

Profit

Responsibility Center is a unit of organization headed by a manager who has a direct responsibility for its performance. Controllable Cost is an item of expenditure which can be directly influences by a given manager within a given time span. Controllability of fixed cost: Committed fixed cost (e.g. PPE-------non-controllable in short term) Discretionary fixed cost ( e.g. R.&D. or Advertisement ---------- controllable in short term)

Role of IT in Strategic Management IT as changing industry: With Porters 5 forces model. IT/IS as competitive advantage: With Porters generic strategies for competitive advantage. & With Peppards 9 ways 5 forces 1. 2. 3. 4. 5. 6. Generic strategies 7. Differentiating Product/Service 8. Increasing Cost efficiency 9. Decreasing Supply Cost.

Ensure competitive pricing Establish entry barrier (cost of entry) Using information as a product Limiting access to distribution channel Affecting cost of switching Building close relationship with supplier and customer.

Chapter 4 & 5 : Strategic Management : Traditional & other models

Traditional and other models of Strategic Management Strategic Management: Strategic Management is the analysis, choice, implementation and control of agreed strategies Strategy is a course of action including the specification of resources required to meet a specific objective. Tactics is the deployment of resources to execute an agreed strategy. Policy is a general statement providing guidelines for management of decision-making. Levels of strategy: (by Hofer and Schendel) 1. Corporate Strategy determines the overall purpose and scope of the organization. It is concerned with what types of business the organization is in. Defining aspects of corporate strategy: Scope of activities (whole organization) Faces environment (opportunities and threats) Resources (how to obtain and allocate them) Values (of people in power in organization affect it) Time scale (long term) Complexity (uncertainty of future) 2. Business Strategy is how an organization approaches a particular product market area (applied at SBU level). 3. Functional/Operational strategies deal with specialized area of activity within an SBU e.g. Production, Marketing, HRM, Finance. Traditional approach to make strategy: (through Planning in a systematic way) o Strategic analysis Analyzing Vision, Mission and Objectives (Strategic Direction) Corporate appraisal (where we are) o Analyzing external environment i. SLEPT analysis ii. Porters 5 forces model iii. Scenarios o Analyzing internal environment (Situation analysis/Position audit) i. Resources Audit ii. BCG and GEBS matrices iii. Value chain iv. System structure o SWOT Analysis o Gap analysis Strategy formulation/Choice (how we can go) Strategy implementation Strategy evaluation and Control

o o o

Favor of rational model: (Ansoff and Drucker support it) 1. Corporate level first 2. Strategies are best generated from Top-Down 3. Provide a common thread 4. Enables decision making in conditions where i. Partial ignorance (Ansoff) ii. Risk is inevitable (Drucker) 5. Basis for strategic control 6. Improves stakeholders perception Problems with rational model: (Mintzberg criticizes it) 1. Organizations are incapable of having objectives because i. Objectives may conflict with each other. ii. Objectives will change from time to time

2. 3. 4. 5. 6. 7. 8.

iii. Objectives are unlikely to be directly related to economic benefits of shareholders. Senior management should not be only strategy- setter. In reality formulation is not a simple step by step process. Strategies that firms follow are not the same as ones they set in plans. Over reliance on formalization. Predetermination Failure in practice (suitable for only stable environment) Hinders innovation and radical change.

Other models of(making strategy) Strategic Management Mintzbergs emergent strategy model: (Considers random shocks) It is unlikely that a firms environment is totally predictable. Emergent strategy is a non-conscious strategy arising from patterns of behavior. Strategic Management is to control and shape/craft these emergent strategies as they arise.

Intended Strategies Unrealized Strategies Patterns of behavior Unexpected Contingencies

Deliberate Strategies Realized Strategies

Emergent Strategies

Activities affecting Crafting Strategy: Manage stability o Implement, not just plan o Obsession to change is dysfunctional; know when to change Manage patterns o Detect patterns and help them shape; grow positives and eliminate negatives. Know the business operations Detect discontinuing and significance of environmental changes. Crafting strategy---- requires natural synthesis of past, present and future. (reconcile change and continuity) Mintzbergs 8 styles of strategic management: 1. Planned strategies (imposed by central leadership, large no. of controls, precise intentions) 2. Imposed strategies (imposed by environment e.g. influential customers) 3. Ideological strategies (collective vision of organizations members, shared values) 4. Umbrella strategies (ends are defined, means are emergent, target based) 5. Disconnected strategies (members mind their own business, strategies are deliberate for sub-units but emergent for organization) 6. Consensus strategies ( groups shares common patterns) 7. Entrepreneurial strategies (visioned from strong leadership) 8. Process strategies Mintzbergs 5 ways to describe strategy: 1. Plan - consciously intended course of action 2. Ploy - a competitive game (e.g discouraging competitors to enter) 3. Pattern - ideas of emergent strategies 4. Position - environmentally fit & relationship with other organisations 5. Perspectives - approach towards world Strategy and managerial intent: (Johnson and Scholes) not emergent The Command view: Strategy develops through the direction of an individual or group, but not necessarily through formal planning. Control of strategy direction is possessed by autocratic or charismatic leader.

Paradigm and Politics: Paradigm (basic assumption and beliefs common in organizations decision makers) is inhabitant and conservative than culture. Politics is process of bargaining and negotiation of strategy among powerful stakeholders. Process by which Paradigm and Politics influence process of strategy development. o Issue awareness (by internal results, customer response or environmental change) o Issue formulation (analysis of issue to get its root) o Solution development Summary: Memory search (from past experience) a) Managers do not take best Passive search (time will tell) decisions but satisfactory o Solution selection ones. Eliminate unacceptable plans (politics) b) Managers do not pursue the Endorsement to junior management whole rational model but take small-scale decisions. Incrementalism: Bounded Rationality Theory: (Herbert Simon) Mangers are limited by time, information and skills. They satisfice rather than maximize. Incrementalism: (Lindblom) It involves small-scale extension of past practices. Organizations change incrementally, during which time, strategies form gradually. Disadvantages of Incrementalism: 1. Not suitable where radical new approaches are needed. 2. Some changes are dramatic not incremental. 3. Ignores influence of corporate culture. 4. Applicable to stable environment only. Logical Incrementalism: (mid way) Managers have a vague notion as to where the organization should go, but strategies should be tested in small steps because of uncertainty about future. Knowledge as a source tacit knowledge Learning based strategy: Knowledge creation explicit knowledge Strategy development is a learning process. Learning organization will generate a flow of fresh ideas and insights, This will promote renewal and prevent stagnation. Learning organization is one which is skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.

Double loop learning is where purpose is also reviewed. (derived from control theory) Future will change incrementally Future Orientation: (Hamel and Prahalad) Future will be radically different Future is not just something that happens to organization. Organizations can create the future. They offered a diagnostic to indicate how future oriented an organization is. Diagnostic: Diagnostic statement Senior management, view about future Senior management, spending most time on Are managers Are employees.. The company is better at Within the industry, the company Competitive advantage is pursued by Agenda for change is set by

Protect the past Reactive Re-engineering current practices Engineers of present Anxious Operational efficiency Follows the rules Catching up with competitors Competitors

Create the future Distinctive Regenerating core strategies Architect of future Hopeful Building new businesses Makes the rules Creating new sources competitive advantage Vision of future

of

How to cope with future: Simply more far-sightedness Imaging products and services that do not exist. Spend less time in positioning in competitive environment Future orientation is embodied in the corporate culture. Environmental Fit: (Hofer and Schendel) Strategy is a mediating force between organization and environment. Fit or Suitability means Organizations are successful when they intentionally achieve internal harmony and external adaptation. Strategic logic requires that strategy must: o Be consistent with objectives o Match organizations capabilities with environment. Survival and growth are process of adoptation : Why : because environment gives physical resources and financial resources Hence : choice of strategy must follow a strategic logic. Ecology Model: Organisations environment changes radically, it will only survivor if it adopts its environment and evolves i.e finding niche areas which provide both demands for output and resources to be used as input to the system. Pattern and Competencies: (Andrew) Corporate strategy is the pattern of management decisions in a company o That determines and reveals its objectives, purposes or goals, o That produces the principal policies and plans to achieve those goals, o Defines the range of business, and o Kind of human and economic organization it is or intends to be. Strategy is exploitation of competencies. o The distinctive competence is what it does well, uniquely or better than rivals. It comes through Experience Quality of co-ordination Talents and potentials of individuals Strategic Thinking: (Kenichi & Ohmae) Strategy is a creating process Success business strategies result not from rigorous analysis but from a particular state of mind. Aspects of strategic thinking o Flexible thinking (what if ?questions) o Keeping details in perspective (specially uncertain) o Focus on key factors and distinctive competences) How strategic thinking operates o Ask right question o Find solution of problem, not remedy or symptom. o Observe the problem o Group problems together (e.g. by brainstorming) to see key factors. Competition: (Ohmae & Porter) Competitive strategy is the taking of offensive or defensive actions to create a defendable position within an industry------ and a superior return on investment. Successful strategy is the interplay of 3 Cs (strategic triangle) 1. Competitor 2. Customer 3. Company 3 assumptions of theory: (focus: survival in competitive environment) 1. Survival of business is impossible without a competitive strategy. 2. Actual strategy will be unique. 3. Marketplace is a battlefield.

Competitive strategy: A strategy by which a firm can have significant ground on its competitors at an acceptable costs Competitive Advantage: Re-adjust current resources Relative superiority Challenge assumptions Degree of freedom i.e identify key success factors i.e exploiting competitors weakness i.e segmenting

How to create sustainable strategic position: operational effectiveness doing unique things doing trade-off combining good individual activities making own choices i.e not blindly imitating competitors

Realised Strategies Intended or planned strategies - Senior management decisions - Imposed from top - Well planned - Well thought-out - Time consuming - Deliberately planned Emergent strategies - not planned - not fore throught - not the result of management intentions - caused by pattern of behavior

Implicit & Explicit Strategies (Depends upon extent to which strategies are deliberate or emergent) Implicit Only in head of chief executive Explicit Properly documented Flaws: -

Purely deliberate strategy prevents learning from experience. A purely emergent strategy defies control

Descriptive and Prescriptive Strategies Descriptive : what is actually happening in the organisations i.e paradigm, politics, pattern of decisions, incremental approach Prescriptive : to prescribe something i.e rational model, strategic thinking, learning based environment, resource based model

Chapter # 6 : SWOT Analysis ad gap analysis

Corporate Appraisal Corporate appraisal (where we are) o Analyzing external environment iv. SLEPT analysis v. Porters 5 forces model vi. Scenarios Analyzing internal environment (Situation analysis/Position audit) i. Resources audit ii. BCG and GEBS matrices iii. Value chain analysis iv. System structure SWOT Analysis Gap analysis

o o

Corporate appraisal is assessment of SWOT in relation to internal (SW) and external (OT) factors affecting organization to establish long term plans. OT Analysis---Analyzing external broad environment: Social factors Legal factors Economic factors Political factors Technical factors What Social factors affect: Changing values and lifestyle Changing pattern of work and leisure Demographic change Why social factors are considered: Stakeholders are members of society--assessment of their values and beliefs Good (ethical) reputation Avoid restrictive legislation Change = opportunities Legal factors: o Health and safety legislation o Employment laws o Environmental legislation o Information about performance. Economic key forces affecting organizations: Economic Growth Interest Rates and Tax rates Availability of Credit Inflation Rates Govt. fiscal policies (taxation, govt. spending, borrowing and repayment) and monetary policies (control of money demand and supply through rates) Foreign Exchange Rates Foreign Trade Balances Consumer income, debt and spending Govt. Subsidy Unemployment rate International economic issues: o Extent of protectionist measures o Comparative rates of growth, inflation, wages and taxation o The freedom of capital movement o Exchange rates o Economic agreements

Exchange rate is the rate at which a national currency exchanges for other national currency. Determinants are: Demand and supply of currencies in foreign exchange market (Floating exchange rate) Govt. (Fixed exchange rate) Synthesis of above two (Managed exchange rate) Types are: Spot exchange rate (rate set for immediate delivery of a currency) Forward exchange rate (rate set for future exchange of a currency) Closing rate (Spot exchange rate at Balance Sheet date)

Political factors: Type of Govt. Stability of Govt. Govt. attitude i.e. privatization or nationalization Amount of bureaucracy Pricing, dividend, tax, employment issues Political risk is the risk that political factors will affect an organization e.g. war, corruption, nationalization, political instability. Jeannet and Hennessry developed a checklist to assess political risk: 1. How stable is Political system. 2. How long will govt. remain in power. 3. How strong is govt.s commitment to specific rules of game. 4. If present govt. is succeeded, how specific rules of games would change. 5. What would be the effect of change in specific rules of game. 6. In light of these effects, what decisions and actions should be taken now? Technological factors: o Change in production techniques o Invention and innovation

OT Analysis ---Analyzing external specific and direct environment: (Porters 5 forces model)

i) When costumers have powers: Small number of customers They make high volume purchases Products they are buying are undifferentiated Alternative sources of supply are available (substitute or switching) ii) When Suppliers Have Power: Small number of suppliers Few substitutes exist Suppliers are not dependent on the buyer for a lot of their sales Suppliers have differentiated their products It is costly to switch suppliers iii) When Rivalry Among Existing Competitors Is Intense:

Slow industry growth High fixed costs (plants, machinery, outlets) Undifferentiated products A large number of competitors High exit barriers (what you lose if you leave the business) Small changes in market share have a big pay-off iv) Barriers That Block New Entrants Economies of scale Large capital requirements Product differentiation High switching cost Limited access to distribution channels Some government policies and regulations Other advantages that are hard to duplicate such as patents, great locations, subsidies, partnerships, etc. History of aggressive retaliation toward new entrants v) Indirect Competitors/Substitutes Close substitutes place a ceiling on the price that can be charged for a product or service Close substitutes also set indirect performance comparisons Main product is sensitive to price of substitute. Responding to the Organization/Marketing environment: Companies can passively take environment as uncontrollable and they must adapt to. Companies can take environmental management perspective i.e. actively working to change the environment. Wherever possible, companies should try to be proactive rather than reactive.

Strategic Intelligence: Strategic Intelligence is the knowledge of business environment, which enables an organization to anticipate changes and design appropriate strategies that will create business value for customers and profit for co. Process of creating strategic intelligence: Sensing (Identify appropriate external indications of change) Collecting (Gather information in ways that ensure it is relevant and meaningful) Organizing (Structure the information in the right format) Processing (Analyze information for implication) Communicating (Package and simplify information for users) Using (Apply strategic intelligence) Sources for strategic intelligence = Sources of information

SW Analysis ---Analyzing internal environment: Internal analysis consists of: Resources Audit BCG Matrix GEBS matrix Value Chain analysis Core Competence (critically underpins organizations competitive advantage) Critical Success Factors (CSF are factors on which strategy is fundamentally dependent for its success.

Marketing Is market and share increasing? Segmented effectively? Channel of distribution reliable and cost-effective? Conduct market research? Product priced appropriately?

Finance/Accounting Sufficient working capital? Can we raise capital or borrowings? Return on investment & Cost of capital

Operation Production capacity

R&D Adequate R&D facilities? Outsourcing is cost effective? Are R&D resources allocated effectively? Communication between R&S and other units? Are present products technologically competitive?

Economies of scale

HRM Efficient Or experience manpower Recruitment and Training Communication

MIS Is IS updated regularly? Contribution by all functional managers? Effective passwords for entry? User friendly IS?

Effective budgeting process? Accounting ratios, strong or weak?

Inventory control policies and procedures, effective? Is machinery technically updated? Is equipment in good condition?

Labor relations

Turnover and absenteeism

Training provided?

Effective promotion?

Quality control policies and procedures, effective?

Under or over staffing?

Continuous improvement?

Brand strength

How much expensive? Stocks Sources of supply Turnover periods Storage capacity Obsolescence and deterioration

Products Product quality and brand reputation Age and life of products Price elasticity of demand Margin and contribution Market share and growth

Miscellaneous concepts: A Cruciform chart summarizes significant SWOT. Critical Success Factors are those components of strategy in which organization must excel to outperform competition. Gap analysis (objects existing strategies = Gap) is a comparison between objectives and expected performance of projects both planned and underway. E.g. Profit Gap (Target profit Forecast Profit) Forecasting is the identification of factors and quantification of their effect on an entity as a basis for planning. It includes judgment. Projection an expected future trend pattern obtained by extrapolation. It includes quantitative factors. Extrapolation is a technique of determining projection by statistical means. Scenario Planning: A scenario is an internally consistent view of what the future might turn out to be An industry scenario is concerned with the future of industry. Macro scenario uses macro economic or political factors, creating alternative ways of the future environment. 6 steps in planning scenarios: 1. Decide on the driver for change i. Environmental analysis ii. Important issues and degree of certainty (time horizon is 10 years) 2. Bring drivers together into a viable framework 3. Provide 7 to 9 mini scenarios. 4. Group mini scenarios into two or three larger scenarios containing all topics. 5. Write the scenario. 6. Identify issues arising.

Chapter 7 : Performance Appraisal & Analysis

Performance Appraisal Measurement of Performance: Measurement of Growth and effects of inflation: 1. Revenue 2. Profits 3. Assets 4. Cash Flow 5. ROCE/ROI 6. Market share 7. Number of employees 8. Number of products Costs: Fixed costs Variable costs -------------------------------------Directly attributable costs Shared general overheads -------------------------------------Controllable costs Uncontrollable costs

4 profit concepts to measure performance of divisions: Contribution (sales variable cost) Controllable profit ( sales - variable costs - Fixed cost controllable) Controllable margin ( Controllable profit other costs directly traceable) Net Profit/Margin ( Controllable margin allocated service center costs and general management overhead) Value added is cost of material and bought in service. Measuring performance of Profit Center: 1. ROI/ROCE 2. Residual Income (measure of centers profit after deducting notional or imputed interest cost) Benchmarking: (adoption of best practices) Benchmarking is establishment of targets and comparators (through data gathering) through which relative levels of performance can be identified. Types of Benchmarking: Internal Benchmarking comparing one operating unit with another within same industry. Functional Benchmarking internal functions compared with best external regardless of industry. Competitive Benchmarking information about direct competitors is gathered through techniques e.g. reverse engineering. Strategic Benchmarking aimed at strategic action and organizational change. Levels of Benchmarking: 1. Resources through resources audit 2. Competences in separate activities through analyzing activities 3. Competences in linked activities through analyzing overall performances. Inflation: Effect of inflation on accounting system Effect of inflation on strategy in reference to operating in competitive market and exporting goods overseas

Performance measurement and inflation: i) Fixed asset values & depreciation ii) Cost of sales and inflation iii) iv) v) vi)

historical costing problem increased profits but low stock turnover (overstated profits) real value of loan decreases over times figures are ditorted ratios will be unaffected, as both side of balance sheet will be inflated

Need for working capital Borrowing benefits in period of inflation Comparability of financial figures Ratios for control

Chapter 8 : Mission Goals and Objectives

Analyzing Vision, Mission and Objectives Hierarchy Vision--------Mission----------Goals (objectives and aims) at 3 levels----------strategy at 3 levels

Vision:
Where the organization wants to be Advantages of vision: gives general directions to organisation gives hope and motivation establishes scope and boundaries enables flexibility in choice Problems with vision It ignores real, practical problems It can degenerate into wishful thinking Strategic intent: Vision with an emotional core to energize and stretch similar to vision stretch current competencies gives sense of direction gives coherence to plans

Mission Statement:
This is a statement purpose of existence-What it wants to accomplish in the larger environment. Mission statement includes Purpose, Competence, Strategic Scope, Product, Targeted customers, and Values of various stakeholders. It should be market oriented, specific, realistic, motivating and consistent with market environment. e.g. To provide best satisfaction to customers and fair return on investment, keeping environment healthy and clean and promising secure future to employees. Place of mission statement: Annual reports Publicity materials In chairmans office Communal work area Elements of mission statement: Purpose ( e.g creating wealth, satisfy shareholders) Strategy ( e.g logic, product, service) Scope Politics & behaviors Values & culture (e.g commitment) Characteristics of mission statement: Bravity Flexibility Distinctiveness Problems with mission statement: Ignorance in practice Only for public showment and not for internal decision making Only rationalising existence of organisation Wish list, full of generalisations

Functions/Importance of mission 1. Employee motivation 2. Contributes to profitability 3. Focus for strategic decision making 4. Replaces national or divisional subculture with a corporate culture 5. Communicates nature of organization to insiders and outsiders Problems with mission = Problems with Rational model of Strategic Management

Goals:
Goals could be Objectives (quantifiable) Aims A goal must be SMART. S M A R T Specific Measurable Attainable result-oriented time-bounded Operational goals Measurable

Goals Non-operational goals not measurable

3 levels of goals/objectives and strategy: Corporate level SBU level Operational level Corporate level objectives: (trade off between objectives) 1. Profit (Accounting Profit = Economic Profit = Sale price Explicit Cost Implicit Cost i.e. Opportunity Cost) 2. Market share and growth Objectives 3. Cash flow 4. Customer satisfaction Primary Secondary 5. Quality of product 6. Industrial relations Long-term Short-term 7. ROCE 8. EPS Unit Objectives: Commercial sector Increase number of customer by 15% (sales department) Decrease number of rejects by 50% (production department) Public sector To provide cheaper, subsidized bus traveling (local transport department) Responding more quickly to calls (police, fire station, hospital) Types of Goals: 1. System Goals 2. Ideological Goals 3. Formal Goals 4. Shared Personal Goals System goals (subverting Mission) Survival Efficiency Control Growth Dealing with goal conflict (inter departmental): Rational evaluation (financial criteria) Satisficing (not aiming to maximize profit) Bargaining (b/w different goals of managers) Sequential attention (one by one) Priority setting [Derived from organizations existence] [Focus on organizations mission] [Imposed goals; e.g. from Shareholders] [Consensus b/w individual and collective goals]

Goal Congruence Trade off between objectives: Primary and secondary objectives:

State of individuals to take actions which are in their own interest and also in best interest of organization. [One at expense of other.] [Based on importance.]

Stakeholders
Stakeholders are Groups or Individuals whose interests are directly affected by activities of a firm or organization. Stakeholder Shareholders Objectives To maximize wealth Increased by (dividend, capital gain of shares, EPS, ROCE) Measured by (increase in Retained earnings, Market Value listed or non-listed) Timely repayment of interest and principal Timely payment High prices Continuing profitable relations High wages Job security Job satisfaction Continued supply Quality products Maximize own reward Training and career development SHE Issues Level of employment Taxes Legislation compliance

Lenders Trade creditors

Employees

Retailers customers Management Society Govt.

and

2 approaches to stakeholders: 1. Strong view (To balance all stakeholders is important) 2. Weak view (Primary objective is profit, stakeholders are satisfied indirectly) Stakeholders mapping: (Mendelow) High Interest Key Players High Strategy must be acceptable for them Power E.g. major customer Influence powerful stakeholders Low Should be kept informed Power E.g. Community representatives/Charities

Low Interest Pessimist Should be kept satisfied. E.g. large institutional stakeholders Negligible

Organizations Culture Culture/Organizations Culture: Culture is sum total of belief, knowledge, attitudes, norms, customs, values and peculiarities that prevail in a society/ an organization. Influences on organizations culture: Organizations founder Organizations history Leadership and management style Structures and Systems Levels of Culture: There are 3 levels of culture in an organization: 1. Basic, underlying assumptions (guide the behavior of individuals and groups in organization) 2. Overt beliefs (expressed by organization and its members) 3. Visible artifacts (e.g. style of offices, display of trophies etc.)

Some Important concepts: Belief is what we feel to be the case on the basis of objective and subjective information. Values are beliefs which are relatively general and widely accepted as culturally appropriate behavior. Customs is culturally accepted behavior in response to given situation. Artifacts are physical tools designed by human beings for their physical and psychological well being including works of arts and technology. Rituals are activities which take on symbolic meanings. Ethics is a set of moral principles to guide behavior. McKinseys 7-S model Explains relationship of different aspects of business: [Link b/w organizational & individual behavior] 3 Hard elements: [Formal Aspects] 1. Structure (division of tasks and hierarchy of authority) 2. System (technical system e.g. Accounting, HRM, MIS) 3. Strategy (org plans, tackling competitors, achieving objectives) 4 Soft elements: [Informal Aspects] 4. Shared values 5. Staff (own concerns and priorities) 6. Style (ways of working, attitude of management) 7. Skills French and Bells iceberg: Overt formal aspects (= 3 hard S) i. Goals ii. Structure iii. Policies and procedures iv. Products v. Financial resources Covert informal aspects ( = 4 soft S) i. Attitude, belief, feelings, perception ii. Value iii. Informal interactions iv. Group norms

Theories on Culture
Harrison and Handys Work: (gods of management) There are 4 types of culture in organizations: i) Power Culture (Zeus) All decisions are centered on one person i.e. founder of business For small entrepreneurial companies ii) Task Culture (Athena) No dominant leader Principal concern is to get the job done iii) Role Culture (Apollo) Organization has formal structure and well established rules and procedures People do their jobs as specified in their contracts For large organizations where work is predictable iv) Person/Existential Culture: (Dionysus) Organizations purpose is to serve interest of individuals within it. Miles and Snows Work: (models of strategic culture) There are 4 approaches to strategy in organizational culture.

1. Defenders (doing things right) Low risk, low profits Secured niche market Tried and trusted solution 2. Prospectors (doing the right thing) High risk, high profits Move into new ways Take initiatives

e.g. accountants, engineers etc

e.g. designers

3. Analysers Balance risk and profit Using core stable products & markets Follow the change, do not initiate change 4. Reactors Do not have viable strategy Denisions model:

e.g. managers

Stable environment

Changing environment

Strategic orientation of firm towards environment Focus on internal Focus on external Consistency Culture Mission Culture Formal ways of behavior, predictability and Customer oriented. (hospital, church) reliability(bureaucratic) Involvement Culture (satisfied employees give Adaptability Culture ( fashion co.) performance e.g. Orchestra) Focus on external environment which is changing.

Deal and Kennedys work: (Association of culture & risk) Culture is function of willingness of employees to take risk and Their feedback Slow feedback Bet your company Culture Slow and steady wins the race Long decision cycles Stamina required Oil company, Aircraft company, Architects Process Culture It is not what you do, it is the way you do Attention to excellence of technical detail. Risk management Procedures and Status symbol Banks, Financial services, Government Fast feedback Hard Macho Culture Find a mountain and climb it Entertainment, Advertisement, Consultancy Work hard/Play hard culture Find a need and fill it All action and fun Team spirit Computer companies

High risk

Low risk

Peter and Watermans Excellence Culture: Dominance and coherence of culture was an essential feature of excellent companies. Employees are loyal and make efforts if: Cause is great. They are treated as winners. They can satisfy dual needs of team and own interest. Key attributes of excellence 1. Autonomy and Entrepreneurship 2. Bias for action 3. Customer orientation 4. Stick to core activities 5. Simple organizational structure 6. Simultaneous loose-tight properties (competition between individuals and group within organization)

Pumpins dynamic company (Cultural characteristics of dynamic companies) Dynamic company is one that considerably increases the benefits for its stakeholders within a relatively short time 4 aspects of such a culture Speed Productivity Expansion Risk taking Weak areas in a dynamic company Customer service Innovation Technology Attitude to workforce Company spirit and loyalty Strategic Excellence Position: (similar to excellence) SEP will fall into 3 fields: 1. Product related 2. Market related 3. Functional SEP can be developed only if culture supports it.

Chapter 10 : Corporate Reorganisation

Defensive Strategies
Capital Restructuring Scheme A capital reconstruction scheme is a scheme whereby a company reorganizes its capital structure. Procedure of designing a capital restructuring scheme: 1. Calculate what each partys position would be in a liquidation 2. Assess possible sources of finance 3. Design the reconstruction 4. Assess each partys position as a result of the reconstruction 5. Check that the company is financially viable. Exit strategies for a venture capitalist: 1. Sale of shares to public or institutional investors following a flotation 2. Sale of shares to another company 3. Sale to company itself or its owners 4. Sale to institution management

Downsizing
Divestment- (selling of business) Divestment is a proportional or complete reduction in ownership stake of an organization e.g. Demerger Sell off Liquidation Spin off Management Buy Out (MBO) Privatization Reasons for Divestment: To concentrate on a particular part of business Selling a loss making unit Liquidity problems Selling a subsidiary with high risk Selling a subsidiary at profits Provide an exit route for investors Remove value gaps to avoid takeover Demerger is splitting up of a corporate body into two or more separate and independent bodies. Sell off is a form of divestment involving the sale of a part of a company to third party usually another company. Liquidation is extreme form of liquidation where the entire business is sold and funds are distributed to shareholders in their proportion. Management Buy Out. (MBO) management buyout is the purchase of all or part of a business from its owners by its managers. Management Buy Out.(MBI) where purchase of a business is made by group of managers from outside the business. Spin Off : a new company is created whose shares are owned by the shareholders of the original company which is making the distribution of assets.

Management Buy Out: Possible reasons for MBO: All reasons of Divestment Best offer from management Sale can be arranged quickly Group can still maintain relations Success factors of MBOs: (Advantages) Favorable buyout price Personal motivation and determination Quicker decision making and more flexibility Saving in overheads Healthy relationship with subsidiary Questions in evaluating MBOs for investment: Does management has full range of skills? Why is the company for sale? Projected benefits and cash flows? What is being bought? Price? Fund availability? Exit routes? Problems faced by MBOs: (Disadvantages) Little experience of financial management Tax and other legal complications Changing the attitude of employees Deciding the bid price Cash for maintenance of fixed assets Change in HR (loss of key employees) Maintenance of relations with suppliers/customers Going Private A public company goes Private when a small group of individuals buys all of the companys shares (possibly including existing shareholders) Advantages: Cost saving (cost of meeting statutory requirements are saved) Limited number of members Similar objectives of shareholders Shareholders are close to management Protection against volatility in share price Disadvantages: No trading of shares on stock exchange Loss of repute Loss of some value of share

Disadvantages of De-Merger Loosing economies of scale Lower turnover Higher overhead cost Less ability to raise finance

Chapter # 11 : Ethics and Social Responsibility

Ethics Ethics: Ethics is a set of moral principles to guide behavior. It concerns with what is right and what is wrong. Individual Levels of Practicing ethics Personal ethics professional ethics Org. culture Organisation Org. System

Ethical problems faced by organization: While achieving a higher ROI, an organization faces following problems: SHE Issues (Safety, Health, Environment) Extra payments to govt. officials Extortion (when officials threaten company with complete closure) Bribery (where organization is not entitled to services) Grease money ( where organization is entitled but unable to receive services) Gifts Honesty in advertisement (e.g Marketing ethics) Competitive behavior (e.g putting others to competitive disadvantage) Ethical systems in an organization: Personal ethics (e.g religious, political, personality ethics) Professional ethics (e.g CA code of ethics, medical ethics, fit and proper criteria) Organization culture (e.g. customers first) Organization system (ethics must be contained in formal code e.g part of ethical sys. and mission statement) 2 approaches to manage ethics: Compliance based approach aims to remain within letter of law by establishing system of audit and review so that violations are prevented, detected and punished. It works from outside the system. Integrity based approach combines a concern for the law with an emphasis on managerial responsibility. This approach incorporates ethics in organizations culture in which managers will do the right thing e.g shared accountability, sound behavior, defining values. It works from within the system Whistle blowing: It is the disclosure by an employee of illegal, immoral or illegitimate practices on part of the organization. Four types of ethical leaderships in organisations: i) Creative :reflecting founder, such leaders create ethical style. ii) Protective :they sustain value of customer services iii) Integrative :aim through consensus through people iv) Adaptive :changing culture as per new environment Social Responsibility Objectives of a company: Economic objectives Social/Ethical objectives Boundaries (Imposed rules; they restrict managements freedom of action) Responsibilities (Voluntarily undertaken obligations e.g. charities) Social/Ethical objectives of a company: SHE Issues (e.g minimum wages, job security) Good employer (e.g good working environment, job satisfaction) Good Public image (e.g good quality products) Society well being (e.g regular order and timely payments to suppliers) Pollution Financial assistance (e.g. Charity, Sports) (For other objectives see Stakeholders objectives)

Arguments against and favoring Social Responsibility recognition: Social responsibility is expected from all types of organizations. AGAINST: Organizations should concern wealth only because Shareholders own assets. Shareholders are part of society. Taxes on revenues are given to build society. Businesses exist for profit. FAVOUR: (by Mintzberg) Most shareholders are passive. Ultimately consumer pays taxes via higher prices. Govt. support Firms produces 2 outputs: Goods and services Social consequences of activities e.g. Pollution Responsibility recognition (e.g. charity) improves: Public relations. Business success and development as part of society. Decisions by organization affects society Externality is a social/environmental cost of organizations activities not borne by organization. Boundary Management: - Good public image - Protect environment from pollution - Good employer - Welfare of local community - securing political environment - improving quality of life - protecting minorities

Compliance Based Approach e.g - Audit - Review - Questioning - System for employees - Disciplinary procedures (lawyers) e.g

Integrity Based Approach - Internal commitment - Guiding values - Pattern of thoughts - Share accountability (managers)

Chapter 12 : Corporate Governance

Corporate Governance is the system by which companies are directed and controlled. Patterns of share ownership: (Who are shareholders of company) Types of institutional investors: Pension funds Insurance companies Investment trusts Unit trust Venture capital organizations Range of shareholders: Advantages: Greater activity in firms shares No individual controlling whole firm Less effect on share price if anyone sells No threat of takeover Disadvantages: Administrative cost is high. Various objectives in holding shares.

Why knowing shareholders: To get support by exchanging views. Knowledge of shareholders preference about Dividend Policy. To explain recent share price movement. Shareholders attitude to risk and gearing. Key shareholders to consult in the event of takeover bid. Agency Theory: Although individual members of the business team act in their own self-interest, the well being of each individual depends on the well being of other team members and on performance of the team in competition with ot her teams Assumptions of theory: Behavioral Structural Investments are not infinitely divisible. Individuals vary in their access to funds and their entrepreneurial ability. Individual welfare maximization. Individual rationality. Individuals are risk-averse.

Agency Problem: Arises from separation of ownership from management. Goal Congruence: (solution for agency problem) It is accordance between objectives of agents (acting within organization) and objectives of organization as a whole. Via (e.g.) Profits related pay e.g. bonuses, commission, incentive etc. Rewarding managers with shares Executives Share Option Plans Non-executive directors are directors not running the day to day operations of the company.

Chapter 13 : Human Resource Management

Human Resource Management-Introduction Human Resources Management is concerned with people at work and their relationship as they arise in working environment. Roles/Scope of HR Manager: Staffing: Job Analysis HR Planning Recruitment Selection Retirement, Resignation, Redundancy

HR Development: Performance Appraisal Career Planning Training Development Motivation/ (Individuals): Job Analysis and Design Pay and Promotion Leadership and Groups: Creating effective teams Managing conflicts between teams Other Aspects: Health and Safety Workforce diversity (Equal Employment Opportunity) Maternity Compliance with legal and other standards Personnel record and Information System Necessity of separate HR Department depends on Size and Activities of organization. Objectives of HRM: Cooperative Relationships Development of motivated employees Effective response to change Fulfilling social and legal requirements Advantages of HRM: Decrease in Staff Turnover Increase in Productivity Increase in Group learning Increase in initiative Decrease Absenteeism Lesser conflicts Increase quality Increased co-operation Increased commitment HRM Theories Scientific management Human Relation Rational Contingency theory

[Clearly defined principals] [Fulfillment of needs] [Division of authority] [Change according to situation]

4 Roles/Areas of HR Planning: (by Tyson as per new strategic viewpoint) To represent organizations central value system To maintain boundaries of organization

To provide stability and continuity To adapt the organization to change

Views of HRM: Traditional Odd Job view It is a collection of incidental techniques without much internal cohesion (Drucker) Manager was partly a Clerk, housekeeper, social worker and fire fighter. It dealt mainly with Hiring and Firing. Reactive and defensive role Employees Consent was obtained. New Strategic Viewpoint

It is concerned about Organization, Employees relations and service. Proactive and constructive role Employees Commitment is obtained.

Motivation,

HR Planning Human Resource Planning: HR Planning is forecasting demand of human resources, forecasting its supply and closing gap between demand and supply It considers When employees needed. How many employees needed. So basically HR Plan deals with recruitment, retention, downsizing & training of workforce. Process of Human Resource Planning 1. Strategic Analysis (of) a. Environment b. Organizations objectives c. Manpowers SWOT 2. Job Analysis a. Job description b. Job specification c. Employee specification 3. Forecasting of a. Internal Demand and Supply b. External Supply Implementation a. HR Plan

4.

Job Analysis The process of collecting, analyzing & setting out information about the contents of job in order to provide basis for job description and data for recruitment, training, job evaluation & performance management. Systematic way to gather and analyze information about the Content Context Human requirements of the job. Type of information needed Purpose of the job Content of the job Relations to other job Performance criteria Responsibility Accountabilities Organizational factors Development factors Environmental factors Job analysis results in: Job description Job specification Employee specification

Job Description A written statement of duties, responsibilities and tasks of job. It should be written in outputs and performance levels. Purpose of Job description: Organizational--------- Defines jobs place in organizational structure (job evaluation). Recruitment------------ Provides person specification Legal-------------------- Provides basis for contract of employment Performance----------- Performance objectives can be set. Contents of Job description: A job description should be a formal, written document, usually from one to three pages long. It should include the following: Date written. Job Status (full-time or part-time; salary or wage). Position title. Job summary (a synopsis of the job responsibilities). Detailed list of duties and responsibilities. Supervision received (to whom the jobholder reports). Supervision exercised, if any (who reports to this employee). Principal contacts (in and outside the organization). Related meetings to be attended and reports to be filed. Competency or position requirements. Required education and experience. Career mobility (position[s] for which job holder may qualify next). Alternative to Job Description is Role Definition. (wider) Job Specification Minimum acceptable qualification (i.e. knowledge, skills, abilities, experience and other characteristics needed to do a particular job.) Person Specification Identifies the type of person needed to do a particular job. Following characteristics are assessed: (Frasers 5 point to assess pattern of personality) 1. Impact on other 2. Motivation 3. Acquired knowledge or qualification 4. Innate ability (initiative, innovative) 5. Adjustment and emotional balance Competencies Capacity of a person that leads to behavior that meets the job demands. Intellectual Competence (Strategic, judgment, planning) Interpersonal Competence (managing staff) Adaptability (flexibility with change) Results Methods of Job Analysis: Logos/Diaries Interviews Observations Questionnaires HR managers write job description & specification for review by managers Managers identify performance standards based on job analysis information.

Forecasting Demand and Supply of manpower: Demand is estimated from: New markets New product/service New technology Divestment Organizational restructuring

Supply is estimated from: Current workers Stocks and Flow analysis External labor market A Position Survey compares demand and supply. (Grade, skills, location etc) Closing the gap between Demand and Supply- HR Plan: (along with subsidiary plans of HR Plan) HR Plan is prepared on the basis of personnel requirements, productivity and cost. Meeting Shortage of HR (Less supply More Demand) Internal Promotions, Transfers (Redevelopment Plan) and Training (Training Plan) etc. Reducing Labor turnover (Retention Plan) Overtime (Productivity Plan) External recruitment (Recruitment Plan) Meeting Surplus of HR (Less Demand More supply) Restricting recruitment Part-time working Redundancies (Redundancy Plan) Recruitment(a part of HR plan) Definition: Recruitment is the process of generating a pool of qualified applicants for organizations job Strategic Recruitment Decisions: 1. Organization based Vs. Outsourcing 2. Regular Vs. Contractual Vs. Leased 3. Internal Vs. External recruitment 4. EEO and Diversity issues Systematic approach to recruitment and selection: HR Planning Job analysis Identification whether employee is to be recruited from outside or promoted inside (from HR Plan) Evaluation and use of Sources of Recruitment Selection Notification of result Induction training

Sources of Recruitment:
Internal Search: 1. Organizational database (HRIS) to sort employee data according to job requirement. 2. Employee referrals 3. Promotion and Transfers Advantages: Good employee relations Encourages ambitious individuals Less costly No adjustment or orientation time required, because already familiar i. Individual with organization and policies ii. Organization with individual Disadvantages: No new blood, no innovation and new perspectives Political fight for promotion Morale problems of those not promoted Diversity lacking Requires training

External Search: 1. Advertisement (method depends on organization and nature of job) Newspaper T.V. Net Agencies and Professional organization Blind Box ads Schools, Colleges and Universities Unsolicited applications Creative recruitment methods Banners Announcing prizes for Referee Applicants

2. 3. 4. 5. 6.

What must be included in job advertisement: Information about organization Primary business EEO Employer Information about job and application process Title and responsibility Job location Starting pay range Contact address Closing date for application Desired qualification of candidate Experience 3----5 Characteristics needed Internet Search: 1. 2. Employer website Professional career websites

Advantages: Cost saving Time saving Global in nature

Disadvantages: Non-serious application Difficult to process large number of application Not accessible to all

Selection:

(part of Recruitment)

The process of choosing individuals who have needed qualification to fill job in an organization Purpose of selection: Filling a right person to the job ensuring Person fits job (matching people with job characteristics) Person fits organization (Objectives, culture, values etc. of organization) Steps in selection process: Initial screening Complete application (on specific form) Employment tests Comprehensive interview (keeping in mind job description & job specification) Background information (depends on nature and sensitivity of job) Medical examination Conditional job offer Permanent job offer

Why and What tests are conducted Cognitive ability tests o Thinking, memory, reasoning o Mathematical abilities o Communication abilities Physical ability tests Writing analysis Performance simulation test (requiring to perform actually a small segment of the job) Advantages of interview Most valid to determine applicants Organization fit Level of motivation Interpersonal skills Limitations of Interviews Unreliable assessment (wrong decision) Fail to provide accurate prediction (error of judgment) Halo and Horns Effect (based upon single attribute) Stereotyping candidates on the basis of dress, hairstyle, accent etc. Discrimination in selection is justified only if required by law. Induction Training: Identify area for later learning or training (e.g. detailed technical knowledge) Explain nature of job and goal of each task Explain working hours Explain structure of organization hierarchy and his position Introduce with people in office. Plan and implement training program. Appraise after 3,6 or 12 months.

Chapter 14 : Motivation and Performance

Individuals

Variables affecting Job performance:

Organizational and Social variables Social environment Type of Incentives Type of Training and Supervision Situational variables Characteristics of Organization Physical environment Physical and Job variables Methods of work Work space and arrangements Designing and condition of work equipment Individual (non work) variables Age Sex Physique Education Experience Intelligence Aptitude Motivation Personality Personality and individual Development: (Individuals are different because their personality is difference and personality differences affect work behavior). Personality is the total patterns of thinking; feeling and behaving that constitute the individuals distinctive method of relating to the environment. According to Chris Argyris, as people mature they display certain characteristics: 1. Increasing self awareness 2. Acceptance of equal or superior relationship to others 3. A tendency to move from dependence towards independence 4. Diversification of behavior patterns 5. An increasing tendency to activity, rather than passivity 6. Deepening and more stable interests Factors affecting personality differences: Authoritarinism Self-esteem Feedback on performance Moderately difficult tasks Psychological success Commitment

- Need of achievement - Attitude - controls and standard - levels of risk taking - challenging goals and achievement - willingness

Motivation Motivational Theories

(Content theories VS Process Theories)

McGregors theory X and theory Y: Theory X---People dislike work and responsibility, they have to be controlled, threatened, punished to get work done. Theory Y---Work is as natural as play and rest, they accept responsibility, they give way to consultation and self growth.

Maslows hierarchy of needs: ( A ranked structure of behavior stimulating within individual which explains motivation) Self actualization (fulfillment of personal potential, freedom, fairness, justice) Esteem needs (Independence, status, respect, gaining knowledge) Social needs (relationship, affection, belonging) Safety needs (security, threat) Physiological needs (food, cloth, shelter) Alderfers ERG theory: E-----Existence R---Relatedness G---Growth McClellands needs: Need for achievement, Need for power, Need for affiliation These needs could be taught from top to lower managers.

Top management Entrepreneur Achievement Employees

Power Affiliation

Herzbergs two factor theory: There are 2 groups of work related factors. Hygiene factors (remove dissatisfaction e.g. Salary, Job security, Working conditions, Interpersonal relations) Motivators (creates satisfaction e.g. Status, growth in job, power authority and responsibility) Vrooms expectancy theory: Motivation shall depend upon expected results of his efforts i.e value attached to an outcome. F (Force i.e. motivation) = V (valence i.e. strength for preference of outcome) * E (Expectancy i.e. expectation that performance will lead to outcomes) Porter and lawlers model: (extension of expectancy theory)
Valence

Force Ability Understanding Actual Performance

Expectancy

Satisfaction
Importance of reward

Success/Failure

Intrinsic rewards (interest, enjoyment)

Extrinsic rewards (pay, bonus)

Equity theory: Reward of 1/Output of 2 = Reward of 2/ Output of 2 Satisfaction = (atleast fair reward, not maximum reward) people compare results and rewards people get upset if inequity in rewards

Goal theory: Goals can motivate.

Psychological contracts Members will expend efforts and organization will reward them in exchange Coercive contract (returns are inadequate compensation; involuntary contribution)

Calculative contract Cooperative contract

(returns are defined; voluntary contribution) (employees participate also in decision making)

Pay and Job satisfaction Under Herzbergs theory, Pay is the most important of all hygiene factors. Under Expectancy theory, Pay motivates if pay is linked with performance and is valued by individual. Difficulties in incentive schemes: No motivation if employee already enjoys good package. External factors may affect output and reward. Not suitable in groups Assessment of satisfaction and moral: Through Productivity, Absenteeism and Turnover. Types of incentive schemes: performance related pay (PRP) i.e commission bonus schemes profit sharing e.g opportunity of being member of the company.

Job Design (with parameters of Mintzberg) Job design is the process of determining the specific tasks to be performed (Job specialization), methods used in performing these tasks (training and indoctrination in organizational values), and how job relates to other works in organization (regulation of behavior). Change in job design may be : Job enrichment Vertical expansion of responsibilities Change in the content and responsibility of job to provide greater challenge Job enlargement Horizontal expansion of duties Provides greater variety of tasks

Job Components: Occupation------Jobs-----------Position----------Duties------------Tasks (Responsibilities) Job restructuring and redesign: Job redesign Job rotation Job enlargement Job enrichment

suiting of jobs according to motivational factors. allowing variety and understanding, development of extra skills adding extra and related tasks to current job increases depth of responsibility by adding planning and control of current job.

Working arrangements: attitude and values high performance work systems empowerment compressed week part-time work i) ii) iii)

flexible working arrangement multi-skilling flexitime job sharing home-working (distant working)

Numerical flexibility Financial flexibility Task flexibility

Employee Appraisal Appraisal is a systematic review and assessment of an employees performance Why: Employee Development: Specific Job performance feed back Career opportunity information Assessing employee potential Decision Making for Action by Administration: (Results of appraisal) Promotion Demotion Transfer Termination Organizational Research: (Importance of appraisal) HR Planning (Promotability and Potential) Evaluation of Selection and Training methods To motivate employees giving feedback Inventory assessment for planning To assess training needs Purpose of appraisal: Reward review for deserving employees Performance review to confirm whether any training is required or not Potential review to confirm whether any management career planning is required or not. Objectives:

Achieving objectives Performance levels Training needs Identifying lacking areas Communication

360-degree feedback -Sources: Self Senior Peers Juniors Assessment centers Customers [Upward appraisal is better.] Types: (What could be assessed) Traits Behavior Performance

Methods: 1. Check list appraisal (yes/no) 2. Forced choice appraisal (MCQs) 3. Essay appraisal/ Overall assessment (paragraph) 4. Grading, result oriented schemes, and self appraisals An appraisal system: i) ii) iii) iv) v) vi) Identify criteria for assessment Preparation of appraisal report Appraisal interview Review assessment Action/plan preparation Monitoring progress (follow-up)

Methods of appraisal: i) Upward appraisal ii) Customer appraisal iii) 360 degree appraisal

sub-ordinates upraise their seniors internal & external

Mairs 3 approaches to appraisal interview: The tell and sell method The tell and listen method The problem solving approach Effective Appraisal: Job related criteria Standardization Trained appraisers Employee access Purpose must be understood by both It must be participative, problem solving activity Regularly conducted. Effort, integrity and ability of line managers. Locketts appraisal barriers: Lack of agreement on performance level Rater is biased. Recency effect (weighting recent events) Disagreement on long term prospects One sided process Central tendency Many targets at annual meeting become out of date. Central tendency (giving average rating to anyone) Sampling Error (available information is insufficient or inaccurate) Interview and counseling: 1) Tell and sell method 2) Tell and listen method 3) Problem solving approach

(manager tells, and then try to gain acceptance) (manager tells, the subordinates responds, and consensus is achieved) (manage becomes counseller, and ask work problems)

Managing Careers: Career management is a technique whereby the progress of individuals within an organization from job to job is planned keeping organization needs and individual capacity in mind. Difference between Functional Manager and General Manager: Functional Manager Short term Task oriented Organizer General Manager Long term Goal oriented Facilitator Coordinating interdepartmental activities Obtaining and allocating resources Poorly defined sources Informal channels

Goals Orientation Role

Information

Defined sources Formal channels

Chapter 15 : Training Appraisal and Career Management

Training and Development HR Development: The process of extending personal abilities and qualities through development activities e.g. training, appraisal, career planning, job rotation etc. Training: The process of providing employees with specific skills to carry out work effectively or to correct deficiencies in their performance Development: An effort to enhance a persons abilities that organization will need in future. Development purpose: Ensures firm meet current and future performance objectives by Maximizing peoples potential Continuous improvement Development activities: Training (on job and off the job) Career planning Job rotation Appraisal Other learning opportunities Benefits of training and development: For Organization Training supports business strategy Higher productivity Management of SHE issues Less need for detailed supervision Multi skilled people Succession planning Increased commitment For employees: Enhanced skills Psychological benefits (valuable) Social benefits (e.g. contact) Job management When training does not work: Bad management Poor Job design Poor equipment Motivation Poor recruitment Other characteristics of employee (e.g. intelligence) Types of training courses: Day release Distant learning Evening classes Revision courses Sandwich course Full time course

Learning organization: An organization that facilitates the learning of all its members and continuously transforms itself. A learning organization creates, exploits and shares knowledge. Characteristics of learning organization:

Learning approach to strategy Participation in decision making Information is used as a resource Formative accounting Reward flexibility Enabling structural responsiveness to external changes All employees are environmental scanners Intercompany learning Learning climate Training Process: Step 1. Training needs are identified: Training need analysis Current state Desired state Existing knowledge and skills Required knowledge and skills Individual performance Required standard Organizations current results Desired results Difference between two columns is Training Gap. Training surveys Corporate strategy Appraisal and performance review Attitude surveys Evaluation of existing training programs Job analysis Step 2. Specify knowledge, skills and competence required: Step 3. Define training objectives: These objectives should be clear, specific, measurable, and observable. Step 4. Plan training program Step 5. Implement the training Methods of training Formal training On Job Training

Course training (lectures, discussions, exercises, role-plays, case studies) Computer based training Instructions/Demonstrations Coaching Job rotation Temporary promotion Assistant to Positions Action learning Committees Project work

Step 6. Evaluate the training Ways to evaluate. Organizational changes as a result of training Trainees learning test Trainees reaction to experience Changes in job behavior following training Impact of training on organizations goals Validation of training means observing results of training and measuring whether training objectives have been achieved. Evaluation of training means comparing costs incurred with benefits obtained to redesign/withdraw scheme. Personnel Development Plan: Development plan for individual

Skill analysis: Aim is to put interest into actual role. Performance High Likes and does well (Motivated) Dislikes but does well Low Likes but does not do well (Requires training) Dislikes and does not do well

Liking of skills

High Low

Learning cycle by Kolb:

Concrete experience

Applying/testing the implications of concepts in new situations

Observation and reflection Formation of abstract concepts and generalizations

Learning styles of individuals by Honey and Mumford: Theorists Reflectors Activists Pragmatists Good at learning new techniques in OJT Aim is to implement action plans and/or do the task better May discard as impractical good ideas which require development. Require training on hand-on Excited by participation and pressure e.g. new projects Flexible, optimistic, rush without preparation, take risks and get bored. Observe phenomena, think about them and then choose how to act Find learning difficult if forced into hurried program. Tend to be fairly slow, non participative and cautious. Understand underlying concepts Preference for concepts or analysis Take intellectual hand-off approach based on logical argument

Competence Capacity that leads to behavior that meets job demands within organizational environment and brings desired results Types of competence: 1. Personal/Behavioral (Personal characteristics and behavior required for successful performance). 2. Work based/Occupational competence: (expectation of work performance and outputs and standards that are expected by people in specific roles) 3. Generic competence can apply to all people in an occupation. Competence of managers: Intellectual i. Strategic Perspective ii. Analytical Judgment iii. Planning and Organizing Interpersonal i. Managing staff ii. Persuasiveness iii. Assertiveness and Decisiveness iv. Interpersonal sensitivity v. Oral communication Adaptability results i. Initiative ii. Motivated iii. Business sense

Chapter 16 : Management and Human Resource

Leadership Trait Theories: Leaders have certain qualities (Inborn or Acquired) e.g. Helicopter factor i.e certain traits makes a person good leader. Style theories: A managers style is the way in which the manager handles his relationship with the task and with subordinates. Leadership is an interpersonal process and is affected by behavior. To create an effective group, characteristics of followers should match with characteristics of leader. Huneryager and Heckman: Dictatorial Autocratic Democratic Laissez-faire Manager presents a problem and asks to solve it. Manager allows his subordinates to act freely within prescribed limits. Manager suggests his idea and amends as per comments Manager presents problem, asks for ideas and makes a decision Manager sells his decisions Manager suggests own ideas and asks comments Manager makes decisions and enforces them Manager makes decisions and announces them

Leadership: Definition Management vs Leadership Manager VS Leader Key leadership skills Developing managers as leaders Theories of leadership i) Trait theory ii) Style theory iii) Contingency theory Leadership skills: Entrepreneurship Interpersonal skills Decision making Time management Self development skills Competitive Goal oriented Team empowering motivated

Wholly task oriented Leaders Wholly people oriented Lickerts 4 elements presented in effective managers: 1. Expect high level of performance 2. Employee centered 3. No close supervision 4. Participative style

4 styles of leadership: Style Tell (autocratic) Sell (persuasive) Consults Characteristics Manager makes decisions and enforces them Manager makes decisions but convince staff to motivate them. Manager presents problem, asks for ideas and makes a decision Leader and followers make decisions on consensus. Strengths Quick decision making Suitable for routine work. Reasons are told to staff. They have better idea of what to do Employees contribute knowledge and experience. Initiative and commitment High motivation and commitment Shares knowledge and experience Weaknesses No initiative and commitment One way communication No initiative and commitment One way communication Slow decision making Staff may not be mature.

Joins (democratic)

Slow decision making Staff may not be mature. Conflict may arise.

Blake and Moutons managerial grid: High

Country club Team

Concern for people

Impoverished

Middle road

Low

Task

Low Concern for production

High

Contingency approach to leadership: (by Charles Handy) Factors which contribute to the success of leader: Leaders personality Subordinates Task Environment Power, authority and responsibility: Power is ability to do. Following are different forms of powers in an organization: Position power/legitimate power Enjoyed by senior management. It is associated with particular job, almost authority. Resource power (reward power) Enjoyed by senior management Control over resources and power to grant them e.g. promotion Physical power (coercive power) Enjoyed by senior/middle management Power of superior force but mostly absent. Expert power Enjoyed by middle/low management Power based on expertise Negative power Enjoyed by middle/low management Use of disruptive attitude to stop things, it may be destructive. Personal power Power in personality of individuals Authority is right to do. (decision-making power) Responsibility is obligation to do.

Influence is ability to change behavior of others. Accountability managers are accountable for their action. Delegation of authority sharing of decision making power.

Discipline
Discipline promotes good order and behavior in an organization by enforcing acceptable standards of conduct. Disciplinary problems: Absenteeism Poor punctuality Poor job performance Poor attitudes Breaches of safety regulations Refusal to carry out legitimate instructions Disciplinary actions: Informal talk Oral warning Written or official warning Disciplinary lay-offs or suspension Demotion Discharge

Warning

Action

Retirement, Resignation, Redundancy

Why retirement is encouraged: Promotion opportunities for younger. Early retirement is an alternative to Redundancy. Age structure may become unbalanced. Cost of pension rise with age. Resignation: Exit interview Period of notice. Fair grounds for dismissal: Redundancy o Employer has ceased to carry on business all or in part o Requirements of employees have ceased or diminished. o No compensation if Suitable alternative offer made. Employee is of pension-able age or has less than 20 years of continues service. Legal impediment Non-capability Misconduct Other substantial reasons Unfair Dismissal (See PBP)

Discrimination and Equal opportunities

Discrimination could be Direct Indirect Positive (law protected) Measures to address underlying problems of equal opportunity: Support from the top Appoint equal opportunity managers Encourage disadvantaged groups to apply Monitoring of minority Maternity leaves, Maternity Pay, Work place nurseries Flexible hours

Career break Accommodate wheelchair users

Health and Safety

Importance of Health and Safety at work: 1. Legal obligation 2. Accidents cost money i. Compensation + Repair cost + Increased insurance premium ii. Time lost iii. Subsequent performance is reduced. iv. Recruitment and training of replacement has cost. 3. Corporate image is improved. Employers Duties: Work environment must be safe and healthy. Plant and equipment must be maintained to standard. Work practices must be safe. Health and Safety Policy should be communicated to all employees. Statement of principles Detail of safety procedures Detailed instruction of how to use equipment Training requirement Compliance with law Risk assessment should be made. Hazard and risk information should be shared. Identify employees who are especially at risk. Controls must be introduced to reduce risks. There must be safety and health advisors. Employees duties: Take reasonable care of themselves and others. Allow the employer to carry out his duties. Inform the employer of any situation which may cause danger. Use all equipment properly.

1.

2. 3.

4. 5.

6.

National legislation on important labor matters Industrial and Commercial Employment (Standing Orders) Ordinance 1968 i. Appointment, transfer, promotion ii. Leaves iii. Insurance iv. Bonus v. Termination vi. Gratuity Industrial Relations Ordinance 1969. Employee Social Security Ordinance 1965 i. Medial expenses ii. Compensation in lieu of wages during illness Employee Old age Benefits Act 1976 i. Rules for pension Company Profit (Workers Participation) Act 1968. i. 5% of net profit + adjustments ii. Fund could be maintained. Workers Welfare Fund Ordinance 1971.

Chapter 17 : Groups in Organisation

Groups: A group is any collection of people who perceives themselves to be a group. Sense of identity Loyalty to group Purpose & Leadership

Team:
A team is a small number of people with complementary skills who are committed to a common purpose, performance goals for which they hold themselves accountable A team could be: Multi-disciplinary teams Contains specialists in different areas Freer and faster communication between disciplines in organization Multi skilled teams Contains people who possess many skills Tasks can be shared in flexible way. Development of team: (by Tuckman) Forming (collection of individuals) Storming (targets are set and trust increases) Norming (work sharing, individual requirements and expectations) Performing (execution of task) Members/Roles of team: (by Belbin) Coordinator (presides and coordinates) Shaper (dominant, extrovert, task oriented) Plant (introverted, source of ideas) Monitor evaluator (analytical rather than creative) Resource investigator Implementer (administrator not leader, scheduling, planning) Team worker (supportive, noticed in absence) Finisher Problems with team: Group norms restrict individual personality. Conflict in roles and relationship Personality problems Rigid leadership Not suitable for all jobs Too much harmony (group think) or differences of opinion Creating an effective team work: (A contingency approach by Handy) The Given Groups members Groups task Groups environment Intervening factors Motivation Leadership Process Procedure The Outcomes Productivity Effectivity Objective is met within time Group satisfaction Management can operate on both givens and intervening factors to affect the outcomes.

Indications of Effective Team: Quantitative factors Productivity Absenteeism Turnover rate Accident rate Targets Interruption to work rate Qualitative factors Commitment Understanding Communication Feed back Job satisfaction Motivation

Conflict in organizations: (Individual / Group level)

Different views conflict in organizations: The happy family view: Organizations are essentially harmonious. There are cooperative structures to achieve common goals with no systematic conflict of interest. The conflict view: Organizations have conflict on individual and group level. Members battle for limited resources, status and reward. Conflict could be destructive if not handled carefully. The evolutionary view: Conflict is seen as a useful basis for evolutionary change and not for revolutionary change. Could be constructive if handled by arguments or competition(Handy). Causes and tactics of conflicts between departments: Operative goal incompatibility Personality differences Task interdependence (if managed badly) Scarcity of resources Power distribution (Boundaries of authority) Uncertainty (in change) Reward systems (not being fair) Conflict constructive and destructive How constructive Different solutions Creativity and testing of ideas Attention on individual contribution Brings emotions into open Motivational factors brings out Effects of Conflicts within groups: How destructive Distract attention from task. Objectives may be subverted for secondary goals. Disintegration of the group Emotional/ Win-lose conflicts may arise. (Close competition)

(Sherif and Sherif) PTCL vs. Union

Within a group: Group becomes more structured and organized. Members eliminate their differences, get close and demand loyalty. Climate becomes task oriented. Members individual needs are subordinated to achievement. Leadership moves from democratic to autocratic with groups acceptance. Winning group: Cohesion Relaxation

Return to group maintenance and concern for members needs. Assertion for group self-concept with little reevaluation. Losing group: It may deny defeat or blames on others. Loses cohesion. Turn to regrouping. Reevaluates perception of itself and other group. Might become cohesive and effective unit if defeat is accepted. Managerial response to conflicts: (by Hunt) Denial/Withdrawal Suppression Dominance Compromise Integration/Collaboration To reduce conflict behavior: Limited communication Structural separation Bureaucratic authority (use of) To encourage cooperative behavior: Job rotation Inter-group training Integration devices (e.g. problem solving teams, force to work together) Group think: (IL Janis) Psychological drive for consensus at any cost, that suppresses dissent and appraisal of alternatives in cohesive decision making groups Symptoms of group think: Moral blindness (might is right) Perception of unanimity Strong group pressure to quit dissent Rationalization for inconsistent facts. Mutual support to guard the decision. Group subculture: Subcultures are cultures which exist within cultures. Characteristics: Group share distinctive way of life, beliefs. Learned from others in the group. Way of life has somehow become traditional. Political behavior: Organizations are political systems because people within them have their own objectives and priorities. Political behavior is concerned with competition, conflict, rivalry and power relationships in organization. Political Game: Mintzberg identifies various Political Games played in organization which can be useful or harmful. Game resist authority Game to counter this resistance Game to build power basis (control over resources and superiors, colleagues, subordinates etc.) Game to defeat rivals (interdepartmental) Game to change the organization At senior level political activities occur in following cases Allocation of resources. Management Succession Interdepartmental coordination Structural change

(if conflict is trivial) (preserve working relations despite minor conflicts) (application of power to settle the conflict) (bargaining, negotiating, conciliating) (emphasis must be put on task and individuals must modify behavior)

Chapter 19 & 20 : Change Management and Changing Environment

Change Types of change: Changes in environment (Cause) Changes in organization (Effect) Changes in products/services Changes in technology and working conditions Changes in management and working relations Changes in organizational structure and size Change is small and gradual whereas Transformation is crucial and significant.

Factors forcing change:

Environmental factors: SLEPT Porters 5 competitive forces Changes in Technology: Computerization New products Better MIS Change in Working conditions: New offices Varied work times Emphasis on health Govt. regulations Change in Management: New style of leadership Participation in decision making Collaboration between management staff & unions Change in Personal policies: Change in rules and procedures (e.g. smoking) Promotion, transfer, training , development Change in structure and size: Due to Takeovers Delegation of authority Centralization Downsizing

Changes may occur due to Threat of new entrants Bargaining power of suppliers Bargaining power of customers Threat of substitutes Rivalry between competitors

Nature of strategic change: Incremental Change may be Transformational Reactive Management may Be Pro-active Step change Planned change Emergent change

Types of Changes

Model for change: Determine need/desire for change in a particular area. Prepare tentative plan (via Brainstorming) Analyze probable reactions to change. Make a final decision (Coercive or Adaptive) Establish time table for change. Speed of implementation will depend on: Type of change (Coercive, Adaptive or Managed resistance change) Reaction of people (Acceptance, Indifference, Passive resistance, Active resistance) Driving and Restraining forces (Force Field Analysis) Communicate the plan for change Implement, review and modify change. Review the change Approaches to change: i) Unfreeze Move /Shake Refreeze ii) Adaptive change approach iii) Coercive change approach iv) Using Change agent v) Integrative VS segmentalist vi) Theory E & Theory O Resistance to change Active resistance passive resistance

Force Field Analysis: (Lewin) It is an interplay of restraining and driving forces that keeps things in equilibrium. Introducing change: 3 factors to consider to minimize resistance. Pace of change: Adapt strategy according to time available. Manner of change: Resistance should be welcomed. Reasons and results of change should be circulated. Change must be sold to people concerned. Individuals must be helped to learn. Scope of change: Small or Transformation. Change process: (by Lewin/Schein)

Unfreeze existing behavior: Most difficult and neglected stage. Selling the change. Give motive for change. Behavior change: Identify new behavior. Encourage individuals to own change. Refreeze new behavior: Through positive or negative reinforcement Effect of change on People: Physiological effect (e.g. pattern of shift working affect eating, walking and sleeping habits) Circumstantial effect (e.g. working environment and working relations) Psychological effect (e.g. feeling of disorientation, Insecurity, risk of rejection, feeling of misfit) Effect on Self concept (New psychological contract, Uncertainty affects sense of competence) Changing culture: Hamper Turner suggests 6 modes of intervention: 1. Find the dangers (locate black sheeps) 2. Brings conflicts in open. 3. Discuss culture with members (play out corporate drama) 4. Reinterpret the corporate myths. 5. Look at symbols, images, rituals. 6. Create a new learning system. Pattern of unhealthy culture: (by Edwin Baker) Flourished initially by founder. Founder retired, employees become rigid and insular. Speed, innovation, flexibility, concern for survival and customer disappeared. Formalization Departmentalism/ Sub optimization Coercive actions needed to compete. Organizational life cycle: Handys sigmoid curve: Application of concept of lifecycle to organization with 4 broad stages: 1. The organization is established. 2. Organization grows in size and scope. 3. Period of maturity 4. Organization begins to decline. Such a lifecycle is not inevitable, if organization is able to adapt.

Greiners growth model: (Growth & Organisational Development) As an organization ages, it grows in size. This growth takes place in 5 discrete phases. Each phase has 2 characteristics i.e. Evolution (distinctive factor that directs growth) and Revolution. (crisis to pass to enter next phase)

Growth (Move Stage) Crisis (Unfreeze Stage)

Phase 1:

(Focus) Evolution (Small organization focusing on operations, personnel issues and innovation) Revolution (Need for leadership skills) (Management/group) Evolution (Management is professionalized, there are more employees but less enthusiasm) Revolution (delegation is problem; lack of detailed control; no initiation) (System) Evolution (decentralized decision making) Revolution (no coordination between departments, sub optimization occurs) (Internal Controls) Evolution (Internal control systems and procedures are developed for coordination and optimal use of resources) Revolution (new procedure inhibits useful actions) (Communication / collaboration) Evolution (Increased informal collaboration; control is cultural rather than formal) Revolution (Crisis of psychological saturation in which individuals become exhausted by teamwork)

Phase 2:

Phase 3:

Phase 4:

Phase 5:

Criticism on lifecycle models: Formation could also be by Merger or Joint venture. i.e not always founded by visionary ppl. Too many issues for growth and control. (i.e org. structure, org. culture) Growth is not the same as effectiveness. (i.e not a normal state of affair) No idea of time scale involved in any stage. (i.e Linear development) Growth seen as linear development over time; there might be different rates of growth at different times and even loss. Model does not clearly indicate relationship with environment. (i.e it ignores environment) Effect of competition in market is also ignored. Measurement of Growth: (how Adamjee is the largest insurance co.) Sales revenue Profit (in absolute term or ROCE) No. of goods/services sold. No. of outlets No. of employees No. of countries reached. No. of markets served.

Chapter 22 : The evolution of marketing concept

the right product or service to the right customer, at the right price, at the right time and right place Marketing Department: Functions (Research, Demand, Design, Selling) Marketing Environment: PESTEL (Political, Economical, Social, Technological, Ecological, Legal) Chapter 1- Introduction Marketing, : Managerial definition: Managing profitable customer relationships, by delivering superior value to customers. Social definition: a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Core Marketing concepts: Market: A market is the set of actual and potential buyers of a product. Needs, wants and demands: Needs are fulfilled : a state of felt deprivation. Wants are satisfied : the form taken by a human need as shaped by culture and individual personality. Demands are extinguished : Human wants that are backed by buying power. Marketing Offer: Combination of good-service offered to market to satisfy need or want. Value and Satisfaction Customers perceived value is the difference between the values that the customer gains from owning and using a product and the costs of obtaining the product. Satisfaction is whether performance meets or exceeds expectations. Exchange, Transaction and relationship: Exchange is an act of obtaining a desired object from someone by offering something in return. Transaction is a trade of value between two parties. Elements of Marketing: Company Supplier Market Intermediaries Competitors ENVIORNMENT End user

Customers life time value: Value of entire stream of purchases by customer over his lifetime. Customer Equity: Total lifetime value of all of companys customers. Marketing Management: Marketing management has four functions: Analysis, Planning, Implementation and control. Demarketings aim is to reduce demand temporarily or permanently. It is done when product is not feasible from supplier or customers point of view. i.e intentional and non-intentional reduction in demand. Marketing Management Orientations The production concept holds that consumers will favor products that are available and highly affordable and that management should, therefore, focus on improving production and distribution efficiency. The product concept states that consumers will favor products that offer the most quality, performance, and features, and that the organization should, therefore, devote its energy to making continuous product improvements. The selling concept is the idea that consumers will not buy enough of the organizations products unless the organization undertakes a large-scale selling and promotion effort. The marketing concept holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. The societal marketing concept holds that the organization should determine the needs, wants, and interests of target markets. It should then deliver the desired satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumers and the societys well-being.

CONCEPT Production concept Product concept Selling concept Marketing concept

CUSTOMER WANTS Availability and affordability Quality, performance, features No feelings to purchase Needs & wants of target market

COMPANY SHOULD Improve production, distribution efforts Continues product improvement Large scale selling, promotion Effective & efficient than competitor

Two Steps of marketing: Determine Need, Wants And Interest Of Target Market Then Satisfy Them Effectively And Efficiently Marketing Vs. Selling: Selling concept Marketing concept Starting point Factory Market Focus Existing products Customer needs Means How to increase demand How to satisfy demand Ends Profits through sales volume Profits through satisfaction customer

Despite adoption of market oriented approach; there is need for sales force: To create awareness To convince to buy from company, not from competitors To reassess benefits to customers To convince that average customers requirements are met Problems in introducing the marketing approach: Understand what marketing orientation actually means Organizational, structural and cultural changes are required. Assessment of Product, logistic, level of services and marketing techniques Organization wide dedication Types of Marketing Working together as whole Strategic Marketing Scope of Marketing = Marketing Planning Tied with corporate strategy e.g which product of market to choose Tactical Marketing Short term, and focuses on place, promotion, price

Marketing Vs. R&D department: Marketing has commercial and competitive atmosphere whereas R&D has University atmosphere with open-end work and consumption of substantial resources. Customers needs and change in product specification tighten them. Consumerism is a term describing importance and power of consumers. Customer Database Customer Relationship Management: Customer Portfolio Defined narrowly as a customer database management activity. CRM is managing detailed information about individual customers and carefully managing customer touch points to maximize customer loyalty. Companies look for touch points. These includes customer purchases, sales force contact, service, and support calls, Web site visits, satisfaction surveys, credit and payment interactions, market research studies, etc. To be effective in CRM, the marketer must forego short-term profit maximization on individual transactions. Elements of Marketing Mix: Controllable: Product Price Place Promotion Uncontrollable: (Marketing environment) SLEPT Analysis How to Get Customer Touch Points: Purchasing trend Payment trend Service obtaining trend Family trend History Support calls Website visits Emotional attachments

Porters 5 forces model i) ii) iii) iv) v) Service industry: People Processes Physical evidence Important Points for discussion questions: 1. Expectation = Perceived value 2. Customers often do not judge products value and cost accurately and objectively. 3. A Customer buys the highest perceived value. 4. Satisfied customers give benefits of i. Loyal ii. Being less price sensitive iii. Talk favorably 5. Two fold object of marketing i. Retain existing customer by providing satisfaction ii. Attract and grow new customers by promising superior value Marketing Approaches Push Approach Focused on pushing goods to Reseller and customer. The focus Is on sale volumes. Pull Approach Focused on pulling resellers and customers by satisfying them, Fulfilling their demands to attract Them to the company Threat of new entrants Threat of substitutes Bargaining power of customers Bargaining power of suppliers Rivalry among competitors

Three Important Concepts: Value-Chain : How activities of organisation contributes towards creating value in goods or services. Internal Customer Concept: Department in an organisation treat each other as customers, it encourages serviceoriented attitude. Hence when every department is satisfied ultimately the quality will be enhanced. Relationship Marketing: To build long term relationship with existing customers, rather than focusing on products, focus is on relationship i.e selling more products to same customer, rather than to new customers. Model of Consumer behavior: A model of consumer behavior helps managers answer questions about what, where, how and how much, when and why they buy. The stimulus-response model of buyer behavior shows that marketing (made up of the four Psproduct, price, place, and promotion) and other environmental stimuli (Micro and Macro) center on the consumers black box and produce certain responses. Marketers must figure out what is in the consumers black box. Marketing and other environmental stimuli: (i.e Stimulus response model) Already discussed Consumers Black box: The black box has two parts. 1). The buyers characteristics influence how he or she perceive and react to stimuli. (Uncontrollable) 2). The buyers decision process itself affects the buyers behavior. (Semi-controllable) Characteristics affecting consumer behavior: Marketer can not control them but should learn them. Cultural o Culture o Subculture o Social class

Social o Reference group o Family o Roles and status Personal o Age and lifecycle stage o Occupation o Economic situation o Lifestyle o Personality and self concept Psychological o Motivation o Perception o Learning o Beliefs and attitudes Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and other important institutions. Subculture is a group of people with shared value systems based on common life experiences and situations. Subcultures might be nationality groups, religious groups, racial groups, or geographic area groups. Social classes are societys relatively permanent and ordered divisions whose members share similar values, interests and behaviors. Reference group has a direct (face to face) or indirect points of comparison or reference in forming a persons attitudes or behavior. Aspirational group is one to which an individual wishes to belong. Opinion leader is a person within a reference group who, because of special skills, knowledge, personality or other characteristics, exerts influence on others. Personality is a persons unique psychological characteristics that lead to relatively consistent and lasting responses to his or her own environment. A motive (drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. Learning is changes in an individuals behavior arising from experience. Belief is a descriptive thought that a person holds about something. Attitude is a persons consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or idea.

Purchase Decision Process i) Problem Recognition: Perceiving a need. It can be stimulated by: Consumers depleted assortment (e.g. empty paste) or Marketing efforts ii) Information Search: To clarify options available to consumers. o Internal search: Scanning of memory (experience) or knowledge about solution of problem/need sufficient For frequent/regular purchases. o External search: Personal sources (family, friends, neighbors, acquaintances) Commercial sources (advertisement, dealers, websites, salesmen) Public sources ( Mass media, consumer rating organizations) For new products. Word of Mouth or Personal sources has 2 major advantages (through satisfied customers): 1. Convincing, i.e. of consumers by consumers for consumers 2. Costs are low. At the end of this stage, customer arrives at a set of final brand choices. iii) Evaluation of alternatives: Assessing value. Customer may be interested in many attributes. E.g. for Camera Picture tube Ease of use

Size Price However sometimes consumer has to base his decision only on one attribute. iv) Purchase Decision: [The best rated camera will be bought.] v) Post-Purchase behavior: Dissatisfied Satisfied Delighted A policy by firms is to understate performance because customers are delighted with better-than-expected performance. Why satisfaction of Customer/study of this stage is important: 1. To attract new customers cost more than to retain current customers. 2. Satisfied customers are less price sensitive. 3. Satisfied customers tell others (words of mouth). Bad words travel farther and faster. Decision process for new product i.e. stages in adoption process (from hearing to adoption): 1. Awareness: 2. Interests: seek information i.e. through external sources 3. Evaluation: whether to try or not 4. Trial: on small scale to improve estimate of value 5. Adoption: decides to make full and regular use

Chapter 2 Company and marketing strategy Strategic Planning Process: Strategic Planning is the process of developing and maintaining a strategic fit between organizations goals and capabilities and its changing marketing environment. Following are steps of strategic planning: 1. Defining mission 2. Analysis of Business Portfolio 3. Setting strategic objectives and goals 4. Developing Competitive strategies i. Porters 5 forces ii. Cost-Differentiation-Focus Triangle iii. Growth Strategies (product/market expansion grid) 5. Developing detailed marketing and departmental plans and strategies Mission Statement: This is a statement of organizations purposes- What it wants to accomplish in the larger environment. It should be market oriented, specific, realistic, motivating and consistent with market environment. e.g. To provide best satisfaction to customers and fair return on investment, keeping environment healthy and clean and promising secure future to employees Designing the business portfolio: Business portfolio is the collection of businesses and products that make up the company. Business portfolio planning involves 2 steps: 1. Analysis of current business portfolio. 2. Developing strategies 1. Portfolio Analysis: A tool by which management identifies and evaluates SBUs to determine which business should receive more, less or no investment. BCG growth-share matrix is used to evaluate a companys SBUs in terms of market growth rate and relative market share. SBU is a unit of company that has a separate mission and objectives and that can be planned independently from other company businesses. 2.Developing strategies for growth and downsizing: The product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through:

Existing Market New Market

Existing Product Market Penetration Market Development

New Product Product Development Diversification

Downsizing: When a firm reduces business portfolio by eliminating products or business that is not profitable or no longer fit its overall strategy.. Setting strategic objectives and goals: Firms mission is translated into set of objectives for the current period for each SBU. Developing plans and strategies Marketing Process: The marketing process is the process of 1. segmenting the market, 2. selecting target markets, 3. marketing positioning 4. developing the marketing mix, and 5. managing the marketing effort. Marketing mix: The marketing mix is the set of controllable factors that the firm blends to produce the response it wants in the target market. i.e. Product, Price, Place, Promotion Managing the Marketing Effort: Marketing Management has four functions of analysis, planning, implementation, and control.. 1. Marketing Analysis o Analysis of companys Strength and Weakness [Internal] o Analysis of environments Opportunities and Threats. [External] 2. Marketing Planning involves deciding on marketing strategies to attain its overall strategic objectives of company. 3. Marketing Implementation is the process that turns marketing strategies and plan into marketing actions in order to accomplish strategic marketing objectives. Implementation addresses the who, where, when, and how. 4. Marketing control is the process of evaluating the results of marketing planning and its implementation, and taking corrective action to ensure that marketing objectives are attained. Two broad forms of control are important: 1). Operating control involves checking ongoing performance against the annual plan and taking corrective action when necessary. 2). Strategic control involves looking at whether the companys basic strategies are well matched to its opportunities. The major tool for accomplishing this form of control is the marketing audit. The marketing audit is a systematic analysis and evaluation of organizations marketing position and performance. It may cover all marketing activities or some of them. Audit will focus on 3 things: 1. Marketing capabilities 2. Performance evaluation (are sales meeting forecasts?) 3. Competitive effectiveness (competitive advantage, product differentiation) Partnership relationship management: Working closely and jointly with Other departments of company Other companies to bring greater value. Value Chain and Value delivery network: Value Chain is series of departments within the company carrying out value-adding activities e.g. Designing Producing Marketing Delivery Supporting Value delivery network is network of suppliers, company, intermediaries, and consumers who partner with each other to improve performance of entire system.

Chapter 23 : Strategic Marketing & Planning

1. Market Segmentation
Market segmentation is dividing a market into smaller group of distinct buyers who have different needs, characteristics or behavior and might require different marketing mixes. Market segment is a group of buyers who respond in a similar way to a given set of marketing mix.

Basis of segmenting markets: Segmenting consumer market Geographic segmentation calls for dividing the market into different geographical units such as states, regions, counties, cities, or neighborhoods. Demographic segmentation calls for dividing the market into groups based on variables like age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Psychographic segmentation calls for dividing a market into different groups based on social class, lifestyle, or personality characteristics. There are four possible lifestyle categories: 1. Upward mobile, ambitious i. Seek better or more affluent lifestyle ii. Higher standard of living iii. Will try new products 2. Traditional and sociable i. Compliant and conform to group norms ii. Purchasing pattern will be conformist 3. Security and Status seeking i. Stresses security and ego-defensive needs ii. Purchase of known and established products and brands e.g. Insurance 4. Hedonistic preference i. Emphasis on enjoying life now ii. Immediate satisfaction of needs and wants Behavioral segmentation involves dividing a market into groups based on consumer knowledge, attitudes, uses, or responses to a product. E.g. Occasion segmentation: dividing market according into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use purchased item. Benefit sought: Dividing market into groups according to different benefits that consumers seek from the product. Consumers seek unique combination of benefits e.g. for a laundry detergent, from cleaning and bleaching to economy, fresh smell, strength or mildness etc. User status and user rate Loyalty status Segmenting Business Markets Demographic segmentation Industry (which industry) Company size (what size) Location Operating variables

Technology (what technology to focus) User- nonuser status (heavy, medium or light user) Customer capabilities (many services or few services)

Purchasing approaches Purchasing function organization (centralized or decentralized) Power structure Nature of existing relationship General purchasing policies (leasing, service contracts, or sealed bidding)

 Situational factors

Purchasing criteria (quality, service or price)

Urgency (quick delivery/service?) Specific application Size of order

Personal characteristics Buyer-seller similarity of values Attitude towards risk (risk taking or averse) Loyalty (to companies who show high loyalty to suppliers) Segmenting International Markets Companies can segment international markets using one or more of a combination of variables. The chief factors that can be used are: 1). Geographic location: location or region 2). Economic factors: Population income or level of economic development 3). Political and legal factors: Type / stability of government, monetary regulations, amount of bureaucracy, etc. 4). Cultural factors: Language, religion, values, attitudes, customs, behavioral patterns. Requirements for Effective Segmentation Substantialsegment must be substantially large or profitable. Accessiblesegment must be reached and served easily. DifferentiableIt must be conceptually distinguished and should have the ability to respond differently to different marketing mix elements and programs. ActionableIt should be possible to design effective programs for attracting and serving market segment. MeasurableSize, purchasing power, and profiles of a market segment should be measurable.

2. Target Marketing
Target market is a set of buyers sharing common needs or characteristics that the company decides to serve. Target marketing strategies: (Product affecting Promotion) The firm can adopt one of four target marketing strategies: A. Undifferentiated marketing (or mass marketing) a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer B. Differentiated marketing (or segmented marketing) a market-coverage strategy in which a firm decides to target several market segments and designs a separate offer for each. C. Concentrated marketing (or niche marketing) a market-coverage strategy in which a firm goes after a large share of one or a few segments or niches. D. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals (individual marketing) and local customer groups (Local marketing). Market offers can be differentiated along the lines of: Product Service Channels People Image Considerations while choosing strategy: Company, resources and objectives Competitor, strategies Product o stage in the life cycle o variability Market, variability Evaluating Market Segments Segment size and growth Segment structural attractiveness Level of competition

Substitute products Power of buyers Power of suppliers Company objectives and resources

3. Product Positioning
Product positioning is imaging the product in the minds of consumers relative to competing products. Positioning task (or choosing a positioning strategy) consists of following four steps: 1. Identifying possible competitive advantages 2. Choosing right competitive advantages 3. Selecting an overall positioning strategy 4. Developing a positioning statement 1) Identifying possible competitive advantages: Competitive advantage (making a difference) is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. 2) Choosing the right competitive advantages: How many to promote: Only one difference. Aggressive approach More than one differences. Where more than one firms are claiming to be the best at same attribute. However it risks disbelief and a loss of clear positioning. Which ones to promote: Important for buyers Distinctive than competitors offer Superior Communicable and visible difference Competitors can not copy easily Affordable for buyers Profitable for company 3) Selecting an overall competitive positioning strategy: What offer to make in relation to competitors offer (Use 2x2 or 3x3 Grid) Price More Same Premium brand More Quality Same Less Cow bow brand Average

Less Super bargain brand Bargain brand Economy brand

Other strategies are: More for same (Penetration) Same for less Less for much less 4) Developing positioning statement: Positioning statement is a statement that summarizes company or brand positioning, it takes following form: To (target segment and need) our (brand) is (concept) that (point of difference) e.g. To young, active, soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

Chapter 24 : Marketing Research

Marketing Research Marketing Research: It is the objective gathering, recording, and analyzing of all facts about problems relating to the transfer and sales of goods and services from producer to consumer or user Marketing research helps in a. Regulating systems b. Reducing risks c. Decision making Types of Marketing Research: Market research: Study and analysis of Characteristics of market Market share Market trends Sales forecasting for all products Market potential for existing products Likely demand for new products Product research: Comparative study between competitive products Studies into packaging and design Forecasting new uses for existing products Customer acceptance of proposed new products Development of new product lines Test marketing Price research: Analysis of elasticity of demand Analysis of cost and profit margins Effect of change in credit policy on demand Customers perception of price and quality Place (Distribution) research: The location and design of distribution centers Analyzing the packaging for transportation and shelving Cost of different methods of transportation and warehousing Dealer supply requirements Dealer advertisement requirements Promotion research: Analyzing the effectiveness of sales force Analyzing the effectiveness of advertising on sales demand Establishing sales territories

Research procedure: The marketing research process consists of following steps: 1. Defining the problem 2. Designing the research (basis of research objectives) 3. Collection of data 4. Analysis of data (Pre and Post testing etc) 5. Presentation of report 6. Management decision

Defining the problem and designing the research After the problem has been defined carefully, the manager and researcher must set the research objectives. Collection of data (Research work) Marketing Research data comprises of Primary Data (Field search) Secondary Data (Desk Search) Researchers usually start from secondary data. 1. Collecting secondary data: (Desk research) Secondary data collection is information that is neither direct nor specific. Sources of secondary data: Internal databases: (i.e. MkIS) Advantages Quick access Cheaper Regular & Reliable Confidentiality

Disadvantages Incomplete Wrong form Ages quickly Not expert

External sources: Information about Competitors (annual reports, press releases, web pages, business publications, advertisements etc.) Analyzing competing products Rival companies personnel (executives, engineers, sales force, purchasing agents) Trade suppliers Outside suppliers Online databases New patents or applications for patents

2. Collecting primary data:( Field research) Primary data is information collected for the specific purpose at hand. A plan for primary data collection calls for a number of decisions on Research approaches, Observational research Survey research Experimental research Research methods EPOS (Electronic Point of Sale system) DSS (Decision Support system) Data Warehousing Internet Contact methods, Mail questionnaires Telephone interviewing Personal interviewing Individual interviews Group interviews (including focus-group interviews) Online (Internet) marketing research Mechanical instruments i. People meters ii. Supermarket scanners iii. A galvanometer measures strength of interest or emotions aroused by a subjects exposure to different stimuli, such as an ad or picture. iv. Eye cameras are used to study respondents eye movements to determine at what points their eyes focus first and how long they linger on a given item.

Sampling plans As surveying the whole population would be too expensive & time consuming, so a sample is selected. Sample is a segment of population selected for marketing research to represent population as a whole. Sample should be a true representative of population and should not be biased Types of samples: Random sampling: Every member has a known and equal chance of selection) Non-random sampling: 1. Systematic (Every nth item is selected) 2. Stratified (Population is divided into mutually exclusive groups e.g. age groups and selecting random samples from each group. 3. Multistage (Process of subdividing population and selecting sample again and again till a suitable selection is made) 4. Quota (Different categories of populations are made and a specific quota from each category is selected) 5. Cluster (Investigators are told to examine every item in a small population that fits the required definition) Potential faults in sampling: Insufficient data Unrepresentative data Bias (where chance of occurrence is not equal) Omission of an important item in questionnaire Carelessness Misinterpretation of data 3Implementing the Research Plan This involves processing, and analyzing the information. 4Interpreting and Reporting the Findings Distributing the information: MkIS: Marketing Information System represent a systematic attempt to supply continuous, useful, usable marketing information within an organization to decision makers often in the form of a database. Audits: Trade audits: count of stock at wholesalers and retailers Retail audits: count of stock at retailers only

Marketing in the Digital age E.Business is the all electronic based information exchange within company or between companies and consumers using following platforms: Intranet Extranet Internet Intranet is a network that connects people within a company to each other and to the company network. Extranet connects a company with its suppliers, distributors, and other outside partners. Internet is a vast public web of computer networks, which connects users of all types all around the world to each other. E.Commerce is more specific than E.Business. It is the ability to buy and sell goods and services electronically primarily by internet. E. Marketing is the marketing side of E.Commerce. Company efforts to communicate about, promote and sell products and services over internet. It includes only Business and Consumers. Advantages:

Geographical reach Speed Information sharing of any kind e.g. text, audio, video, animation, graphics Shopping at home (Consumer) No physical barriers (Consumer)

Doing business 24 hours (Business) Paperless business (Business)

Disadvantages: Security concerns (consumer) Whom to complaint (consumer) What you see is sometimes not what you get (consumer) Sometimes physical presence is necessary e.g. smelling a perfume or fitting clothes (consumers) Logistic, shipping, distribution and delivery challenges (business) Availability of secure and affordable communication network

E.Business Models: Government Government Business Consumer G2G B2G C2G Business G2B B2B C2B Consumer G2C B2C C2C Employee G2E B2E X

B2C E.Commerce occurs when an average citizen interacts with a company (like Bata Pakistan or amazon.com) through a website to buy shoes or books online or making inquiries. B2B E.Commerce is companies doing business electronically with other businesses e.g. a business selling up, down or across the supply chain involving business partners. Such as All Pakistan Textile Association Mills B2E E.Commerce is use of intranet technology to handle activities that take place within a business. Using B2E E.Commerce employees collaborate with each other, exchange data and information and access in-house database, sales information, market news and competitive analysis. Its need arises when branching out and spreading business across geographical areas. E.g. H/O receiving and processing Timesheets, Expense Claims, and Absent forms. C2C E.Commerce is consumers selling goods directly to consumers in an auction process. E.g. EBay Chat rooms for information and advertisement Over personal websites Advertisement on E.news papers G2C E.Commerce is the use of E.Commerce technology by the government to handle activities electronically in which govt. is involved with. E.g. To publish and disseminate information by Govt. Change in address, marital or family status Submission of tax returns To cast vote Customization and Customerization: Customization is individualizing the marketing offer. E.g. taking measurement of jeans for a customer. Customerization is leaving it to individual customers to design the marketing offer, allowing customers to be prosumers rather than consumers. E.g. adding specific features to jeans like colorful patches. New technology in Distribution: DRTV Internet (B2C) o Websites o Email

Chapter 25 : Product
Product A product is anything that can be offered to a market for use, or consumption and that might satisfy a want or need such as soap. Product includes: Goods Services Other entities e.g. People, idea, places, organizations Services are a form of product that consist of activities, benefits offered for sale that are essentially intangible and do not result in the ownership of anything. such as a doctors exam. Levels of Products and services: The core product, What is the buyer really buying? The actual product may have as many as five characteristics that combine to deliver core product benefits. They are: Quality level.. Features Style and design. A brand name. Packaging. The augmented product includes any additional consumer services and benefits built around the core and actual products. a. Delivery and credit b. Warranty c. Installation d. After sale service Classification of products: 1. Consumer Products i. ii. iii. iv.

Convenience Shopping Specialty Unsought Types of consumer products

Marketing Consideration Consumer buying behavior

Convenience Frequent purchase Little planning Little effort and involvement Little comparison

Shopping Less frequent purchase Much planning Much effort & involvement Much comparison Higher Selective distribution in fewer outlets Advertising and personal selling Televisions Furniture Clothing

Specialty Special effort Little comparison Strong brand loyalty Low price sensitivity

Unsought Either no awareness or no interest

Price Place

Low Intensive distribution at convenient locations Mass promotion

Very high Exclusive distribution in only one or few outlets per market area Targeted promotion by producer and reseller Luxury goods e.g. Rolex watches

Varies Varies

Promotion

Examples

Tooth pastes Magazines

Aggressive advertising and personal selling Life insurance Red cross blood donation

2. Industrial (Business) Products,: i. Material and parts ii. Capital items iii. Supplies and Services

Key Decisions about product: Individual product o Standardized or adapted Market offers can be differentiated along the lines of: Product Service Channels People Image o Product attributes Tangible Quality Features Style and design Brand name Packaging Intangible Image Perceived value o Packaging & Labeling o Product support service Product Line Decisions o Product line length Product Mix/Assortment/Portfolio Decisions o Width (No. of product lines of a company) o Depth (No. of items per product line) o Consistency (how closely related the various product lines are in end use, production requirements, distribution channels, or in some other way. A brand is a name, sign, symbol, or design, or a combination of those that identifies the maker or seller of a product or service. Packaging is the activity of designing and producing the container or wrapper for a product. Labeling is also part of packaging and consists of printed information appearing on or with the package Product support services are the services that augment actual products. A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer group, are marketed through the same types of outlets, or fall within given price ranges. Product line length is the number of items in the product line. Long/short depends on increase of profit by adding/deleting items. An organization with several product lines has a product mix.

Product-Market Matrices: It is a simple technique used to classify a Product/Business according to the features of the product and market to determine the Relative positions of Businesses/Products and Strategies for resources allocation between them. There are 2 commonly used techniques: 1. Boston Consulting Groups Growth-Share Matrix 2. General Electric Business Screen (GEBS) 1) BCG growth-share matrix is used to evaluate a companys SBUs/Product in terms of market growth rate and relative market share. Star Needs heavy investment to finance rapid growth potential Cash Cow Established, successful Needs less investment Question Mark Requires a lot of cash (Problem Child) Dog Enough to maintain themselves No future Relative market share

Growth rate (%age)

After determination of position of a SBU in BCG matrix, following strategies are available: Build Hold Harvest Divest The BCG and other formal methods revolutionized strategic planning. Such approaches, however, have limitations: 1). They can be difficult. 2). They can be time consuming. 3). They can be costly to implement. 4). Management may find it difficult to define SBUs and measure market share and growth. 5). The approaches focus on classifying current businesses but provide little advice for future planning. SBU is a unit of company that has a separate mission and objectives and that can be planned independently from other company businesses.

2) General Electric Business Screen (GEBS): This approach is like BCG matrix but includes a broader range of company and market factors. Matrix classifies products according to: Industry attractiveness (market size, market growth, competitive climate, stability of demand, ease of market entry, industry capacity, level of investment, nature of regulation, profitability) Company strength (market share, company image, production capacity, production costs, financial strengths, product quality, distribution systems, control over prices/margins, benefits of patent protection) Classification is highly subjective assessment. Strategy for an individual SBU/Product is then suggested on the basis of the position of the matrix. Market attractiveness Attractive Average Invest for growth Invest selectively for growth Invest selectively and build Develop selectively; build on strength Develop selectively for income Harvest

Unattractive Develop for income Harvest or Divest Divest

Business Strength

Strong Average Weak

Nature and Characteristics of a Service 1). Service intangibility (cannot be touched) 2). Service inseparability (from provider) 3). Service variability (standard will vary each time) 4). Service perishability (cannot be stored) 5). Service ownership (not transferred to service taker) Marketing mix of services: Along with 4 normal Ps, 4 extra Ps are also required i.e. 1. Personal selling (greater reassurance, information and reliance required) 2. Process 3. People (sometimes people and services are inseparable; first line importance) 4. Physical evidence ( remedy for intangibility) Service Profit Chain: Profit of service firm is linked with satisfaction of employees and customers i. Internal service quality ii. Satisfied and productive service employees iii. Greater service value iv. Satisfied and loyal customers v. Healthy service profits and growth It requires more than just traditional external marketing: External marketing (B2C) Internal marketing (B2E) Interactive marketing (E2C)

Product Development: (New Product) What is a new product: That opens up an entirely new market That replaces an existing product That broadens the market of an existing product. When an old product can be new: Introduced into a new market Packaged in different way Different marketing approach is used Mix variable is changed. Degree of newness: Unquestionably new product Partially new product Major product change Minor product change Sources for new products: Licensing Internal product development Customers External innovators Competition Acquisition Academic institutions Patent agents Why so many new products fail: 1). Overestimated market size. 2). Poorly designed product. 3). Poorly priced, placed, promoted or positioned. 4). Result based on poor market research findings. 5). The costs of producing the product may have been higher than expected. 6). Sometimes competitors fight back harder than expected. 5 product characteristics affecting rate of adoption for new product: Relative advantage i.e. new technology making it superior Compatible with values and experience of potential consumers Ease of understand and use Trial option Communicability of results of using product. Product Development Process 1. Idea generation which is the systematic search for new product ideas rather than haphazard? a. Internal sources (R&D) b. External sources (customers, competitors, distributors, suppliers) 2. Idea screening Evaluation against criteria to spot good ideas and drop poor 3. Concept development and testing Product concept is a detailed version of the new-product idea stated in meaningful consumer terms. Concept testing involves testing the concepts with a group of target consumers to find out if the concepts have strong consumer appeal. 4. Marketing strategy development A marketing strategy statement should be produced. This is a statement of the planned strategy for a new product that outlines the target market, positioning, market mix and market share, long term sales, profit goals and marketing budget for the first few years. 5. Business analysis Review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the companys objectives

6. Product development Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product 7. Test marketing The basic purpose is to test the product itself in real markets. 8. Commercialization Introducing a new product into the market. Stages of Product Life Cycle (PLC) 1. Introduction 2. Growth 3. Maturity 4. Decline Exceptions are Fad, Style, and Fashions. Strategies change with change in stage of PLC. Product life cycle- Characteristics, objectives and strategies: Introduction Characteristics Sales Cost Profit Customers Competitors Marketing objectives Low High per customer Negative Innovators Few Create product awareness and trial Growth Rapidly rising Average cost customer Rising Early adopters Growing Maximize share [very nice table] Maturity Peak sales Low cost per customer High profit Middle majority Stable number beginning to decline Maximize profit defending market share Diversify brand and model Price to match or beat competitors More intensive distribution Increase to encourage brand switching Stress brand differences and benefits Decline Declining sales Low cost per customer Declining profit Laggards Declining number Reduce expenditure and milk the brand

per

market

Strategies Product

Offer Basic product

Price

Use cost-plus

Place Promotion

Selective distribution Use heavy promotion sales

Offer product extensions, service, quality Price to penetrate/skim market Intensive distribution Reduce to take advantage of heavy demand Mass market (build awareness)

Phase out weak items or Repositioning Cut price

Go selective; phase out unprofitable Reduce to minimal level Reduce to needed to core-loyals level retain

Targeting

Early adopters (build awareness)

Assessment of PLC: Regular review of existing products Analysis of past trends History of other products Market research Analysis of competitors Estimate of future life and profitability should be discussed with experts R&D Deptt. ----------------------Product life Marketing staff-------------------Price and demand Management accountant------- Cost Decide to continue, stop or change strategy. Criticism on PLC approach: Relevant only for products where consumer demand is high Underlying stage of PLC is determined by marketing actions. Stages can not be easily defined. S shape does not always occur in PLC Strategic decisions can change PLC

Packaging: Functions of packaging: Protection Quality standard (e.g. expiry) Distribution Selling (Advertising, attractive, motivating,) User convenience (value depicting) Conforms to govt. regulations (e.g. ingredients, price, expiry etc.) Usually goods are packaged in more than one layer. Qualities required of a packing: Size and variety should be minimized. Attractive and distinctive to target consumer. All functions of packing are also required. Cost effective Fitting for storage purposes Product Portfolio Planning All product lines and items that company offer for sale [Overall product range of organization] Width (No of product lines carried by Company) Depth (No of items carried divided by No of product lines) Consistency (closeness of items in range in terms of marketing/production characteristics)

Chapter 26 : Price
PRICING CONSIDERATIONS AND APPROACHES Price is the sum of the values that consumer exchange for the benefits of having or using the product. Only element to produce revenues Most flexible element Could be Fixed or Dynamic Price Setting Cost Competition Demand (Elastic / Inelastic) Common Pricing Mistakes 1). Pricing is too cost-oriented. 2). Prices are not revised often enough to reflect market changes. 3). Prices do not take into account the other elements of the marketing mix. 4). Prices are not varied for different products, market segments, and purchase occasions. Internal Factors Affecting Pricing Decisions 1. Marketing objectives 2. Marketing mix strategies 3. Costs 4. Organizational considerations 1. Marketing objectives: Survival Current profit maximization Market share leadership Product quality leadership Other objectives To prevent competitors To keep loyalty and support of reseller To avoid govt. intervention To create excitement or draw attention of new customers To help the sale of other product in product line 2. Marketing mix strategy: Price decisions must be coordinated with product design, place, and promotion decisions to form a consistent and effective marketing program. Companies often make their pricing decisions first and then base other marketing-mix decisions on the prices that they want to charge. Target costing is positioning of product on price and then tailoring other marketing decisions to the price they want to charge. But remember that consumers rarely buy on price alone. 3. Costs Set the floor for the price that the company can charge. (price below this is not acceptable) Companies want to charge a price that covers all its costs for producing, distributing, and selling the product, and provides a fair rate of return for its effort and risk. To price wisely, management needs to know how its costs vary with levels of production. The experience curve (or the learning curve) indicates that average cost drops with accumulated production experience 4. Organizational considerations. Management must decide within the organization who should set prices. Small companies: CEO or top management Large companies: Divisional or product line managers Some companies have pricing departments

External Factors Affecting Pricing Decisions 1) Nature of market and demand 2) Competitors costs, prices, and offers 3) Other environmental elements 1) Nature of market and demand Pure competition No single buyer or seller has much effect on the going market price. Monopolistic competition Market consists of many buyers and sellers who trade over a range of prices because they can differentiate their products. Oligopolistic competition Market consists of a few sellers who are highly sensitive to each others pricing and marketing strategies. Pure monopoly Monopolists do not always charge a full price because: 1]. They do not want to attract competition. 2]. They want to penetrate the market faster. 3]. They fear government regulation. Price-demand relationship Demand curve Price elasticity of demand Factors affecting Demand / Price elasticity of demand/ Consumer choice Price Price of substitute and complementary goods Consumer income Taste and fashion Advertisement and Training After sale services and grant of credit 2) Competitors costs, prices, and offers 3) Other environmental elements a). Economic conditions (such as boom or recession, inflation, or interest rates). b). Resellers policies (reactions) must be considered especially if they do not match the suppliers. c). The government (because of its regulatory power) must be considered. d). Social concerns may affect the firms short-term sales, market share, and profit goals.

General Pricing Approaches/Methods

Price will be set between 2 extremes. Roof / Ceiling i.e. Customers value Floor i.e. Cost Price will be set between these 2 levels after consideration of Competitors prices and Other internal and external factors Approaches

Cost based pricing Cost plus pricing Break even or target profit pricing Customer value based pricing (i.e. demand based ) Competitive based pricing Going rate pricing Sealed bid pricing

Why Cost based pricing is popular 1. Sellers are more certain about cost than demand 2. Price is simplified being tied to cost. 3. Fairer to both buyer and seller 4. Price competition is minimized New-Product Pricing Strategies Market-Skimming Pricing Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price. Product image must support price Competitors must not be able to enter the market Prices are lowered when demand falls

Market-Penetration Pricing Setting a low price for a new product to attract a large number of buyers and a large market share. High volume reduces cost Spare resources are utilized Eliminates competition May promote related products.

Product Mix Pricing Strategies Product Line Pricing Setting price steps between product line items. Kodak prices different types of films at different level. Optional-Product Pricing Pricing optional or accessory products sold with the main product Car buyer may choose to order power windows, cruise control, and a CD changer. Captive- product pricing. Setting a price for products that must be used along with a main product. Examples of captive products are blade with razors, game cassettes with system. By-Product Pricing Pricing low-value by-products to get rid of them Product Bundle Pricing Pricing bundles of products sold together Theater and support teams sell season tickets.

Price adjustment strategies: To account for various customer differences and situation differences Discount and allowance pricing Reduction in price to reward customer response for paying or promoting product. Segmented pricing Adjusting prices to allow for differences in customers, products, or locations. Psychological pricing Seller considers the psychology of prices and not simply the economics e.g. consumers usually perceive higher priced products as having higher quality in the absence of past experience or information. Promotional pricing Temporarily reducing pricing to promote short term sales. Geographical pricing Adjusting prices to account for the geographic location of customers. International pricing Adjusting prices for international markets. Assessing and responding to competitors price changes Has competitor cut prices?

Hold current price and continue to monitor competitors prices

N Y Will lower price negatively affect our market share and profit? N Y Can/Should affective action be taken? Y N Reduce price
Raise perceived quality Improve quality and reduce price Launch low-price fighting brand

Some other concepts that could not be covered here in Details Price Leadership Price elasticity of demand Absorption & Marginal Costing and breakeven analysis

Chapter 27 : Place
Place / Distribution Channels / Delivery System Place is selection of distribution channels to deliver goods to consumers. Key issues in Distribution Channel:: Coverage and density (Exclusive, Selective, Intensive) Channel length (no. of intermediaries between consumer and producer) Power and alignment of different elements Logistic and physical distribution Support and after sale service Channel design decision (Customer, Product characteristics, Distributor characteristics, Channel choosed by competitors, Suppliers own characteristics) Nature and Importance and Functions of Marketing Channels: Marketing Channel (distribution channel) is a set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by consumer or business user. Each organization performs a specialized and specified role. Importance includes: 1. Channel decisions affect other marketing decisions 2. Competitive advantage could be gained. 3. Involves long term commitments to other firms 4. Channel members add value through a. Their contacts, experience, specialization and scale (economies) of operation. b. Matching supply and demand c. Bridging Time, Place and Possession gap Functions performed by members of marketing channel: Functions that help to complete transactions: 1. Information (Marketing research and intelligence information) 2. Promotion (Developing and spreading persuasive communication) 3. Reselling (Finding and communicating with prospective buyers) 4. Matching (shaping and fitting to the buyers needs e.g. assembling, packing) 5. Negotiation Functions that help to fulfill the completed transactions: 6. Physical distribution (Transportation, storing and Inventory management) 7. Financing (Acquiring and using funds) 8. Risk taking (Assuming the risk of carrying out the channel work) You can eliminate middle man, but not middle mans functions Types of Distribution channels: Direct distribution channel has no intermediary. Intermediaries dont get their share. Intermediaries dont get dominant Own sales force is best for geographically centered buyers. Indirect distribution channel has one or more intermediaries. Where resources are insufficient to finance large sales force. Where no local knowledge of market Suitable for geographically spread buyers.

Types of Distributors: a) Franchisees: Trade in name of parent in exchange of initial fee + share of sales volume

b) Distributors/Dealers: Buy and resell at profit Dealing in narrow range of products; Sometimes exclusive distribution or dealing only one manufacturer; Also provide after sale services. c) Agents: (vs. Dealers) Consigned for commission on sale) d) Wholesaling: Selling goods to business buyers e) Retailing: Selling goods to consumer buyers f) Multiple Stores: Sell under the own label brand name How do channel firms interact and organize to do the work of the channel: Channel Conflict is disagreement among marketing channel members on goals, roles and rewards (who should do what for what reward). It may be Horizontal, conflict among firms at same level of channel e.g. dealers may complain that others are pricing too low or selling beyond their territory. Vertical, conflict among firms at different level of channel e.g. conflict with dealers when opening online stores even though for hard to reach customers. Disintermediation is eliminating or replacing intermediaries. e.g. opening online stores

Marketing logistic and Supply Chain Management (SCM): Marketing logistic (or physical distribution) involves planning, implementing and controlling the physical flows of goods, services form points of origin to points of consumption. Marketing logistic addresses whole Supply Chain Management i.e. Outbound distribution (moving product form factory to reseller and ultimately to consumers) Downstream Inbound distribution (moving products from supplier to factory) Upstream Revere distribution (moving broken, unwanted or excess products returned by consumers or resellers) Major logistic functions/ Functions in distribution process: Warehousing o Production and consumption cycles rarely match. o A company must decide, how many, what types and where o Company might use either storage ware house or distribution centers. Inventory management o Managers must maintain balance between too little and too much inventory. o Just in time requires accurate forecasting along with fast, frequent and flexible delivery o Just in time substantial cost saving in carrying and handling cost and low obsolescence. Logistic information management, In VMI (Vendor Managed Inventory) customer share real-time data on sales and current inventory levels with supplier and supplier then takes full responsibility for managing inventories and deliveries. Transportation Promotion Display New technology in Distribution: DRTV Internet (B2C) o Websites o Email

Chapter 28 : Promotion
Two basic strategies of Promotion: Push strategy using sales force to push the product through the channels, the producer promotes the product to wholesalers, the wholesalers promote to the retailers, and the retailers promote to the final consumers. Pull strategy spending a lot on advertising and consumer promotion to build up consumer demand; if successful, consumers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the producers. Communication media 1. Personal communication channels, through which people communicate directly with each other. i. Face to face ii. Person to audience iii. Over telephone iv. Through mail v. Through internet chat 2. Nonpersonal communication channels, media that carry messages without personal contact or feedback. i. Print media (newspapers, magazines) ii. Broadcast media (radio, television) iii. Display media (signs, posters) iv. Online media (online services, Websites) Marketing communication mix or Promotional mix It is a blend of A. Advertising B. Personal selling C. Sales promotion D. Direct Marketing and E. Public relations tools That a company uses to communicate with its customers. A range is better than only one. A) Advertising: Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor Advertising objectives (AIDA) are as follows: 1. Informative advertising a. To communicate information b. To create awareness c. In Early stage of PLC or on modification 2. Persuasive advertising a. To create a desire for a product and to stimulate actual purchase b. In growth stage of PLC 3. Reminder advertising a. Reinforcing knowledge and b. Reminding of benefits c. In Maturity stage of PLC Advertising media Above the line (Press, Radio, TV, Cinema) Below the line (Direct mail, Exhibition, Package design, Merchandizing) Advantages (Vs. Personal selling): Mass communication Expressive advertisement Standardization and legitimacy Seller is able to repeat a message many times Disadvantages (Vs. Personal selling) Costly One way communication Impersonal Not so persuasive

B) Personal Selling (face to face via sales force): Personal presentation by the firms sales force for the purpose of making sales and bui lding customer relationships i.e. paid form of personal communication Sales force structures: 1. Salary only 2. Salary with bonus 3. Commission only C) Sales Promotion: Marketing activities other than personal, selling & advertising that stimulates customer purchasing Short-term incentives to encourage the purchase or sale of a product or service. Major tools are: 1. Samples 2. Coupons 3. Rebates 4. Premiums (buy 2 get 1 free) 5. Contests, sweepstakes, and games 6. Free gifts Objectives of sales promotion: To increase in sales revenue To launch a new product To attract new customers To attract resellers to stock To clear out old stock Counteraction for competitors D) Direct Marketing: (one to one marketing) Direct connections with carefully targeted individual consumers to obtain and immediate response and cultivate lasting customer relationships It is the use of mail, telephone, fax, email, internet and other tools to communicate directly with specific consumers. Characteristics of Direct marketing: Non public Immediate and customized Interactive Forms of direct marketing: 1. Face to face selling 2. Telephone marketing i. Outbound calls ii. Inbound calls (toll free numbers) 3. Catalog marketing 4. Direct mail marketing e) Public relations: Building good relations with the companys various publics by obtaining favorable publicity, and building up a good corporate image Publicity is non-paid, non-personal communication dealing mass audience. Planning a Promotion campaign: Identify the target audience Specify the promotional message Select media Schedule media Set the promotional budget Evaluate promotional effectiveness Branding: Expenditures on promotion gives rise to brands. A Brand is a name, term, sign, symbol or design intended to identify the product of a seller to differentiate it from those of competitors.

Reasons for branding: Product differentiation Conveying lot of information quickly and concisely Advertisement needs a brand name. The more similar a product is to competing goods; the more branding is necessary. It facilitates self selection. It reduces price sensitivity. Brand loyalty gives control over marketing strategy. Other products (i.e. new flavors/sizes) can be introduced into brand name/range. (Brand extension) Eases personal selling Eases market segmentation Brand strategies: Brand extension Multi branding (different names for similar nature goods serving similar consumer habits) Product----------------Names----------------Brands in each name Family branding Relationship Marketing: (Keeping customers; not getting customers) Sale is not end of process; but start of relationship. It is easy, cheaper and profitable to retain old customers than to make new customers because: Old are valuable Old have trust in company Old are satisfied. Key account management: (Key Customer Database) Like relationship marketing but more specific It refers to how an organization manages its relationship with those customers identified as key to the organization in achieving its objectives. Factors used to identify a key account: Historic value of purchases Expected future purchases Other competitive factors o Status within the marketplace o Personal relationship of people o To prevent a competitor getting a hold in market Extra services given to key account Time Finance Procedure Hospitality Auditing Customer satisfaction: (why customers are not satisfied ? ) Customer satisfaction surveys Work won and lost Changes in market shares Revenue from newly released products Rude and unhelpful staff A policy is to encourage customers to complain( 96% do not) Technology Development Interactive marketing: Interactive marketing in instant communication and responses between promoter and customers. It may be called sometimes as Computerized Personal Selling e.g. DRTV (Direct Response Television) Interactive Internet websites Interactive Kiosk

Part F : International Business

Theories on International Trade Scarce resource is a resource for which the quantity demanded at a nil price would exceed the available supply. 4 scarce resources are Land, Labor, Capital and Enterprise. Scarcity is the excess of human wants over what can be produced. Production Possibility Curve illustrates limits of possible production of two products within given resources. Opportunity Cost is the cost of sacrificed alternative. Mercantilism: Export > Import Zero-sum game (benefit at the expense of other) Absolute advantage: Absolute advantage is producing goods more efficiently than any other country. Country should produce goods for which they have an absolute advantage and then trade these goods for other goods produced by other countries. Comparative advantage: One step further than absolute theory introducing concept of opportunity cost. Country should specialize in the production of those goods in which it has lowest opportunity cost. Why countries avoid specialization Comparative advantage is never stable. Diversification protects fall in world demand. Agriculture industry is subject to uncertainties of climate. Import restrictions are possible by other governments to develop self sufficiency. Multi nationals may assemble or manufacture in different countries for political or logistic reasons. Competitive advantage (national): Porter states that Comparative Advantage is too general concept to explain success of individual companies and industries. He believes 4 conditions (diamonds) within a country help firms to compete.i.e. 1. Factor conditions 2. Demand conditions 3. Firm strategy, structure and rivalry 4. Related and supported industries Orientations of International Business Management (by Perlmutter) Ethnocentrism: Company focuses on domestic market and export is secondary. No local research, marketing mix is standardized. Same products with same market programs. Polycentrism: Each country is unique and requires customization. Product and market programs must match with local environment. Company establishes independent local subsidiaries and decentralizes marketing management. Geocentrism: Synthesis of two approaches. Think globally, act locally. Integrated approach to create a global strategy that is fully responsive to local market. Regiocentrism: It is Geocentricism but that it recognizes regional differences.

Evolution and Reasons of Global Business (by Ohmae) Evolution: Ethnocentrism 1. Export (extension of home sales) 2. Overseas branches (when turnover is large, greater investment) 3. Overseas production (exploits cheap labor and reduces exporting cost) Polycentrism 4. Insiderisation (full functional organization having production and distribution system is set-up overseas, company is multinational) Geocentrism 5. The Global Company Reasons: 5 Cs 1. Customer (market convergence) 2. Company (economies of scale) 3. Competition (Keeping up) 4. Currency (exchange rate risk) 5. Country (Absolute and comparative advantage, local orientation) Other reasons: For Govt. Surplus deficit balance Political advantages To support govt. policies (e.g. Balance of Payment) For Company Large market encouraging economies of scale. Increased competition at home market Mature or declining home market To dispose excessive/discontinued products.

Exchange rate: Purchasing Power Parity theory calculates exchange rate based on relative cost of purchasing same basket of goods in two countries. A currencys exchange rate is also determined by Demand and Supply. They in turn are determined by Inflation, Speculation, Interest rates, Govt. policies and Balance of Payment. Exchange rate risk is the risk that foreign currency will exchange in smaller amount of domestic currency in future. Types: This can arise under any of three Exchange Rate Systems i.e. 1. Fixed (Central bank interferes to fix the rate) 2. Managed (Like fixed but allowed to vary between preset limits) 3. Floating (depends on supply and demand) Managing exchange risk: Hedging devices Flow of money in both direction Design for global business (by Bartlett and Ghoshal ) Low requirement for local adaptation and responsiveness Global environment Geocentric orientation Global product divisions Chemicals, Construction International Environment Ethnocentric orientation International division Paper, textile High requirement for local adaptation and responsiveness Transitional environment Polycentric orientation Integrated system and structure Pharmaceutical, motor vehicles (focus of organization is heteroarchy) Multinational environment Polycentric orientation National or regional divisions Fast food, tobacco

High pressure Globalize

to

Low Pressure Globalize

to

Planning to enter Foreign Market

Phase 1: Preliminary analysis and screening: Evaluation of available markets (to exclude obvious unfit) Applying screening criteria to evaluate remaining markets (criteria might include Profit, Market Share, Quality) Analysis of environment conditions in each country Porters 5 forces analysis Choosing country (i.e. Target Market) Screening Process consists of : (by Jeannet and Hennessy) Marco level research Environmental analysis Climate and demographic General Market factors Size of market Regulations Culture Micro level research Competition Transportation Healthcare Education Labor Target Market

Phase 2: Adapting the marketing mix to target markets: Deciding Adaptation or Standardization Phase 3: Developing the marketing plan: Situation analysis Objectives Strategic options Budgets Action programs Phase 4: Implementation and Control Objectives and Standards Assign responsibilities Measure performance Corrective actions Problems in International Planning: Foreigners dont know local culture, feelings, attitudes Local level problems Different attitude to product and marketing task Lack of strategic outlook and marketing expertise Resentment at being bossed around Unclear goals Inadequate control HR considerations to be managed at local level Poor IS and Communication Diversification of countries over population, income, development, education etc. Time horizon

International Marketing Research Objectives: Availability and quality of information is enhanced for planning. Change in customers needs and preferences is timely observed. Competitors plan and strategy

Finding of new markets Opportunities and Threats Trends of market SLEPT analysis Technology Quality of information Information sources for International Markets: Human sources Managers of subsidiaries, associates, branches (relevant + unpublished + biased) Consumers, Customers, Distributors, Suppliers and even Competitors Documentary sources (Publications etc., not to the point) Direct sources Direct observation and specialist knowledge Direct observation and background information Personal experience supporting indirect information Export publications Export Market Information Centers IMR Process: Monitoring Passive information gathering (Market not yet targeted) Identification of market for which information needs to be gathered. Investigation (accurate assessment of market opportunities) Existing demand; where customers needs are already being served. Latent demand; where potential customers are currently recognized but are not being served. Incipient demand; where there is foreseeable, but not a present, market for products. Research Define scope of project Define projects, information needs Evaluate available sources for required information Undertake desk research Undertake field research Using IMR data: To estimate patterns of demand/consumption in individual markets by Demand pattern analysis Income elasticity of demand To compare patterns of demand/consumption in different markets by Comparative analysis Intermarket timing differences To identify clusters of markets with similar characteristics To identify strategically equivalent segments Problems in IMR: Secondary data problems Lack of data Not timely, out of date information gathered on unpredictable schedules Not comparable, different data definitions in different countries Lack of reliability Response problems (Peoples unwillingness to provide info) Tax evasion and avoidance of responsibilities Wish to preserve secrecy Cultural taboos and norms General problems (developed vs. undeveloped) No suitable list (sampling frame) Inadequate communication infrastructure Low level of literacy Problems of language and comprehension

Entry in International Market

Entry in International Market could be through: Foreign Direct Investment/Overseas production 100% owned subsidiary Joint venture o Industrial cooperation/Contractual (fixed period) o Joint-equity venture (continued) Export Direct (greater control but lesser market knowledge) o To Branch office o To Agents between importer and exporter o To Wholesaler, Retailer or Consumers Indirect (greater market knowledge but lesser control) o Through Export houses o Through Specialist export management firms o Through UK buying offices of foreign stores and government o Through Complimentary Export (i.e. Piggy back export) Licensing Giving right to use production process for Royalty. Critical analysis of entries Foreign Direct Investment is direct investment in business operations in a foreign country. It may be: 1. Horizontal FDI (investment in same industry abroad) 2. Vertical FDI (investment in an industry abroad which provides input to firms domestic operations. i. Backward Integration (to acquire raw material) ii. Forward Integration (to establish final product) Selection criteria for entry mode: (Factors to be considered) Mode varies among firms, according to markets and over time. Firms marketing objectives (in relation to volume, time scale and coverage) Low ----------export High----------produce locally Firms size Small--------export Mode availability Govt. may restrict modes Mode quality Qualified, trained staff is necessary for export of high technology goods. Human Resource Requirement If staff is suitable---------Direct export If staff is not suitable----Indirect export (agent based) Market information feedback Is received in case of Direct export. Learning curve requirement Heavy investment calls for learning curve i.e. close observation through direct export before investment. Political risks Control needs FDI vs. Export vs. License: FDI(Foreign Direct Investment) Lower production cost Better understanding of Market and Customers. Lower transportation cost. Overcomes tariff and nontariff barriers. Export Concentration on production Economies of scale Consistency of product quality International experiment on small scale Easiest, cheapest, most common Political risks are avoided. License Avoids costs and hassle of setting up overseas. Rapid penetration No investment No Political risk, No Protectionism

Advantages

Political risks. Partnership Managing overseas facilities Usually more involvement but subsidiary may act independent.

If FDI, 100% owned subsidiary or Joint venture: Wholly owned subsidiary (as compared to Joint venture) Advantages: Key Issues: No sharing in profit Heavy investment needed No sharing in decision making Suitable managers not available No communication problem Govt. discourages 100% ownership Operation of integrated international No local knowledge systems Varied experience Protectionism (discouraging imports) by Govt. Government and Local producers get benefit not consumers. 1. Tariff (tax on imports) 2. Non-tariff barriers a. Official i. Subsidy ii. Import Quotas/ Export Restraint iii. Local Content Requirement (specific fraction must be produced locally) iv. Anti-dumping policies (e.g. special duty) v. Administrative policies (informal instruments or bureaucratic rules) vi. Embargo (total ban) b. Un-Official i. Quality and inspection procedures ii. Packing safety and documentation standards iii. Restriction of distribution 3. Exchange control (making difficult to obtain required currency) 4. Exchange rate policies (e.g. competitive devaluation of currency) Dumping is selling goods in foreign market below cost or market value to: Unload excessive production Capture market. Political risk in FDI for multinationals Political risk is the risk that political actions will affect the position and value of a company. How Political actions can affect: 1. Tariff and non-tariff barriers e.g. Quotas 2. Govt. interference in contracts 3. Imposition of i. Increased tax rates ii. Price controls iii. Exchange controls through a. Rationing supply of foreign exchange b. Blocking funds of foreign parent (counter ways) Dividend Selling goods/services (volume and transfer pricing) Royalty Loan and high interest rates Management charges 4. Nationalization How to cope with political risk: 1. Negotiation (agreement) with Government i. Transfer of capital

Key Issues

Protectionism Exchange rates Usually less involvement

Small cash inflows Quality standards issues Indirect competition where both export Licensee may become competitor (by transfer of knowledge and technology)

ii. iii. iv. v. 2. 3. 4. 5. 6.

Access to local finance Govt. interference Taxation Transfer policy

Insurance Contacts with markets Management structure (joint venture or giving control to local) Financial management (obtain finance locally) Production strategies (giving control to local to produce Or to supply chain management)

Regional trading groups/blocks--- A way to overcome Protectionism and Political risks Regional trading group promotes trading between members of group. Following are common types: Free trade area: Internal barriers to trade are removed. Each company determines its own external trade policy. Customs Union: Internal barriers to trade are removed. Common external trade policy is adopted. Common Market: Similar to customs union except it allows factors of production to move freely between countries. Economic Union: It is Common market but more closer integration including establishment of common currency and tax rates.

Taxation issues in FDI By structuring the group, tax advantages could be availed. Foreign tax credit avoids double taxation in both countries. Tax havens is a country with exceptionally low or even no income tax but there should be: Stable currency and Govt. Adequate financial services support facilities. Capital Structure Decisions Equity or borrowing If equity, Parents or Subsidiarys If externally, from host or other country What Currency (same to avoid fluctuation and symmetry) How much and what period

Factors influencing choice of financing: 1. Local finance cost 2. Taxation system 3. Restriction on dividend remittance 4. Flexibility in repayment Global Capital Market International banks (provide financial and other services) Factors affecting development of international banks: 1. Globalization (Trade of securities world wide e.g. Euro equity) 2. Securitization (Debt via issuance of securities e.g. Euro bonds, Euro commercial papers) 3. Deregulation (national barriers) 4. Disintermediation (directly from investor) 5. Increased foreign exchange and interest rate volatility Benefits of international banks: 1. Financing of foreign trade 2. Financing of capital projects 3. Provision for advice and information 4. Providing full local banking services in different countries 5. International Cash Management services 6. Trading in foreign exchange and currency options 7. Participation in syndicated loan facility 8. Lending and borrowing in foreign and euro currency markets 9. Underwriting of euro bonds

Borrowing in Euro market Vs. Domestic market Domestic banking is subject to tighter regulation Domestic banking is subject to security requirements Euro finance may have i. Flexibility in draw-down dates ii. Early redemption penalties iii. Commitment fee Euro is suitable for very large finance requirements Euro Currency: Following types of currency is available in Euro Markets: 1. Euro equity 2. Euro bond 3. Euro currency 4. Euro Currency loan 5. Euro credits 6. Commercial papers 7. Syndicated credits 8. MOFs Euro equity issue: Issue of equity in a market outside the companys own domestic market. Not developed like Euro bonds, hence sweeteners are added e.g. Rolling Put Option Euro bond: Currency differs country of issue (underwritten by international syndicate of banks and sold internationally) Euro bonds are suitable when: Large organization with excellent credit rating Requires long term loan for capital expansion Requires borrowing not subject to national exchange control Interest rates are fixed or floating with minimum. Investors of Eurobonds will be concerned about: Marketability Anonymity Return on Investment Security Euro currency: Eurocurrency is any currency banked outside of its country of origin e.g. Eurodollars are dollars banked outside United States. Euro Currency loan: UK company borrows in US $ from a UK bank, it is a Euro Dollar loan. Euro credits: like Euro currency loan Commercial papers: An example of Securitization. Short term financial instruments Issued in the form of unsecured promissory notes with a fixed maturity date. Issued in bearer form Issued on discount basis Companies with net capital of 25 million can issue it. Syndicated credit market: Provides credit at high rates over LIBOR. Suitable for Takeover bids Govt. borrowings Project financing Credit is a facility whereas Loan is a transaction.

MOFs: Multiple Options Facilities (MOF) comprise variety of instruments through which company can raise funds and include: Note Issuance Facilities (NIF) Revolving Underwriting Facilities (RUF) Counter Trade Counter trade is a trade of goods and services for other goods and services. Types/arrangements of Counter Trade: Barter (direct exchange of goods/services between two parties without a cash transaction) Counter purchase (A reciprocal buying agreement between two parties whereby seller also undertakes to purchase a certain amount of merchandize from other country) Offset (like counter purchase but party can purchase from any firm in the country) Switch Trading (A third party trading house buys the firms counter purchase credits and sells them to another firm that can better use them) Buyback (One country supplies capital goods and receives its output as partial/full payment) Advantages of Counter Trade: 1. A mode to finance exports when other modes are not available. 2. Competitive advantage over parties preferring cash transactions. Disadvantages of Counter Trade: 1. Goods received may be unusable, poor quality, or unprofitable. 2. Expensive and time consuming to develop a separate in-house trading department to dispose those goods 3. Unrealistically high value may be impose on goods. 4. Cost may exceed expectation. (Cost includes Consultancy fee, Discount, Bank fee, Insurance, Any fee paid to third party) Why Countries do Counter trade: Countries lack commercial credit or convertible FCY. Countries use it as an instrument of political, economical policies (e.g. Balance of Trade, relationships) To boost developing manufacturing industries To obtain more trade or new technology Which Countries do Counter trade: Oil exporting companies. Less developed and developing countries. Unusual in industrial countries with exception of defense, aviation and big advanced technology. Financial problems in Foreign Trade Foreign Trade raises special financial problems i.e. Bad debts risk is greater Large investment appears in receivable and stocks Reducing bad debts risk: 1. Export factoring 2. Forfeiting 3. Documentary Credit (L/C) 4. International Credit Unions 5. Export Credit Guarantee Schemes Export factoring: Factoring company provides administration of: Client invoicing Sales accounting Debt collection Credit protection Forfeiting: (providing medium term export finance) Exporter sends Capital goods to overseas buyer who wants medium term loan. Buyer makes down payment and issues notes/ accepts draft. Notes/drafts are guaranteed by Availising bank. Exporter discounts them from Forfeiting bank.

Documentary Credit (L/C): 1. Importer orders. 2. Exporter accepts. 3. Importers bank issues L/C to exporters bank. 4. Exporters bank authorizes exporter to ship merchandize. 5. Exporter ships and gives documents and draft to own bank. 6. Exporters bank sends documents to importers bank and gets the draft accepted. 7. Importers bank informs importer about arrival of documents and merchandize. 8. Importer pays (or not pays) his bank. 9. On maturity, importers bank pays to exporters bank who pays to exporter. International Credit Unions: These are organizations/associations of finance houses/banks in different countries having reciprocal arrangements for providing installment credit finance. Export Credit Guarantee Scheme: (where L/C is not acceptable by strong importer) Preshipment Facility: Guarantee is issued to banks to indemnify them against losses on finance given to exporters to manufacture and process goods for export. Risks covered are: o Insolvency of exporter o Inability to repay or deliver on due date Postshipment Facility: Exporter submits application with required particulars to ECGS. ECGS will issue a guarantee specifying maximum amount covered and rate of premium. Risks covered are: o Insolvency of buyer o Political and Economic risks o Risks of refusal to take delivery o Risk of any loss (beyond control of buyer or exporter) Reducing large investment in Receivables and Stocks: Advance against collection Documentary credit Negotiation of bills or cheques International Marketing Mix Policies International place policies: Exclusive Selective Intensive

International product policies: Standardized/Undifferentiated marketing (same product, price, marketing program for all markets) Adapted/Differentiated marketing Concentrated marketing Standardization Vs. Adaptation: whether to adopt or not is linked with promotional issues. Product Standardization Occasional exporters Also major companies seeking economies of scale Same product for different uses in different countries Product Adapted Single product meets the same need in all markets but need to be adapted. Costly Required to exploit market fully

Communication Standardization Communication Adaptation

Barriers to International Standardization: Law Price control Product regulation Distribution restrictions

Advertising and media restrictions Competition Nature of existing products Competitors prices Culture Consumers tastes and habits Language and attitude differences Economy Income level Media availability Domestic business as compared to International business: Social factors: No language problem. Homogenous market. Rules of game are understood. Similar purchasing habits. Economic factors: Single currency Uniform financial climate Stable business environment Competitive factors: Data collection is easy and accurate. Political factors: Relatively unimportant Technological factors: Standard production and measurement systems Motivating international agents: Communication Assuring long term business relationships Regular and frequent personal contacts Exclusivity Hofstedes model of national culture: Hofstede pointed out that countries differ on following dimensions: 1. Power distance how for superiors are expected to exercise power 2. Uncertainty avoidance some cultures prefer clarity and order while others prefer novelty 3. Individualism in some cultures, it is individual achievement what matters. 4. Masculinity in such culture, roles of sexes are clearly differentiated. Hofstede grouped countries into eight clusters: 1. More developed Latin 2. Less developed Latin 3. More developed Asian 4. Less developed Asian 5. Near Eastern 6. Germanic 7. Anglo 8. Nordic Type of industry and size of company is also important. Finance in International Business Treasureship: Treasureship is the function used with provision and use of finance. It covers Provision of short term borrowings/ capital Foreign Currency management Banking Collection Money market investment Treasury department should be cost center or profit center?

Cash Management: Centralized Cash Management: 1. Avoids mix of cash Surplus and overdraft. 2. Large volumes of cash are available to invest 3. Any borrowing could be arranged in bulk at lower rates. 4. Foreign currency risk management in improved. 5. Specialist Treasury Department will employ experts. Decentralized Cash Management: 1. Great autonomy 2. Quick and more response to needs of individual operating units 3. More opportunities to invest on short-term basis. Float is amount of money tied up between initialization and finalization of payment. Measures to reduce Float include: Lodgment delay should be minimum BACS CHAPS Standing orders/ direct debit for regular payments Lock boxes for international payments Cash Pooling is netting of Debit and Credit balances with same bank to reduce interest cost. How Cash surplus arises By profitability By low capital expenditures By receipt from selling part of business How Cash surplus is utilized Takeover bids Buy back of shares Short term investments o Banks o Investment in listed shares o Investment in debt instruments Certificate of Deposits (certificates by bank acknowledging deposit for specified time) Treasury bills (IOUs by govt. issued weekly for 91 days to finance govt. projects) Eligible bank bills (IOUs by those top rated banks whose bill Bank of England agrees to buy) Bills of exchange Local authority bonds Commercial papers Certificate of Deposits, Treasury bills and Eligible bank bills are Negotiable and Resalable. International payment modes: Cheque Lock boxes (speeds up payment by cheque) Bills of exchange Bank draft (cheque by a bank drawn on one of its own account) Mail Transfer It is a written payment order authenticated by official in sending bank which Instructs by Airmail to pay a certain sum of money to a beneficiary. Telegraphic Transfer Like mail transfer but instructions are sent by cable or telex instead of by airmail. Speeder, Costly and Confidentiality than Mail Transfer. SWIFT (Society for Worldwide Interbank Financial Telecommunication) Provides rapid electronic fund transfer In addition to banks, users include Security houses, Exchanges, Money brokers, Fund managers etc. International Money Orders

Transfer pricing: Basis include Standard Cost Marginal Cost/ Full Cost/ Opportunity Cost Market Price Market Price discount Negotiated Price (any other basis) Advantages of having Market Price as Transfer Price 1. For buying department i. Better quality of services ii. Greater flexibility iii. Dependability of supply 2. For both departments i. Lower cost of administration, selling and transportation Disadvantages of having Market Price as Transfer Price 1. Market prices may be temporary. 2. Disincentive to use spare resources as compared to incremental cost approach. 3. Buying department may enforce discount. 4. Many products dont have equivalent market prices.

HRM in International Business HRM issues in International Business: 1. Expatriate or local management Expatriate (as compared to local) Advantages: Poor educational/technical opportunities in local market Greater control Better central communication Corporate picture is clear 2. 3. 4. 5.

Key Issues: Costs more Lesser local knowledge Culture shock Language/Communication training required

Recruitment and Training Career management within firm Appraisal schemes Communication with staff (e-mails, conferences and news letters etc.)

Changes in World marketplace: (by Jerry Wind) Globalization of businesses Science and Technology development Strategic alliances Changing customer value and behavior Increased scrutiny of business decisions by govt. and public. Increased deregulation Changing business practices (e.g. outsourcing,, downsizing, reengineering) Changing social and business relationship between companies, employees, customers and other stakeholders. Porters national competitive advantage: There are 4 determinants of national competitive advantage.
Factor conditions

These are a countrys endowment of inputs to production e.g. Human Resources, Physical resources, Capital, Knowledge and infrastructure. These factors could be Basic (inherited and creation involves less investment e.g. natural resources) or Advanced (include modern digital communications, highly educated people and research laboratories etc.) Demand conditions The home market determines how firms perceive, interpret and respond to buyer needs. Related and supported industries Competitive success in one industry in liked to success in related industries. Firm strategy, structure and rivalry

HUMAN RESOURCE MANAGEMENT

OVERVIEW Objective
!

To discuss the major issues in Human Resource Management (HRM).

HUMAN RESOURCE MANAGEMENT

HUMAN RESOURCE MANAGEMENT

! ! ! ! !

Strategic HRM Skills Flexible organisations Mechanistic and organic Intrapreneurship

HUMAN RESOURCE PLANNING

! ! ! ! !

APPRAISAL
! ! ! ! ! !

HUMAN BEHAVIOUR
! ! ! !

Manpower planning Job design Cost/benefit Sources HR planning

RECRUITMENT AND SELECTION

! ! ! !

Purpose Featurs Procedures Types Reward and motivation Competence

Job satisfaction Taylor Schein McGregor

MOTIVATION
! ! ! !

Process Interviews Tests Assessment centres

Maslow Herzberg Vroom Porter & Lawler

PRACTICAL MOTIVATION TOOLS

! ! !

Financial Non-financial Teamworking and empowerment

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1 1.1

HUMAN RESOURCE MANAGEMENT Introduction

Human resource management considers:

! ! !

Integration of manpower planning into strategy Development of human resources Encouraging commitment of employees to company goals

1.2

Strategic HRM

Although organisations have had personnel departments for many years, the modern view (often called the HRM view) is that the management of human resources should be:
! !

strategic, and the responsibility, to a great extent, of line managers. Traditional personnel management

1.2.1

Training

Industrial relations

Recruitment + selection

Traditional view

Welfare

Administration

Health + safety

= Specialist personnel function

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1.2.2

Modern HRM

A strategic and coherent approach to the management of . . . people . . . contribute to . . . competitive advantage Involves all levels of management

Development of human resources

Modern view

Part of management strategy

Commitment to values and goals

1.3

Skills and competencies

One of the core roles of HRM is to ensure that the organisation, through its human resources, possesses the necessary skills and competencies to be able to:
! !

perform all the tasks involved in doing business today implement the strategy of the organisation

This, of course, requires continual review of the staff and strategy, often called needs assessment.

1.4

The flexible organisation

Modern organisations seek to be able to modify their structure in response to customer demands or environmental change. There are four types of flexibility that can be built into the organisation:
!

Numerical flexibility. By employing part-time or freelance staff, numbers can be increased or decreased very rapidly to meet changes in demand Functional flexibility. Employees can be persuaded to perform a range of tasks, some of which lie outside the scope of their original contract or normal working patterns. Temporal flexibility. Hours of work can be varied to meet changing business trends. Financial flexibility. The level of payment to each employee can be varied in line with changing organisational profitability or individual performance. 1603

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An organisation that achieves all or most of the above can be called a flexible organisation.

1.5 2.3.1

Mechanistic and organic organisations (Burns and Stalker) Mechanistic organizations: Features

Adapted to suit relatively stable operating environments.

!

Clear specialisms with the tasks of management formalised into assigned, predefined tasks. There is a clear hierarchy, with most key decision-making confined to senior management. Requires formal rules and obedience to superiors. There is an emphasis on vertical communication, with problems or uncertainty being referred to the appropriate specialist. Organic organizations: Features

! !

2.3.2

Better suited to dynamic environments. Continually adapt and restructure to meet changing demands.
! ! ! !

Individual tasks are frequently redefined Control and authority have a network structure. Communication is less formaland often horizontal. Requires commitment.

1.6

Intrapreneurship

One of the most modern views on organisational management, put forward by Tom Peters and others, is that organisations should develop employees to such an extent that they feel and act as if they are self-employed. This view, of individuals feeling proprietorial about their part of the organisations tasks, is known as intrapreneurship. Example 1 What do you feel are the benefits, to the organisation and the individual, of intrapreneurial behaviour? Organisation
! !

Individual
! !

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2 2.1

HUMAN RESOURCE PLANNING Introduction

This section looks at issues relating to the way in which organisations plan for their human resources.

2.2

Manpower planning

Professional manpower planning has a direct influence on an organisations effectiveness. Recruitment is costly in itself but poor selection or labour shortages can be even more expensive to the company. Careful planning is therefore essential.

2.2

Job design

This process is carried out so that work is divided between members of an organisation in a way in which when combined, effective performance exists. It is more beneficial if the range of tasks, duties and responsibilities are explained so an employee would be willing to undertake them.

2.3

Cost v Benefit analysis

Before a position is created, the cost of new personnel needs to be weighed against the benefits of increased/improved output. Typical costs
! ! ! ! ! !

Typical benefits
! ! ! ! ! !

Advertising Management time Fees Salaries and related costs Training and development Additional equipment, space and facilities

Increased output Improved quality of product Improved quality of life for employees Reduction in out sourcing costs Competitive advantage Legal requirement

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2.4

Sources of staff
Sources Internal External

Why? ! Motivator ! Saves costs ! Abilities known ! Ill-feeling of those not chosen

Why? ! Internally skills not available ! Can effect culture change ! Resented by internal staff

Method ! Promotion ! Transfer

Method ! Advertising ! Agencies ! Head-hunting ! Specialised eg university graduates

2.5

Human resource planning

This is a modern development of manpower planning, and takes a more holistic view of staff as a strategic resource. It consists of manpower planning, plus planning for:
! ! !

Training and management development Career development and succession Exit (redundancy and retirement)

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3 3.1

RECRUITMENT AND SELECTION Introduction

Recruiting the right staff is often a critical success factor to the implementation of an organisations strategy.

3.2

The selection process 1. Use job specification 2. Sort out applications and curriculum vitaes

3. Decide on selection method

4. Contact applicants 5. Conduct selection method (screening) 6. Analyse information 7. Offer job 8. Negotiate terms 9. Take up references 10. Inform departments 11. Arrange induction 12. Follow-up

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3.3

Selection interviews

These are used to assess the personal qualities of an individual. The interview can take many forms but a good guide is (a) Be prepared Obtain all the information Arrange the location Plan the questions Initial courtesies Brief explanation of format of interview Attempt to relax the candidate Ensure all relevant points are brought out Keep check on the time Encourage the candidate to talk Explain the next steps in the process Exchange final courtesies Make appropriate notes and rank for suitability Operate procedures for notification

(b)

Welcome the candidate

(c)

Control the interview

(d) (e)

Close the interview Final steps

3.4

Psychometric tests SELECTION TESTS OR PSYCHOMETRIC TESTS

INTELLIGENCE TESTS
! ! Designed to measure thinking abilities

APTITUDE TESTS Designed to measure innate skills

!

ATTAINMENT TESTS Designed to measure knowledge/skills gained previously

!

PERSONALITY TESTS Designed to assess traits

3.5

Assessment centre

Groups of individuals attend the centre for a number of days. Here they are tested individually and in groups and then interviewed.

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4 4.1

APPRAISAL Introduction

Periodic appraisal is an opportunity to discuss and plan for HR development.

4.2
! ! ! ! ! ! !

Purpose To set performance objectives To assess past performance To help improve current performance To assess training and development needs To assess salary levels To assess future potential To assist in career planning

4.3 F F

Features of effective appraisal requent actual Enough for grade of employee Based upon targets and measurable performance citing factual examples not subjective traits Improvement can only start when failure is recognised

irm

air

Uniform appraisals in different areas of the company No bias from single appraisor or unconnected party

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4.4

Procedures Identify assessment criteria

Prepare appraisal report

Hold appraisal interview

Review appraisal

Develop action plan

Monitor action plan

4.5

Types of appraisal

Appraisals can be carried out in a number of different ways:

! ! ! ! !

Top-down. Here a staff member is appraised by his immediate superior. Bottom-up. A staff member appraises his boss. 180-degree. Superior and subordinate appraise one-another. Peer. Staff appraise those with whom they work. 360-degree. Everyone appraises everyone else!

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4.6

Appraisal, reward and motivation

There are two views on the discussion of remuneration in appraisals:

!

Remuneration is, or should be, directly linked to performance. It is therefore appropriate to discuss remuneration alongside performance. Discussing remuneration in appraisals leads to a complaint session and other issues are seldom dealt with constructively. Remuneration is an organisational issue, not a personal one between superior and subordinate.

4.7

Competence assessment

Often organisations build in testing (see section 3.4) alongside appraisals, so the skills, competences and knowledge of the employee can be monitored and any development needs identified. This may be done as part of a system of management development workshops and courses.

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5 5.1

HUMAN BEHAVIOUR THEORY Introduction

Much of this material will be familiar from your study of paper 1.3 Managing People. There are four factors which affect performance and attitudes in work: abilities, motivation level, perception and personality. ABILITIES

PERSONALITY

INDIVIDUAL PERFORMANCE AT WORK

MOTIVATION

PERCEPTION 5.1.1
! !

Abilities Aptitude Physical or mental capacity to perform tasks. Learning Acquisition of abilities via training or experience Motivation level

5.1.2

Driving forces, such as values, beliefs, attitudes, needs and goals, which channel behaviour. 5.1.3 Perception

Selection and arrangement of stimuli into meaningful patterns based on attitudes and experience. 5.1.4 Personality

This refers to an individuals characteristics and behaviour patterns. It tends to stay relatively constant.

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5.2

Job satisfaction

Research has shown that there is not a definite link between the level of job satisfaction and output or productivity. Indeed, there seems little correlation between the extent to which individuals like their job and the amount of effort they are willing to put in. Most theorists now agree that the level of satisfaction with the job is related to the individuals pre-conception of its nature. If they are disappointed by the characteristics of work they will be dissatisfied. However, as this dissatisfaction manifests itself in undesirable ways, managers should seek to ensure that employees are satisfied.

5.3

Taylor

Frederick Winslow Taylor (1856-1917), as part of his theory of scientific management, put forward the following view of behaviour.
! ! !

Man is a rational animal, motivated by economic gain Man reacts to economic stimuli as an individual Man, like a machine, can be treated in a standard fashion

5.4

Schein

In 1965 Professor Edgar Schein published a classification of human behaviour under four headings.
!

Rational-economic man Social man Self-actualising man Complex man

Concerned with the pursuit of self-interest and maximisation of gain Concerned with social needs and wanting onthe-job relationships Needs challenge, responsibility and a sense of pride in his work Motives vary with different tasks, work groups and organisational climate

5.5

McGregor

Douglas McGregor put forward a different view, preferring a whole range of behaviour patterns between two extremes. He called these extremes Theory X and Theory Y. X x x x x Y

individuals

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Theory X
!

Theory Y
!

Man dislikes work and will seek to avoid it Man must be coerced, controlled and directed Man will avoid responsibility and seek security

Work is as natural as rest or play

Man will exercise self-direction towards accepted goals Commitment to task is a function of rewards available Average human learns to seek responsibility Imagination and creativity are widely distributed Intellectual potential is only ever partially utilised

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6 6.1

THEORIES OF MOTIVATION Introduction

Much of this material will be familiar from your study of paper 1.3 Managing People. Motivation is a measure of the employees willingness to do work. Motivation is important to managers as it is believed to be directly linked to productivity highly motivated people work harder and produce more.

6.2

Abraham Maslow

Maslow proposed that mans needs are arranged in a hierarchy, to be satisfied sequentially. Example 2 Complete Maslows hierarchy of needs:

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PHYSIOLOGICAL (BASIC)

Once satisfied, it is no longer needed for a while eg food, liquid, shelter, sleep Need for predictability and order. Need to belong, be accepted by others Need for achievement, status, respect and recognition by others Realising own potential for selfdevelopment

! ! !

SECURITY SOCIAL ESTEEM SELF ACTUALISATION

6.3

Frederick Herzberg

In the 1950s Herzberg published research based on a survey of 200 accountants and engineers about events at work which had removed or provided job satisfaction. Those factors which the survey suggested should be present, maintained and undisturbed to prevent dissatisfaction, Herzberg called hygiene factors
! ! ! ! ! ! !

Company policy Supervision Salary Relationship with peers/subordinates Working conditions Status Security

Other factors which contributed to high levels of job satisfaction he called motivators
! ! ! ! ! !

Achievement Recognition Work itself Responsibility Advancement Growth

6.4

Victor Vroom

Vroom believes that people will expend effort if they believe:

! !

in the worth of the goal that performing the task will lead to achievement of the goal.

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FORCE

VALENCY

EXPECTANCY

Strength of motivation

Strength of need

Probability of action leading to outcome

These go hand-in-hand. If either is zero, there will be no motivation. 6.5 Porter and Lawler

A more complex process theory of motivation, which takes into account a wide range of factors to determine effort (or motivation).
Value of rewards Ability to do a specified task Intrinsic rewards Effort Performance accomplishment Extrinsic rewards Perception of task required Perceived effort _ reward probability

Perceived equitable rewards

Satisfaction

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7 7.1

PRACTICAL MOTIVATION TOOLS Introduction

One of the great (and unresolved) debates concerns the role of money as a motivator. We can look at the arguments, but conclusions must be drawn on an individual basis.

7.2
!

Financial motivators Maslow: Herzberg: Vroom Porter and Lawler Money satisfies basic needs directly and higher needs indirectly Hygiene factor, unless salary implies status. It depends on how much you need it!

! ! !

We can see, perhaps, situations where payment by results (in terms of commission or piece-rates) or performance-related pay might be appropriate.

7.3

Non-financial motivators

Various non-financial tools are available to motivate staff

! ! !

Participation in the management process and decision making Environmental factors such as office layout and quality of tools Job design

! !

Job enrichment Job enlargement Job rotation

Greater variety, challenge, responsibility. Widen the job by increasing the number of operators. Exchange of jobs to break monotony.

Social factors such as working in a team Opportunity for self development through promotion and variety of work

7.4

Teamworking and empowerment

It is now recognised that managers can improve motivation by creating the right environment and culture. This can be as simple as encouraging participation and collaboration.

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FOCUS You should now be able to:

! ! ! ! ! ! ! ! ! ! ! !

define the strategic role of human resources understand skills and competencies discuss workforce adaptability explain intrapreneurship formulate the human resource plan identify and evaluate appropriate recruitment methods advise on succession planning understand the appropriate motivational and supportive policies describe the links between objectives, appraisal, reward and motivation assess appraisal methods discuss appraisal and competence assessment evaluate the role of teamworking and empowerment.

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EXAMPLE SOLUTIONS Solution 1 Intrapreneurship The benefits are: Organisation Improved productivity !
! ! !

Individual Improved motivation level !

!

Reduced absenteeism and staff turnover Improved flexibility Higher rates of innovation

Greater variety of work

Example 2 Maslow

SELF-ACTUALISATION OR SELF-FULFILMENT

EGO AND ESTEEM SOCIAL

SAFETY AND SECURITY PHYSIOLOGICAL/BASIC

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OVERVIEW Objective
!

To discuss personal, professional and organisational ethics, corporate responsibility and governance.

ETHICS AND GOVERNANCE

SOCIAL RESPONSIBILITY
! ! ! !

CORPORATE GOVERNANCE
! !

ETHICS

Social responsibility Duty of care Environmental lobby Illustration

Separate responsibility Governance

! ! ! ! ! !

Business Professional Legal Investors Dilemmas Diversity

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1 1.1

SOCIAL RESPONSIBILITY Introduction

This section looks at the issues relating to the wider responsibility of the organisation to society.

1.2

Social responsibility

Social responsibility refers to the expectation that business firms will act in the public interest. Businesses have always provided employment for individuals who make goods and provide services for customers. Today there is a wider expectation that a business will seek to preserve the environment, to sell safe products, to meet its financial obligations, to treat its employees equitably, to be truthful with its customers, to train the long-term unemployed, contribute to education and the arts, and help revitalise urban areas of deprivation. In reality, each business is part of the society in which it exists and its actions have both economic and social effects. It would be practically impossible to isolate the business decisions of corporations from their economic and social consequences. Top managers may find a number of areas where their interests, various stakeholders interests and societys interests are mutually compatible. For example, a firm that pollutes the atmosphere because it fails to purchase costly anti-pollution equipment is harming not only society but also its own stakeholders. With a polluted environment, the quality of life of the firms stockholders, directors, managers, employees, suppliers, customers and creditors suffers. Another example is that if businesses do not contribute to the training and education of young recruits, they will eventually experience a decline in the quality of their work force. This result benefits none.

1.3

A duty of care

Many government regulations over business operations came into being because some firms refused to be socially responsible. Had organisations not damaged the environment, sold unsafe products, discriminated against some employees and engaged in untruthful advertising, laws in these areas would not have been necessary. The threat of increasing governmental regulation exists unless companies operate in a manner consistent with the good of society. Organisations that are socially responsible aim to be able to operate profitably whilst simultaneously benefiting society. It is not always clear however what is actually good for society. For example, societys need for high employment and the consumer products which result may be offset by the rapid usage of natural resources or the creation of unpleasant waste. Many firms in their annual reports express, at least in general terms, how they are socially responsible. General Motors, for instance, has published an annual Public

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Interest Report for over twenty years. A recent issue described GMs efforts in such areas as clean air, ozone depletion, global warming, waste management, automotive safety, minority programs, philanthropic activities, higher-quality products, and greater operating efficiency.

1.4

The environmental lobby

Businesses frequently lobby against community regulation constraining its freedom of action over
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use of natural resources - water, land, air, the living environment its treatment of the wastes from its operations.

New productive technologies adopted in 19th/20th century industrialisation have increased waste products and impacted substantially on the fabric of the biosphere. Mining, fishing and drilling exploit. Advanced chemical residues are discarded. Weapons, new bacteria and pollutants affect the health of specific groups of people and fauna/flora and raise the level of risk to life. The profile of business's responsibility (general and for individuals) for environmental stewardship is raised. Business has responsibility of a scale different from the average citizen. An individual's business decisions may add to a trend particularly where he/she controls potentially damaging technology.

1.5

Illustration

Areas in which business can act to protect and improve the welfare of society are numerous and diverse. Perhaps the most publicised of these areas are urban affairs, consumer affairs, environmental affairs, and employment practices. An example of environmental affairs is The Body Shop. Anita Roddick is the founder of The Body Shop, a successful chain of cosmetics shops headquartered in Great Britain and spread across the world. Campaigning against animal testing was the Body Shops prelude to educating the public in other areas of environmental concern. In 1985, the Body Shop sponsored posters for Green Peace, and used its own shop premises as campaign platforms to raise public consciousness about endangered species, the burning of tropical rainforests, acid rain and the receding ozone layer. The shop has an environmental projects department which actively encourages trade with the developing world, and many of the products are derived from materials used by the people in these countries. The Body Shop itself seeks to be socially responsible in the way it conducts its business. Customers are discouraged from using conventional plastic carrier bags. Reusable cotton bags are on sale, and recycled polythene is now used for free carrier bags. Recycled paper is always used, whether it is toilet paper for staff rooms or headed stationery for commercial purposes.

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2 2.1

CORPORATE GOVERNANCE Introduction

The Cadbury Report (Committee on the Financial Aspects of Corporate Governance) was published in December 1992 with a further Financial Reporting Council study in June 1995.

2.2

Separate responsibility

The Cadbury report reported on the propriety of corporate governance particularly public, quoted companies. It argued for clearly accepted division of responsibilities at the head of a company, which will ensure a balance of power and authority, such that no individual has unfettered powers of decision. This reflects UK practice historically where the Chief Executive's and Chairman's position are held by two people. The Chairman chairs the Board and oversees external communications: with large investors and government, presenting the corporation's public face etc. The CEO attends to executive and operational aspects - coordinating the work of other executive directors and running the company internally. This separation is a common UK model whereas the North America model tends to position one person in a combined role.

2.3

Governance

The Organisation for European Co-operation and Development (OECD) Council, meeting at Ministerial level on 27-28 April 1998, called upon the OECD to develop, in conjunction with national governments, other relevant international organisations and the private sector, a set of corporate governance standards and guidelines. The Principles outlined below build upon experiences from national initiatives in Member countries and previous work carried out within the OECD, including that of the OECD Business Sector Advisory Group on Corporate Governance.

I. The rights of shareholders The corporate governance framework should protect shareholders rights. A. Basic shareholder rights include the right to: 1) secure methods of ownership registration; 2) convey or transfer shares; 3) obtain relevant information on the corporation on a timely and regular basis; 4) participate and vote in general shareholder meetings; 5) elect members of the board; and 6) share in the profits of the corporation. B. Shareholders have the right to participate in, and to be sufficiently informed on, decisions concerning fundamental corporate changes such as: 1) amendments to the statutes, or articles of incorporation or similar governing documents of the company; 2) the authorisation of additional shares; and 3) extraordinary transactions that in effect result in the sale of the company.

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C.

Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures, that govern general shareholder meetings: Shareholders should be furnished with sufficient and timely information concerning the date, location and agenda of general meetings, as well as full and timely information regarding the issues to be decided at the meeting. Opportunity should be provided for shareholders to ask questions of the board and to place items on the agenda at general meetings, subject to reasonable limitations. Shareholders should be able to vote in person or in absentia, and equal effect should be given to votes whether cast in person or in absentia. Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed. Markets for corporate control should be allowed to function in an efficient and transparent manner. The rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers, and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class. Anti-take-over devices should not be used to shield management from accountability. Shareholders, including institutional investors, should consider the costs and benefits of exercising their voting rights.

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2.

3.

D.

E.

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II. The equitable treatment of shareholders The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. A. All shareholders of the same class should be treated equally. 1. Within any class, all shareholders should have the same voting rights. All investors should be able to obtain information about the voting rights attached to all classes of shares before they purchase. Any changes in voting rights should be subject to shareholder vote. Votes should be cast by custodians or nominees in a manner agreed upon with the beneficial owner of the shares. Processes and procedures for general shareholder meetings should allow for equitable treatment of all shareholders. Company procedures should not make it unduly difficult or expensive to cast votes. Insider trading and abusive self-dealing should be prohibited.

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3.

B.

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C.

Members of the board and managers should be required to disclose any material interests in transactions or matters affecting the corporation.

III. The role of stakeholders in corporate governance The corporate governance framework should recognise the rights of stakeholders as established by law and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises. A. The corporate governance framework should assure that the rights of stakeholders that are protected by law are respected. B. Where stakeholder interests are protected by law, stakeholders should have the opportunity to obtain effective redress for violation of their rights. The corporate governance framework should permit performance-enhancing mechanisms for stakeholder participation. Where stakeholders participate in the corporate governance process, they should have access to relevant information.

C.

D.

IV. Disclosure and transparency The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. A. Disclosure should include, but not be limited to, material information on: 1. 2. 3. 4. 5. 6. 7. B. The financial and operating results of the company. Company objectives. Major share ownership and voting rights. Members of the board and key executives, and their remuneration. Material foreseeable risk factors. Material issues regarding employees and other stakeholders. Governance structures and policies. Information should be prepared, audited, and disclosed in accordance with high quality standards of accounting, financial and non-financial disclosure, and audit. An annual audit should be conducted by an independent auditor in order to provide an external and objective assurance on the way in which financial statements have been prepared and presented. Channels for disseminating information should provide for fair, timely and costefficient access to relevant information by users.

C.

D.

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V. The responsibilities of the board The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the boards accountability to the company and the shareholders. A. Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the company and the shareholders. B. Where board decisions may affect different shareholder groups differently, the board should treat all shareholders fairly. The board should ensure compliance with applicable law and take into account the interests of stakeholders. The board should fulfil certain key functions, including: Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans; setting performance objectives; monitoring implementation and corporate performance; and overseeing major capital expenditures, acquisitions and divestitures. Selecting, compensating, monitoring and, when necessary, replacing key executives and overseeing succession planning. Reviewing key executive and board remuneration, and ensuring a formal and transparent board nomination process. Monitoring and managing potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions. Ensuring the integrity of the corporations accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for monitoring risk, financial control, and compliance with the law. Monitoring the effectiveness of the governance practices under which it operates and making changes as needed. Overseeing the process of disclosure and communications. The board should be able to exercise objective judgement on corporate affairs independent, in particular, from management. Boards should consider assigning a sufficient number of non-executive board members capable of exercising independent judgement to tasks where there is a potential for conflict of interest. Examples of such key responsibilities are financial reporting, nomination and executive and board remuneration. Board members should devote sufficient time to their responsibilities. In order to fulfil their responsibilities, board members should have access to accurate, relevant and timely information. Source: OECD

C.

D. 1.

2.

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4.

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7. E.

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2. F.

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3 3.1

ETHICS Introduction

A moral or ethical statement may assert that some particular action is right or wrong; or that some actions of certain kinds are so; it may offer a distinction between good and bad characters or dispositions; or it may propound some principle from which more detailed judgements of these sorts might be inferred - for example that we ought always aim at the general happiness or try to minimise the total suffering of all sentient beings, or ....... that it is right and proper for everyone to look after himself. All such statements express first order ethical judgements of different degrees of generality. J L Mackie 1977 On opposing ends of the ethical spectrum there are deontologists and utilitarians. Deontologists weigh human rights as their main concern while advocates of utility look at all possible consequences and the total happiness a particular action can produce.

3.2

Business ethics

A Code of Ethics for an organisation suggested by Kitson & Campbell includes the following features:
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Conduct themselves in a manner which will merit the respect of the community. Uphold the reputation of the organisation and the dignity of the profession. Ensure professional duties are carried out with integrity. Collect facts without bias. Care over the degree to which the views of others are allowed to influence professional judgements and the presentation of material. Access to confidential information prevented for unauthorised staff or third parties. Staff discouraged from using information acquired during a previous period of employment in ways which are detrimental to their former employer. All material benefits enjoyed by employees will be declared.

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3.3

Professional ethics

The ACCA publishes a set of rules for the conduct of students and members. This sets out the ethical stance and code of the association. Other accounting bodies (and similar bodies from other professions) do the same.

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3.4

Ethics legislation

In the European Union, national legislation has been supplemented by a series of EU directives aimed at harmonising standards and practice. Some of these directives are general, whilst others are specific to certain industries and practices. European governments are anxious to avoid the possibility of less developed countries becoming refuges for cheap and unsafe industrial processes. An example of how this may occur is that a company operating within the private sector, will be strictly profit orientated. Therefore will be less concerned with the quality of their products in the short term. However, when taking into consideration any long term effects, which may occur as a result of a product, the business may opt to cease trading and operate under a totally new name and management. This eradicates any liability it may be responsible for. On the other hand, if it is unaware of any problems associated with the product, it may still be held accountable for the affects of the product twenty to thirty years later, if the company is still in operation. The European government needs to enforce export laws which ensure those products being exported comply with legislation within the European Union. In the UK, the Health and Safety at Work Act (1974), requires employers to fulfil their ethical liabilities towards their employees by providing adequate health and safety conditions at work. However, employees must co-operate with employers regarding safety issues and take reasonable care for their own safety and that of others. For example: particular attention has been paid to the dangers of asbestos, radioactivity, effluents and passive smoking in recent years. The Act also defines several criminal offences which may arise as a result of failure to exercise specific duties, the breach of specific sections or non compliance with the requirements of an Inspector enforcing the Act.

3.5

Ethical investors

Five years ago, socially responsible investing was beginning to look like one of the dominant trends in the world of finance. Close to $500 billion was under ethical management, according to the Council on Economic Priorities, which was able to claim that the careful research and long term view that characterise the principles of ethical investing provide a growing number of investors with dual returns, financial investments that compared well to, and sometimes exceeded, the market as a whole, and social rewards beyond mere dollars and cents. Today, critics of socially responsible investing are questioning whether it produces either of those two benefits. Business Ethics magazine, which tracks the 20 largest ethical funds in the United States, reported in fall of 1996 that those funds had produced roughly 27% returns compared to more that 32.5% for the market as a whole, while some observers were beginning to suggest that ethical investments were failing to produce any significant social impact. The Social Investment Forum defines the term socially responsible investing (others prefer ethical investing) as the channelling of personal, community, or workplace capital toward just, peaceful, healthy, environmentally-sound purposes and away from destructible uses. Socially responsible investing (SRI) emerged as a force to be reckoned with in the 60s, and the focus then was on three issues: South Africa, the environment and the militaryCopyright Accountancy Tuition Centre Ltd 2001

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industrial complex. Socially responsible investors screened out companies that did business in South Africa, were seen as polluters, or manufactured military equipment. Today, socially responsible investors apply both negative screens (avoiding companies they don't like) and positive screens (investing only in companies with progressive values) to further their objectives. And the range of issues has increased, to include tobacco, alcohol, gaming, animal rights, labour and community relations.

3.6

Ethical dilemmas

In any situation where you face an ethical dilemma, consider the:

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Magnitude of Consequences - how bad is situation? Probability of the Effect - how likely is it that the problem will affect people? Social Consensus - What would be the opinion of society on this issue? Would there be a high or low degree of social agreement on this issue? Temporal Immediacy - How long before the problem is apparent? Is there time to take further advice, or wait for further developments, or is a decision needed immediately? Proximity - How near is the decision-maker to the people affected by the decision? Concentration of Effect What is the number of people likely to be affected and by what amount will it affect them?

This framework allows a manager to assess the size of the problem and also to consider the implications of a decision. It can be helpful for a manager to consider the problem in this way in order to get an overview of the situation. Further guidelines to help the decision making process are:
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Is the problem / dilemma really what it appears to be? If you are not sure, find out. Is the action you are considering legal? Ethical? If you are not sure, find out. Do you understand the position of those who oppose the action you are considering? Is it reasonable? Whom does this action benefit? Harm? How much? How long? Would you be willing to allow everyone to do what you are considering doing? Have you sought the opinion of others who are more knowledgeable on the subject and who would be objective?

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Would your action be embarrassing to you if it were made known to your family, friends, co-workers or superiors? Would you be comfortable defending your actions to an investigative reporter on the evening news?

Example 1 Discuss the following situation: On arrival here this morning, your tutor reversed into a parked BMW. The tutors car was not damaged, but the BMW suffered some scratches to the paintwork and part of the trim on the door was torn away. What should your tutor do? No solution is given for this example!

3.7

Ethical diversity

The area of ethics is complicated still further by the diversity of opinions between individuals, industries, cultures and religions. What is perceived as unethical by one group may be seen as perfectly acceptable to another. Ethics in business often becomes a personal matter, rather than one for the organisation.

FOCUS You should now be able to:

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evaluate the meaning of social responsibility discuss corporate social responsibility assess corporate conduct assess the governance framework discuss governance change distinguish between rights, duties and expectations of stakeholders review business ethics review ethical dilemmas describe the ethical spectrum discuss ethics at the national and international level explain ethics at the corporate level explain ethics at the manager level evaluate the cultural context of ethics.

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BUSINESS MANAGEMENT PAST PAPERS ALONG WITH ICAP SUGGESTED ANSWERS

FAISAL ZIA B.COM (GOLD MEDALIST) CA FINALIST

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(1) Question Background: Winter 2012, Q # 1. Syllabus Topic: A sound system of Environment Scanning is of critical importance in the formulation of Strategic Plans of any progressive company operating in a fast-changing and competitive business environment. Hawk Engineering Limited (HEL) is engaged in the business of manufacturing of small motors which are installed in printers. HEL has made substantial investments in manufacturing facilities and R&D and has developed its own in-house technology and manufacturing processes. This gives HEL competitive advantage over its rivals in terms of meeting the stringent requirements of its quality conscious customers. Important customers of HEL are the original equipment manufacturers of precision laser printers. Although motors account for a nominal proportion of the cost of the laser printers, their efficient and reliable performance are of crucial importance for HELs customers who provide performance guarantees for their products. HEL is one of the few firms who manufacture these types of small motors. It is able to achieve high profit margins and returns on its investments because of the superior quality of its products for which its customers are willing to pay premium prices. Required: Identify and explain briefly four factors which HEL should monitor closely to anticipate the emerging business environment in which it operates and its impact in the formulation of its Strategic Plans. (10 Marks) Suggested Answer:HEL should closely monitor the following factors in the emerging business environment in which it operates and its impact in the formulation of its strategic plans: (i) Projection of future demand for laser printers in the international market The demand for motors by the original equipment manufacturers of laser printers is a derived demand and changes in the demand for these printers can have considerable impact on the business prospects of HEL. HEL would have to expand its manufacturing capacity if it anticipates increase in the demand for laser printers or alternatively explore new markets for its products if it foresees decline in demand for these printers in its existing markets. (ii) Technological changes Changes in models and designs of laser printers due to variations in customers requirements can have considerable impact on HELs business prospects. HEL would have to keep abreast of these changes, continuously enhance its R&D capabilities and introduce necessary modifications in its manufacturing processes, designs and tooling. This would involve substantial R&D expenditures and investments in additional equipment which would have to be incorporated in its strategic planning process. (iii) Threat of entry of new competitors HEL is presently earning high profit margins and realizing attractive returns on investments. Therefore, the threat of new entrants who may pose competitive challenges to HEL is always present. HEL should be prepared to meet the threat of new entrants and adopt appropriate measures to maintain its competitive advantages and face threats posed by potential competitors by interacting closely with its important customers and creating barriers of high switching costs. This would involve continuous upgrading of technology and improvement of manufacturing process to retain its competitive advantage. (iv) Competitive rivalry and prices of Competing Products Although HEL has significant competitive advantages in terms of quality of its products over its competitors, it should take cognizance of the strategies of its rivals who would want to improve the quality of their products and may offer competitive prices to attract HELs customers. HEL should adopt appropriate strategies to monitor these threats and counter them effectively.
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(v) Diversification HELs present customer base and product range is considered to be quite narrow. It may like to explore the prospects of marketing its products to other original equipment manufacturers such as manufacturers of photocopiers, computers, etc. and also introduce related products (other than small motors). (2) Question Background: Winter 2012, Q # 2 (a). Syllabus Topic: Sitara Limited is a well-known manufacturer of a wide range of chromium plated sanitary fittings in Pakistan. The company has recently negotiated several long-term contracts for export of various items of sanitary fittings. Consequently, the work force would have to be increased significantly in a short period to expand the production. Prior to recruiting the new workers, Adnan Khan, the Human Resources Manager, intends to prepare a HR Skills Information Database of the existing employees. Required: Briefly discuss the purpose, usefulness and relevance of compilation of HR Skills Information Database in the areas of recruitment, training and development and succession planning of Sitara Limited (06 Marks) Suggested Answer:The compilation of Human Resource Skills Information Database has relevance and usefulness in the recruitment, training and development and succession planning in Sitara Limited in the following areas: (i) Recruitment Compilation of HR Skills Information Database in a systematic manner would help Sitara Limited to identify the pool of skills and experiences of the employees currently available within the organization and fill in the skill gaps by induction of new employees for the expansion of the facilities and efficient functioning of the organization to meet its corporate objectives. This is necessary to ensure recruitment of only such skilled employees who can contribute to the companys requirements for expansion of its manufacturing capabilities. (ii) Training and Development HR Skills Information Database would help to identify the deficiencies and weaknesses among the existing workers and adopt appropriate training and skills development programsto enable them to perform their work more effectively and strengthen the HR capabilities of Sitara Limited. (iii) Succession Planning HR Skills Information Database would help to identify employees who are most suitable for promotion to higher levels in the organization hierarchy due to the creation of new openings in the firm and also in the event of retirement or death of an employee. A proper HR Skills Information Database would help to match these individuals with the HR requirements at various levels and fill in the vacant position promptly without causing any disruptions or delays. (3) Question Background: Winter 2012, Q # 2 (b). Syllabus Topic: A number of firms prefer to conduct Performance Appraisal of their skilled workers on a quarterly basis rather than as an annual exercise. Identify three advantages of pursuing this policy of quarterly Performance Appraisal of skilled workers. (03 Marks) Suggested Answer:The advantages of a policy of Quarterly Performance Appraisal of skilled workers by such firms are: (i) Employees efforts and capabilities are recognized promptly and they are suitably rewarded for their performance resulting in enhanced performance level of the individual employees in terms of productivity and low material losses due to defects in workmanship. (ii) The employer can ensure that the quality specifications of its products are strictly adhered to.
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(iii) The employer is able to identify and retain the highly skilled workers and promptly replace those workers who are unable to meet the quality standards (iv) Employees make sustained efforts throughout the year, rather than strive to achieve high levels of performance close to the year end to earn good appraisal rating. (4) Question Background: Winter 2012, Q # 2 (c). Syllabus Topic: Although companies experiencing high rate of employee turnover are in a position to recruit new workers quickly to replace the outgoing employees, most of them are not aware of the real costs of the high rate of turnover of their employees. Briefly describe the different types of costs which are associated with high rate of turnover of employees. (04 Marks) Suggested Answer:The costs associated with a high rate of turnover of employees include: (i) Hiring Costs comprising of recruiting and advertising expenses, salaries of interviewers, employee testing costs, verification and reference checking time and expenses. (ii) Training Costs including cost of orientation time of new workers, staff time and salaries of trainers, cost of training materials, supervisors and co-workers coaching time and salaries. (iii) Productivity Costs including lost productivity due to break-in time of new employees and lack of awareness of the companys products and services. (iv) Separation Costs such as HR staff and time of supervisors and salaries to process separation formalities and exit interview time and costs. (v) Disclosure of Confidential Information former employees may pass on expert knowledge or disclose important confidential information to competitors. (5) Question Background: Winter 2012, Q # 3 (a). Syllabus Topic: What is meant by the term Customer Database? Suggested Answer:A Customer Database is an organized and updated collection of comprehensive information of existing and prospective customers names and addresses, telephone numbers, demographic information of age, income, number of family members, business activities, interests, purchases and other useful information. (6) Question Background: Winter 2012, Q # 3 (b). Syllabus Topic: Why, in your opinion, it is useful for a commercial bank planning to launch its credit card marketing scheme to create, maintain and update the database of its existing and prospective customers? (07 Marks) Suggested Answer:(i) Identify prospective customers The customer database would help the bank to identify prospective customers and contact them by telephone calls, personal visits and promotion letters to convince them of the advantages of acquiring the banks credit card facilities. (ii) Formulation of marketing policies Credit Cards have different features e.g. platinum cards, gold cards, etc. with varying credit limits, bonus points, payment or waiver of initial and annual fees, etc. Information
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(02 Marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

obtained from the customer database can help the bank to formulate policies for the different needs of customers and offerings of types of credit cards which best serve their needs. (iii) Provide vital information of high-value customers Information from the customer database can enable the bank to create a profile of privileged customers and cater to the special needs of these customers. (iv) Negotiate Terms with suppliers to benefit high-value customers Information from the customer database can be used by the bank to seek concessional special terms for its customers from relevant institutions such as hotels, travels agents, selected retail outlets, etc. (v) Adopt proactive competitive strategies The bank can use the information from the customer database to upgrade the cards and enhance the credit limits of customers who have shown good performance in terms of customer profitability and timely payments of their dues to compete effectively with the products offered by the competitors. (7) Question Background: Winter 2012, Q # 4. Syllabus Topic: Identify the strategies/policies/objectives which are being pursued in each of the following cases: (06 M) (i) Poshak Fashions (PF) are designers and manufacturers of superfine cotton garments and have their two outlets in Karachi and Lahore. PF produces only limited quantities of their exclusive designs of garments for the narrow niche market of the most fashion-conscious customers. PF introduces new designs of garments for the coming season and the unsold inventory at the end of the previous season is sold at lower prices to other retailers in the country after removing PFs prestigious labels.PF is pursuing a __________ market strategy. (ii) Super Beverages believes that the world is one big market for its products and its various subsidiaries and divisions pursue a uniform marketing strategy for sale of its products indifferent countries. Super Beverages has adopted a __________ strategy for marketing its products in different countries. (iii) Sarmad Group is a pioneer in the textile industry in the country. The second generation entrepreneurs of this Group have ambitious plans to launch new ventures in telecommunications, electronic media and real estate development. The Group is now seeking to follow __________ strategy. (iv) To press for their demands, employees of Citizens Bank Limited have decided to work strictly according to the terms of their contract of employment and refuse to perform any extra tasks, resulting in slow down of banking services and causing inconvenience to customers. The employees of Citizens Bank Limited are pursuing __________ policy. (v) Good Meats has recently established several retail outlets to sell selected cuts of choice meats and establish its own brand name in a high growth market before new competitors enter this market and set up their business on similar lines. Good Meats wants to seize the __________ advantage of this market. (vi) Neptune Chemicals, a manufacturer of industrial chemicals, has established independent units who would be responsible for development of their own marketing strategies within the companys overall market and customer focus to be able to serve the needs of the various categories of customers more efficiently. The independent units are __________ of Neptune Chemicals. Suggested Answer:(i) Market skimming (iv) Work-to-rule (ii) Global (v) First mover advantage (iii) Conglomerate or Diversification (vi) Strategic Business Units

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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(8) Question Background: Winter 2012, Q # 5 (a). Syllabus Topic: HR Managers often deal with delinquent employees and encourage them to change their attitude and behaviour and adopt a positive approach towards their responsibilities to the organisation. Consequently, HR Managers have to exercise considerable discretion and provide proper guidance to the employees, rather than resort to immediate extreme punitive measures. Required: Identify and explain briefly the various stages of dealing in a fair and equitable manner with employees involved in wrongful behavior/actions. (08 Marks) Suggested Answer:A competent HR Manager should pursue the following stages in handling employees who have been involved in behavior/actions which are contrary to the rules of company discipline: (i) Investigation A thorough investigation should be undertaken of the nature of the delinquent behavior of the employee and the factors which have led the employee to behave and conduct himself in a manner which is contrary to the accepted norms of the firms rules and discipline. (ii) Counseling The objective in this phase is to create awareness among the employees of organizational policies and rules. Often, creating awareness of rules and knowledge of disciplinary actions may prevent violations by the employees. Counseling by the immediate supervisor can have positive effects. (iii) Written documentation If change in behavior is not achieved, then a second session of meeting with the concerned employee would become necessary. Whereas, the first phase took place as a conversation between the supervisor and employee, the proceedings of this meeting are documented in written form in which the employee and the supervisor prepare written solutions to prevent further continuation of the problem. (iv) Final warning When the employee does not follow the written solutions noted in the second step, a final warning meeting is held. In this session, the HR official emphasizes to the employee the importance of rectifying the inappropriate behavior/actions. Employers may also demote employees or temporarily suspend their services for a limited period with pay. The demotion/suspension period is used to demonstrate the seriousness of the problem and the organisations determination to bring a change in the behavior of the employee. (v) Discharge If the employee fails to follow the action plan that was developed and the problem continues to persist, then the services of the employee is terminated after giving notice and keeping all the legal implications of the action in perspective. (9) Question Background: Winter 2012, Q # 5 (b). Syllabus Topic: The trend of outsourcing of certain activities by business firms to external entities has gained considerable momentum in the past few years. Identify four advantages which, in your opinion, these firms expect to derive from outsourcing of selected business activities to external entities. (04 Marks) Suggested Answer:Business firms expect to derive the following advantages by outsourcing of selected business activities to external entities: (i) Reduce requirements of capital investment and human resources as the facilities and services are provided by the external entities to which these activities have been outsourced.

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(ii) Place greater focus on core value-added activities of the business as the ancillary activities are outsourced to external suppliers. (iii) Achieve cost economies as the suppliers of the outsourced activities are able to obtain the advantages of economies of scale. (iv) Derive benefits of the particular expertise and innovations of the external entities who provide these services. (10) Question Background: Winter 2012, Q # 6 (a). Syllabus Topic: Explain briefly the factors which have contributed to the creation and significant expansion of Global Markets during the preceding 20-25 years. (06 Marks) Suggested Answer:The factors which have contributed to the creation and significant expansion of the Global Markets are: (i) Specialization of Products Certain countries have achieved high degrees of specialization in the manufacturing of specific types of goods which have worldwide demand. These products are promoted on a worldwide scale through aggressive advertising campaigns to create and expand their global markets. (ii) Reduction in tariff barriers and relaxation of direct foreign investment regulations MNCs have been able to increase their exports significantly and expand global markets as policies of liberalization of trade restrictions and relaxation of foreign investment regulations have received worldwide acceptance. (iii) Economies of Scale Access to global markets allow MNCs to obtain benefits of economies of scale which are achieved by manufacturing large quantities that can be sold in several markets in different countries. (iv) High R&D expenditures on Products A number of knowledge-based products involve exceptionally large R&D costs which can be incurred only in countries with substantial financial resources and technical human resource base. Worldwide demand for such R&D-intensive products is responsible for creation of global markets for these types of products. (v) Reduction in Communication and Transportation Costs Efficient and fast means of communications and reduction in transportation costs have provided considerable impetus to the growth of global markets for a large number of products (11) Question Background: Winter 2012, Q # 6 (b). Syllabus Topic: Briefly explain the salient features of the terms which are usually incorporated in a typical Franchising Agreement. Give one example of a Franchise Relationship between an international company and a Pakistani enterprise. (05 Marks) Suggested Answer:The terms which are incorporated in a typical Franchise Agreement are: (i)The franchisor authorizes the franchisee to use the franchisors complete brand concept, goodwill and business operating systems and methods to conduct business as defined in the franchise agreement. (ii)The franchisee undertakes to make investment of a specified amount in the business and operate within a defined territory. (iii)The franchisee undertakes to achieve predetermined sales targets. (iv)The franchisee is entitled to benefit from the promotion and advertising campaigns of the franchisor to facilitate the franchisee to achieve the sales targets in the defined territory.
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(v)The franchisee makes an initial payment of the stated amount and further commission or royalties on the amount of sales. (vi)The franchisee undertakes to purchase selected material inputs from the franchisor or a specified supplier. Examples: McDonald, Burger King, Dunkin Doughnut, Marriot Hotel, etc. (12) Question Background: Winter 2012, Q # 7 (a). Syllabus Topic: Progressive business organizations, which have substantial share of the market, are continuously engaged in the planning of their marketing strategies to achieve specific objectives in their existing markets and also to identify and seize opportunities in new markets. Required: Explain briefly the various objectives which these organizations aim to achieve through their marketing strategies in their existing markets as well as in the new markets (07 Marks) Suggested Answer:Progressive organizations aim to achieve the following objectives by pursuing various marketing strategies: (i) They pursue marketing strategies to achieve maximum market penetration and increase their share of the existing and expanding market. (ii) They plan their strategies to achieve market leadership status or to hold on to their second or third tier positions in the market depending upon their own resourcefulness and objectives and the relative strengths and competitive advantages of the market leader. (iii) They pursue marketing strategies to overcome competitive pressures by special price offers and more aggressive promotion and advertising campaigns and modifications in product specifications to create differentiation advantages. (iv) They create market acceptability for their products and pursue marketing strategies to consolidate their position through aggressive promotion, more efficient distribution and creating stronger linkages with the distribution channels. (v) They pursue marketing strategies to maintain market visibility, create goodwill and strengthen relations with their stakeholders to improve their business reputation in order to counter threats from competitors. (vi) They also pursue marketing strategies to explore new markets to diversify into those markets which offer higher profitability prospects and to identify and seize new opportunities which would create synergy effects with the existing product mix. (13) Question Background: Winter 2012, Q # 7 (b). Syllabus Topic: Successful companies make concerted efforts to retain their competitive advantages vis--vis their competitors as an ongoing exercise encompassing all spheres of their business operations. Required: Narrate six measures which these companies usually take to retain and further consolidate their competitive advantages (06 Marks) Suggested Answer:Successful companies must take the following measures to retain and consolidate their competitive advantages vis--vis their competitors by: (i) Developing, retaining and motivating a cadre of corporate leadership which has a strong value-driven vision of the companys mission.
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(ii) Creating an efficient and flexible organizational structure to achieve the objectives of the company in changing business environments. (iii) Making continuous efforts to improve their performance capabilities in all spheres of their business activities and achieve competitive advantage. (iv) Providing superior and value-added products/services to their customers as compared to the competitors. (v)Protecting their intellectual property rights and ensuring that they are not infringed by any unscrupulous competitors. (vi) Training and development of employees and empowering them to achieve the companys objectives and share the companys values. (vii) Stating clear performance standards and fair and equitable reward systems to the employees to obtain high levels of motivation. (14) Question Background: Winter 2012, Q # 8 (a). Syllabus Topic: Blue Transport Company (BTC) operates a fleet of 150 buses which provides inter-city transport services. The company takes considerable pride in the superior quality of its services. BTC accords a high degree of importance to the human relationship management of its employees, comprising of the ticketing staff, drivers and maintenance crew as it believes that the commitment of its staff is a critical factor for the success of its business. Describe the benefits that BTC expects to derive by pursuing a well-conceived policy of good human relations management between the employer and the employees. (05 Marks) Suggested Answer:BTC expects to derive the following benefits by pursing a well-conceived policy of good human relations management between the employer and the employees: (i) The employees at all levels would be committed to achieve high levels of performance in providing good service resulting in customer satisfaction. (ii) A more co-operative work environment would encourage better team work among the various cadres of employees leading to safety of the passengers, vehicles and staff. (iii) The reduced lost time due to good maintenance of the vehicles and more efficient handling of customers would result in low operating costs and higher profitability. (iv) The staff would be satisfied with the managements good relations policy which would result in low absenteeism and minimum employee turnover rate. (v) There would be open communication between the management and the staff and sharing of information to achieve positive results. (vi) The good human relations policy would encourage training and development of the staff at all levels. (15) Question Background: Winter 2012, Q # 8 (b). Syllabus Topic: What is meant by Competencybased Job Descriptions? Suggested Answer:Competencybased job descriptions define observable and measurable behaviour traits of skills and performance that individuals must exhibit to do the job efficiently. Competencybased job descriptions are primarily worker performance-focused rather than work description-focused and place high degree of emphasis on achievements. Competencybased job descriptions specify that the employees must be capable of achieving high levels of performance and commitment in demanding and highly challenging work environments.
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(03 Marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(16) Question Background: Winter 2012, Q # 9. Syllabus Topic: Zest Dairy Company Limited intends to launch a new line of frozen fruit yogurts in the major cities which would cater to the tastes of the customers for packaged food products. Assume that you are their advertising media advisor and have to give a presentation on the advantages and disadvantages/limitations of placing advertisements for the new yogurt products on each of the following media channels: (i) Television (ii) Widely Circulated Newspapers and (iii) Billboards (Hoardings) Identify and list three advantages and disadvantages/limitations of placement of advertisements of each of these different types of media. Explanations and illustrations are not required. (08 Marks) Suggested Answer:The advantages and disadvantages/limitations of placement of advertisements by Zest Diary Company for introducing their frozen fruit yoghurt products on the various types of media are: Advantages Disadvantages/Limitations Television Offers combined effects of highly attractive Entails high cost. (i) sights, sound and motion to appeal to the (i) audience. (ii) Captures high attention of the audience. (ii) Has very short exposure. (iii) Reaches a large segment of the prospective (iii) market. (iv) Qualities of the product can be highlighted (iv) more effectively. Widely circulated newspapers (i) Extensive coverage of different categories (i) of the prospective audience. (ii) A large part of the audience may read the newspaper in their free time or when required when it is easier to respond. (iii) Customers can refer back to the newspaper whenever there is a need for the product. (iv) Captures attention of the audience for a relatively longer duration. Billboards(Hoardings) (i) High repeated exposure to the passing traffic. (ii) Can be installed at most strategic locations. (iii) Colourful digital graphic billboards attract attention of large audience. (ii) Has minimum audience selectivity. Audience can move away from the TV sets during advertisement breaks. Newspapers have a very short life and advertisements are effective only if they are repeated frequently. Quality of the advertisements is generally not audience attention captivating type. Newspapers have a very restricted pass-on or secondary audience. Busy readers glance through the newspapers to read the headlines and ignore the advertisements. Limited audience selectivity. Ignored by the fast moving traffic on busy roads. Billboards placed too closely are eyesore for the audience and are ignored. Audience often find the similar colours on billboard boring and therefore avoid looking at them. High costs are involved in the maintenance and upkeep of the billboards.

(iii) (iv)

(i) (ii) (iii) (iv) (v)

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(17) Question Background: Winter 2012, Q # 10 (a). Syllabus Topic: Eagle Limited (EL) is a large conglomerate. The company is planning to establish a joint venture in Centralia, a country which has several untapped sectors. EL foresees attractive opportunities for development of its business in Centralia. EL is therefore; keen to pursue corporate and business policies which would be perceived favourably, not only by the joint venture partner but also by the government and other stakeholders. Adoption of these policies would facilitate EL to expand its business in future. Required: Briefly describe four policies which, in your opinion, EL may pursue for achieving its long term business objectives (06 Marks) Suggested Answer:Pursuance of the following policies by Eagle Limited would be perceived favourably by the joint venture partner and other stakeholders and also contribute towards the industrial development objectives of Centralia: (i) Eagle Limited should act as a good corporate citizen and respect the culture, customs, traditions and values of the host country. (ii) Eagle Limited should offer its best manufacturing technologies and practices to the joint venture in the host country. (iii) Eagle Limited should allow the local partners to set their own rules and regulations and adjust the manufacturing processes to match the skills of the local workers. (iv) Eagle Limited should keep the expatriate employees to the minimum strength and provide training to the local managers to enable them to acquire skills and assume responsibilities at all levels. (v) The joint venture should be encouraged to develop local R&D which would help to reduce dependence on imported inputs. (18) Question Background: Winter 2012, Q # 10 (b). Syllabus Topic: State the main reasons why leading companies obtain cross-border financing including equity, debt and bank financing in different countries. (04 Marks) Suggested Answer:Leading MNCs engage in international or cross-border financing and raising funds, including equity, debt and bank financing in different countries: (i) To obtain financing at overall lower costs, comprising of interest costs and impact of any adverse fluctuations in exchange rates. (ii) Because of liberalization of foreign exchange regulations which allows easy and free movement of capital in the important financial centers. (iii) Because financing can be obtained conveniently in different countries in which MNCs conduct significant business operations. (iv) Fund raising in certain countries is easier because the debt and equity markets there are broad-based and have greater market depth. (v) To seize strategic advantages of their presence and relationships in important financial centers in many countries.

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(19) Question Background: Summer 2012, Q # 1. Syllabus Topic: Fintex Company Limited (FCL) is in the advanced stage of implementing facilities for manufacture of home textile products such as curtain draperies, sofa cloth, bed linen, towels, table covers, etc.FCL intends to market its products to customers through 20 company-owned retail outlets to be established in the major cities. FCLs Institutional Marketing Division (IMD) would sell the companys products, as well as workers uniforms to be procured from external vendors, to institutional customers such as hotels, hospitals, industrial companies and government organizations. FCLs principal corporate objectives are to create a sustainable competitive advantage and obtain a firm foothold in the substantial and fast growing target market of middle class customers. These customers are keen shoppers who want quality products at affordable prices. FCLs IMD also wants to aggressively pursue marketing strategies to cater to the requirements of the institutional customers who are a source of repeat business. Required: Identify and explain briefly four Critical Success Factors which in your opinion would create sustainable long-term competitive advantage for FCL (10 marks) Suggested Answer:The Critical Success Factors which would create sustainable long term competitive advantage for FCL and enable the company to obtain a firm foothold in the target market are: (i) Management and Organizational Competence: The knowledge, skills and attitude of the management relating to understanding of the home textile industry, the objectives and role of FCL, including insight in FCLs strengths and weakness and pursuance of appropriate corporate and business strategies to achieve the objectives would be critical success factors .The management of FCL would have to develop necessary competence for identifying opportunities, formulating, implementing and monitoring sound corporate strategies, creating a supporting organizational structure and mobilizing resources. (ii) Manufacturing Capability and Production Process: FCL should acquire and develop the best manufacturing capabilities and introduce sound technical processes. It needs to manufacture products which would satisfy the needs of its customers who want new and better products at affordable prices. (iii) Skilled and Motivated Employees: FCL must adopt sound policies relating to hiring, training, development, performance evaluation, working environment and compensation of its employees. These policies would promote motivation and commitment of the employees at all levels towards the achievement of the objectives of the company. (iv) Marketing Know-how and Promotion Strategies: Market research and knowledge of the target market is essential for sustained growth in sales. Marketing programs would have to be developed to meet the needs of the customer groups. Company-owned retail outlets would enable FCL to achieve high rates of sales turnover through finely tuned marketing policies and also retain high profit margins which otherwise would be demanded by prominent retailers. Ability of the Institutional Marketing Division to develop a supply chain of reliable vendors who can manufacture products of the required specifications to be sold to the institutional customers would also be a critical success factor for FCL. (20) Question Background: Summer 2012, Q # 2. Syllabus Topic: According to the Boston Consulting Group Matrix, businesses organisations which have multi-divisions and compete in different industries pursue separate strategies for their various business divisions. The BCG Matrix describes the characteristics of the markets and the relative competitive position of the various business
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divisions as Stars, Cash Cows and Dogs. Explain the distinctive characteristics of each of these types of business divisions in terms of their relative market positions. Also mention the types of business strategies which should be pursued by each of these types of business divisions. (09 marks) Suggested Answer:The distinctive characteristics of the different types of business divisions in terms of their relative market positions and pursuit of business strategies are as follows: (i) Stars -- Star business divisions have a relatively large share of the market in high-growth industries and offer lucrative opportunities for growth and profitability in the long-run. Substantial investment should be made in Star business divisions to maintain and strengthen their dominant positions. Strategies of vertical and horizontal integration, market penetration and product development may be considered to further consolidate the wellentrenched position of the Star business divisions and to compete aggressively in the market. (ii) Cash Cows -- Cash Cows are business divisions which have a relatively large market share but compete in a low-growth industry. The Cash Cows are in a position to generate substantial funds because of their strong competitive position. However, their requirements of funds for expansion are minimal and they are therefore in a position to generate funds which are in excess of their requirements. The Cash Cows are milked as a source of corporate resources for utilization of funds in other business divisions which offer long-term growth prospects and in which competitive advantages can be achieved. Quite often the Star divisions with the passage of time are relegated to the position of Cash Cows. (iii) Dogs -- Dogs are those business divisions which have a relatively small share of the market and compete in a slow or no-growth industry. Dog business divisions are not able to earn fair profits and generally incur losses. Therefore such divisions are often liquidated or divested or subjected to policies of retrenchment to curtail expenditures on salaries and other associated costs. It may not always be advisable to liquidate or divest the Dog divisions as their assets can be disposed of only at throwaway prices because of the companys weak bargaining position. This strategy may pay off if there is a business turnaround at a later stage. (21) Question Background: Summer 2012, Q # 3 (a). Syllabus Topic: Employee Training is an important function of Human Resource Department of Apollo Engineering Limited, a company which considers workers skills at the factory floor level to be critical for achieving the overall strategic objectives. The HR Department classifies the factory employees in 3 categories as follows: (i) Competent to perform in the present position. (ii) More than competent to perform in the present position. (iii) Not yet competent to perform in the present position.* *Note: These employees are not incompetent Required: Briefly discuss the Training Needs of employees in each of the above categories and explain how they would help Apollo Engineering Limited to improve motivation amongst the employees at all levels (08 marks) Suggested Answer:Training Needs of employees of Apollo Engineering Limited in the different categories are: (i) Competent to perform in the present position: These employees should be provided training by way of lecture sessions and skills enhancement programs to enable them to be able to handle assignments in the next stage of competence. Appropriate training programs for these employees would upgrade their work skills and retain their motivation levels.
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(ii) More than competent to perform in their present positions: These employees should be provided training opportunities through participation in seminars, job enrichment and job rotation to assume greater challenges and to facilitate them to move to higher positions. In case it is not possible to promote such employees, their job satisfaction level can be increased by delegation of authority and responsibilities and redesigning their jobs. Such measures will increase their level of motivation and deter them from seeking job opportunities elsewhere. (iii) Not yet competent to perform in the present position: The specific areas of weaknesses of these employees should be identified and on the job training should be provided to enable them to overcome their weaknesses and perform efficiently. Since employees in this category are not incompetent, providing proper training through lecture sessions, workshops and on the job training would improve their skills and help them to achieve competency in their present positions. (22) Question Background: Summer 2012, Q # 3 (b). Syllabus Topic: Appropriate Employee Compensation and Reward Packages are central to a healthy and enduring relationship between the employer and the employees. These Compensation and Reward Packages comprise of salaries and fringe benefits, pleasant working environment, career growth opportunities, challenging work, self-respect and sense of achievement, etc. What principal objectives should an employer seek to achieve through a well-formulated Employee Compensation and Reward system for a service-oriented company operating in a competitive business environment? (06 marks) Suggested Answer:The Employee Compensation and Reward system for a service-oriented company operating in a competitive business environment should be designed to achieve the following objectives: (i) Obtaining support of employees for the main strategic objectives of the service-oriented company for innovation, efficiency, teamwork and high standards of customer service. (ii) Building of a durable and mutually beneficial long-term relationship between the employer and the employees. (iii) Deriving significant value-addition at all the stages of customer service chain because human resources are strategic assets of a service-oriented company and personnel costs account for a substantial portion of the total administration costs. (iv) Inducting and retaining a pool of suitably skilled and motivated work force. (v) Inculcating a sense of financial transparency and fairness of the compensation and reward system among the employees. (vi) Articulating in precise terms the organizations expectations of employee performance and service standards to create a competitive business advantage. (vii) Aligning the compensation and reward packages with the comparative packages offered by the competitors. (23) Question Background: Summer 2012, Q # 4 (a). Syllabus Topic: What is Wilful Misconduct? State why acts of Wilful Misconduct are considered as serious offences by employers? Identify four situations in which an employee may be guilty of Wilful Misconduct. (04 marks) Suggested Answer:Page 14 of 81 For More Notes and Study Material visit our website

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Wilful Misconduct is a deliberate act of violation of rules of employment by an employee. Acts of Wilful Misconduct are considered to be serious offences as they can cause serious financial loss to the employers and their reputation or pose grave risks to the health and safety of other employees. The situations in which an employee may be liable to be guilty of Wilful Misconduct are: (i) Theft. (ii) Fraud. (iii) Misuse of official properties/assets. (iv) Damage to employers property with malicious intent. (v) Harassment of other employees. (vi) Gross misbehaviour with supervisors, peers and junior staff. (vii) Conduct or actions which pose threat to the employees own life or the lives of others. (24) Question Background: Summer 2012, Q # 4 (b). Syllabus Topic: Sona Sugar Mills is being established in the outskirts of a small rural town. The management has engaged a Chief Security Officer to plan for the security of the employees and plant facilities. State five measures which the Chief Security Officer should adopt to meet the objectives of security of employees and physical facilities of Sona Sugar Mills. (05 marks) Suggested Answer:The following measures should be adopted by the Chief Security Officer to meet the objectives of security of employees and physical facilities of Sona Sugar Mills: (i) Access to the factory premises should be properly controlled by installation of CCTV cameras and deployment of trained security personnel. Only employees on duty and authorized visitors should be allowed entry inside the factory premises. (ii)All vehicles/trucks carrying sugar cane and other supplies should be thoroughly checked at certain designated points before they are allowed to enter the factory area. (iii)Security awareness training and orientation should be provided to the employees who should immediately bring any suspicious activity to the attention of the security personnel. (iv)Crisis Management/Emergency Training should be provided to the employees, including procedures to be followed in the event of a bomb threat, armed attack, fire or any other emergency and communicated to the employees. (v)Policy regarding zero tolerance of any criminal activity should be adopted and communicated clearly and understood by the employees for strict compliance. (vi)Personal records of employees should be investigated to ensure that they do not have affiliation with any groups engaged in criminal activities. This investigation exercise should be conducted in a discreet manner without causing any undue concern or panic among the employees. (25) Question Background: Summer 2012, Q # 5. Syllabus Topic: Consumer Products are classified by marketers in different categories as follows: (i) Convenience Products detergents, packaged milk, newspapers, soft drinks, etc (ii) Shopping Products readymade clothes, furniture, carpets, shoes, etc (iii) Specialty Products televisions, refrigerators, branded watches, etc The marketing mix of each category of Consumer Products comprises of the following ingredients: Price expensive
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Customer Buying Behaviour less frequent purchase/keen comparison of price, quality and style
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low price high price Distribution distribution in few outlets widespread distribution at convenient locations outlets in specialized markets/shopping malls

special purchase effort/brand loyalty frequent purchase/less planning Distribution Promotion Promotion advertising and personal selling by producer/resellers mass promotion/advertising by producer carefully targeted promotion by producer/resellers

You are required to identify the most appropriate characteristics of each ingredient of the marketing mix for the above categories of Consumer Products. (09 marks) Suggested Answer:Identification of appropriate characteristics of each category of the Marketing Mix for the different categories of Consumer Products is as follows: Convenience Products Price Low price Consumer Buying Frequent purchase/ Behaviour less planning Distribution Channels Promotion Advertising Shopping Products High price Less frequent purchase/keen comparison of price, quality and style Distribution in few outlets Specialty Products Expensive Special purchase effort/brand loyalty Outlets in specialized markets/shopping malls Carefully targeted promotion by producer/resellers

(i) (ii)

(iii)

(iv)

Widespread distribution at convenient locations / Mass promotion by Advertising and personal producer selling by producer/resellers

(26) Question Background: Summer 2012, Q # 6. Syllabus Topic: All leading global business organisations possess certain distinctive capabilities and competitive advantages which set them apart from those companies whose operations are confined within their limited geographical areas. Describe at least six core capabilities which are observed in leading global organisations regardless of their special lines of business. (09 marks) Suggested Answer:The core capabilities which are commonly observed in leading global business organizations are: (i) In-depth knowledge of the organisations products/services, their strengths and special customer service skills. (ii) Highly developed marketing skills by way of insight of consumer behavior, market segments, share of the market and distributions channels. (iii) Capacity for continuous innovation and research which is a prerequisite for maintaining and consolidating of their global leadership status in a highly competitive business environment. (iv) Creation and retention of a pool of talented and motivated management team and work force aligned with the strategic objectives of the organisation. (v) Financial resourcefulness with the capability to utilize the funds effectively with sound planning and control structures. (vi) Assessment of the strengths and weaknesses of the competitors in the different territories in terms of their market share, competitive advantages and anticipated business strategies.
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(27) Question Background: Summer 2012, Q # 7 (a). Syllabus Topic: Research in a number of organisational settings shows that efforts to introduce major changes for achieving the objectives of corporate turn-around and improvements invariably meet with strong resistance from employees at various levels. Identify the reasons why employees offer strong resistance to major organisational changes and prefer to continue with the existing status. (05 marks) Suggested Answer:Employees offer strong resistance to major organisational changes and prefer to continue with the existing status because of the following reasons: (i) The employees may have concerns of financial insecurity due to loss of their jobs or decline in their existing level of compensation. (ii) The employees fear that they may lose their present position/status, power and authority. (iii) The employees may anticipate that changes in work assignments, alterations in work processes and transfers would threaten their present work routines, patterns of social-on-the-job interactions and friendships. (iv) The employees may fear uncertainties in the new organizational design, attitudes and working styles of new supervisors and their own status in the organisation in the revised set-up. (v) The failure of management to communicate to the employees in a convincing manner the reasons and need for change which gives rise to suspicions and apprehensions and results in resistance to change. (vi) The fear of dissonance because employees may have to confront with new and different process, systems, technology or expectations. The dissonance or discomfort created by what is new or different is a psychological process which causes resistance to change. (28) Question Background: Summer 2012, Q # 7 (b). Syllabus Topic: Explain the term Business Ethics and discuss its increasing significance in the present business environment. (05 marks) Suggested Answer:Business Ethics are the moral principles of conduct applied in the commercial world. Business ethics provide guidelines to individuals and organizations to determine whether a particular action is right or wrong. Good business ethics are essential for good strategic management as issues of ethics permeate in all areas of strategy formulation, implementation and evaluation. An ethical approach has become increasingly necessary both for corporate success and a positive corporate image. The rapid expansion of information technology has created awareness and enhanced the importance of ethical behaviour in business all over the world. Pressures from employees, consumers and other stakeholders for adherence to ethical and responsible business practices have led many organizations to make public commitment of their ethical business standards. An increasing number of organizations now adopt concepts of personal and corporate accountability in all aspects of their business conduct. Misleading advertisements, poor employee health and safety procedures, causing harm to the natural environment, poor product or service safety standards, insider trading and discrimination in dealing with employees are considered to be violation of acceptable ethical behavior.

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(29) Question Background: Summer 2012, Q # 8 (a). Syllabus Topic: In the past two decades a number of Mergers and Acquisitions have been witnessed between some of the most prestigious and financially strong international corporations in a wide range of businesses such as pharmaceutical and automobile manufacturing companies, financial institutions, supermarkets, etc. Narrate the principal objectives behind the mergers and acquisitions of companies which are considered to be financially sound and well-established in their own spheres of business. (05 marks) Suggested Answer:The principal objectives of mergers and acquisitions of financially strong and well-established international corporations are as follows: (i) To gain access to strategic proprietary assets/technical know-how and exploit these strengths with greater effectiveness. (ii) To gain market power and dominance, including access to strong distribution channels in expanding and lucrative markets. (iii) To achieve synergies in domestic and global operations across different industries which offer complementary advantages? (iv) To expand the size of operations to obtain advantages of economies of scale and achieve competitive advantages in negotiations with suppliers, customers and financial institutions from a position of greater strength. (v) To diversify operations and spread risks over a more wide area. (30) Question Background: Summer 2012, Q # 8 (b). Syllabus Topic: Differentiate between the characteristics of Strategic Decisions and Tactical Decisions. Suggested Answer:The distinguishing characteristics of Strategic Decisions and Tactical Decisions are: (i) Strategic Decisions determine the course and define the contours of the companys main objectives, whereas the Tactical Decisions are concerned with the achievement of targets within the framework of the main strategic objectives of the company. (ii) Strategic Decisions are made at the board of directors/senior management level, whereas Tactical Decisions are taken by middle-level managers. (iii) Strategic Decisions have long-term implications, whereas Tactical Decisions have consequences which are of medium-term nature. (iv) Strategic Decisions have far-reaching financial repercussions, whereas Tactical Decisions have relatively less financial bearing on the companys results. (31) Question Background: Summer 2012, Q # 9. Syllabus Topic: Firms ranking in second and third positions in highly competitive industries demonstrate significant business strengths and hold a sizeable share of the aggregate market. Often these firms have to make strategic marketing decisions whether to challenge the Market Leader to achieve the top position or to continue to hold on to their Market Follower status. Discuss the concepts of Market Challenger Strategy and Market Follower Strategy and briefly explain the circumstances in which a firm would prefer to pursue a particular market strategy. (10 marks)
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(04 marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

Suggested Answer:Market Challenger Strategy - In this strategy, firms which are placed in second and third positions launch aggressive marketing campaigns to capture a larger share of the market to dislodge the market leader from its number one position. A market challenger must have substantial resources and sustaining capability to challenge the market leader. A resourceful market challenger may launch a full frontal attack to match the market leaders main strengths, i.e. product, pricing, advertising and distribution efforts. The outcome of the challenge would depend on the relative strengths of each of the firms. Alternatively a market challenger may pursue a strategy of indirect attack on the competitors weaknesses and gradually make inroads in the market to achieve the top position. A market challenger may also pursue a strategy of acquisition of smaller companies to eliminate competition and steadily increase its share of the market to achieve top position. Market Follower Strategy - In a market follower strategy, a firm prefers to retain its runner-up position in the industry rather than to attack and dislodge the market leader. When the market follower realizes that the market leader would put up strong resistance and not yield easily from its well-entrenched position or the market follower lacks the resources to meet the capabilities of the market leader, it decides to maintain its existing status. A market follower may be satisfied with its existing runner-up position as it would not have to incur the high expenditure on developing new products and educating the consumers of the new product in the market. A market follower learns from the market leaders products and programs usually with less investment. A market follower retains the current customers and plans to achieve a fair share of the market expansion and also avoids retaliation from the market leader. A market follower strives to keep its manufacturing costs and prices low and maintain the quality of its products to meet its targets of market share, sales revenue and profitability without inviting retaliation from the market leader. (32) Question Background: Summer 2012, Q # 10 (a). Syllabus Topic: Multinational Corporations (MNCs) which have widely dispersed operations in several countries often prefer to centralise their cash management functions and conduct all their major cash operations from pools located in internationally recognised financial centers. This policy requires each subsidiary to retain minimum cash for its own transaction purposes and remit all excess funds to a central cash depository. Required: Explain the advantages which MNCs seek to achieve through centralised cash management policies and pooling of all excess cash balances at prominent international financial centers (06 marks) Suggested Answer:Multinational Corporations seek to achieve the following advantages through policies of centralised cash management and establishment of cash pools at prominent financial centers: (i) Security and Convenience: Centralised cash pools are maintained at major financial centers which offer advantages of political and economic stability, convertibility of currencies, access to international communication facilities and well defined legal procedures. The pooling of cash funds at such locations provides security and convenience of prompt transfer of funds from and to the subsidiaries. (ii) Availability of Information: Location of cash pools at major financial centers provide advantages of immediate access to latest information of the relative strengths and weaknesses of various currencies, fluctuations in rates of return on financial instruments in various currencies and ease of execution of financial transactions.

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(iii) Holding of Minimum Surplus Funds for Precautionary Purposes: The pooling of funds at centralised locations in excess of the transaction requirements of the subsidiaries enables the MNCs to reduce the overall size of the cash pool without any loss of level of protection to any individual subsidiary. (iv) Reduction in Interest Costs: The large size of the pooled funds enables financial managers to negotiate borrowings most effectively and thus reduce borrowing costs. (v) Acquisition of Services of Competent Personnel: The funds can be managed by highly competent financial managers whereas individual subsidiaries may not be in a position to acquire the services of such executives. (33) Question Background: Summer 2012, Q # 10 (b). Syllabus Topic: Give five reasons why the process of Globalization has assumed great importance in the present business environment. (05 marks) Suggested Answer:Globalization has assumed great importance in the present business environment due to the following reasons: (i) Adoption of free market economic policies by increasing number of countries has created opportunities for capital investment and significant economic growth. (ii) Rapid improvement in communications have reduced costs of transportation and facilitated quick movement of goods, services and financial resources. (iii) Technological advances have made it possible to manage and control business operations in different countries through electronic mail, internet and frequent travel by key management and other professional staff. (iv) The development of the emerging markets has expanded the demand for products and services worldwide. (v) Global companies seek competitive advantages by locating production facilities of components and parts in those countries where the costs are the lowest. (34) Question Background: Winter 2011, Q # 1. Syllabus Topic: Sound Health Pharmaceuticals Limited (SHPL) is a reputable international company engaged in the business of manufacture of a wide range of medicines with facilities located in several countries. SHPLs products have been developed after long periods of research at considerable costs and are prescribed by medical consultants for patients suffering from life-threatening diseases. As Director of Human Resources, you have to recruit Director Public Relations and Media Affairs to replace the incumbent official who is expected to retire shortly. Identify and explain briefly eight critical skills and competencies you would seek in the prospective candidates for this high-profile position in SHPLs senior management hierarchy. (08 marks) Suggested Answer:The critical Skills and Competencies required for the position of Director Public Relations and Media Affairs of SHPL are: (a) Good understanding of SHPLs mission, goals and objectives and the ability to communicate them to all the stakeholders (b) Deep understanding and insight of the role of the various media channels in projecting a positive image of the reputation and standing of SHPL (c) Demonstrable track record and experience in media relations and media contacts to handle unforeseen situations which may affect SHPLs reputation and image
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(d) Excellent interpersonal and communication skills with ability to deliver messages by adopting appropriate styles, tools and techniques depending on the type of information and the intended recipients (e) Good management and organisational skills and be able to prioritize and plan activities taking into account factors such as deadlines and resources (f) Work closely with senior level executives as an effective member of the top management. (g) Assimilate complex information and take independent action where necessary and handle multiple projects and work demands at a time (h) Excellent writing skills with a high level of capability to attend to details (i) Qualities of leadership and a positive frame of mind (j) Proficient in developing web-site content, maintenance and supporting the in-house broadcasting department. (35) Question Background: Winter 2011, Q # 2. Syllabus Topic: Explain briefly the following types of Growth Strategies pursued by Business Organisations. Give one example of each of these types of strategies. (a) Horizontal Integration Strategy (04 marks) (b) Forward Integration Strategy (04 marks) (c) Conglomerate Growth Strategy (04 marks) Suggested Answer:(a) Horizontal Integration Strategy: This strategy seeks to achieve growth by ownership/acquisition or merging of functions of organisations which operate on a similar level. It is characterized by integration of firms producing the same kind of goods or operating at the same stage of the supply /value chain. This strategy is pursued to achieve economies of scale by sharing of resources and competencies to gain significant competitive advantages. Example: A profitable cement company acquiring another cement manufacturing unit. (b) Forward Integration Strategy: It is a strategy which envisages gaining ownership or taking control of distribution channels when the existing external distribution channels insist on unduly high profit margins or are unreliable or are unable of meeting the firms distribution objectives. Forward Integration strategy is most beneficial when significant competitive advantages can be achieved through ownership or effective control of the distribution channels. The firm must have sufficient capital and human resources for pursuing a successful forward integration strategy. Example: A leading manufacturer of branded fashion clothing establishing its own network of retail outlets. (c) Conglomerate Growth Strategy: This strategy seeks to create diversified business units/entities, each of which is capable of achieving excellent financial performance in its respective line of business. Firms which pursue conglomerate growth strategies search across different industries for opportunities for expansion and purchase of companies whose assets are undervalued and therefore can be acquired at low prices, yet have the potential to offer high returns on the investment. Firms which have excellent top management capabilities and can effectively plan, manage and control individual units in different industries pursue conglomerate growth industries. Example: A prominent textile group establishing or making acquisition of a power generation unit.

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(36) Question Background: Winter 2011, Q # 3 (a). Syllabus Topic: Business firms, at times, place excessive emphasis on Cost Reduction and Austerity policies to achieve their profit objectives. These policies may be in conflict with the interests of customers, employees and the society as a whole. Identify any three adverse effects of introduction of stringent Cost Reduction and Austerity policies on each of the above stakeholders. (4.5 marks) Suggested Answer:Stringent Cost Reduction and Austerity policies may be in conflict with the interests of the stakeholders in the following situations: (i) Customers The products may be of an inferior quality and perform unsatisfactorily The products may have a very limited useful life Sub-standard quality of raw material inputs and packaging may be harmful for the health of the customers (ii) Employees Working conditions may not be conducive for the health of the workers Poor maintenance of machinery and equipment may cause injuries and accidents Inadequate compensation may result in financial difficulties for the workers (iii) Society as a whole Cause pollution and create environmental hazard Lack of interest in charities, sports and community activities Impose social cost on the society by making improper use of public assets. (37) Question Background: Winter 2011, Q # 3 (b). Syllabus Topic: What is meant by the term Corporate Social Responsibility? Suggested Answer:Corporate Social Responsibility is a form of voluntary business approach that a business firm pursues to meet or exceed the expectations of its stakeholders by adopting social, ethical and environmental measures. The goal of CSR is to make a positive impact through its activities on the environment as well as all its stakeholders. (38) Question Background: Winter 2011, Q # 3 (c). Syllabus Topic: State five important factors which should be included in developing an effective Accident Prevention and Reporting System for a company involved in heavy mechanical and engineering operations. (05 marks) Suggested Answer:The following important factors should be included in developing an effective Accident Prevention and Reporting System for a company involved in heavy mechanical and engineering operations: (i) All accidents should be reported on Accident Reporting Forms and proper records should be maintained of accidents resulting in death and major injuries. (ii) Identification of particularly more risky activities and adopting special precautionary measures such as installation of safety grills to prevent accidents. (iii) Periodic training of employees for compliance with the safety rules and procedures so that they are fully aware of the accident hazards while performing their duties.
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(3.5 marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(iv) Regular maintenance of plant and machinery to ensure that all the parts and components are repaired/ replaced promptly so that they do not cause injuries to the workers due to malfunction or breakdown of the equipment. (v) Periodical review of the safety conditions should be carried out by an independent person. (vi) Statistical trends of recurring accidents must be monitored closely to identify and examine the need for introduction of special measures. (vii) Procedures for reporting near-misses should be laid down: anonymously, if necessary to encourage timely corrective actions and openness in reporting of such incidents. (39) Question Background: Winter 2011, Q # 4 (a). Syllabus Topic: Accurate Engineering Limited is engaged in the business of manufacturing precision earth drilling tools used by the oil exploration industry. The Company employs a high proportion of skilled and experienced workers for the smooth and efficient manufacture of its quality-sensitive high-value products. Recently, the company has been facing an unusually High Rate of Employee Turnover which is a matter of serious concern for the management. Identify five disadvantages which Accurate Engineering Limited would experience due to the unusually High Rate of Employee Turnover. (05 marks) Suggested Answer:Accurate Engineering Limited would experience the following disadvantages due to the exceptionally High Rate of Employee Turnover: (i) Loss of important confidential and proprietary information and knowledge of work processes to competitors. (ii) Disruptions and delays in manufacturing operations as new workers would have to be recruited and would require training to learn the work processes. (iii) Deterioration and inconsistency in the quality of the products as the new workers would require time and hands-on experience to acquire the levels of proficiency and skills necessary to manufacture precision earth drilling tools. (iv) Effort and cost incurred in training of employees who leave the organisation are irrecoverable losses. Additional effort and costs would be involved in the training of new workers who would replace the outgoing workers. (v) The new workers would require time to assimilate in the Companys organisation culture. (vi) Additional costs of placement of advertisements, background verification, medical examination and conducting interviews would have to be incurred in the hiring of new workers. (vii) Staff morale and motivation would be adversely affected which would create a sense of insecurity among the remaining workers and result in low employee productivity. (40) Question Background: Winter 2011, Q # 4 (b). Syllabus Topic: (i) Briefly explain what is meant by a Differentiation Strategy. (02 marks) (ii) List six types of skills and resources which are critical for the pursuance of a successful Differentiation Strategy. (03 marks) Suggested Answer:(i) In a Differentiation Strategy, the firm is in a position to provide a product or service which the customer perceives to be of a higher value than those offered by other competitors. The customer considers that the
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additional cost of purchasing the particular product or service is well below what the product or service is worth as compared to the other available alternatives. (ii) The types of skills and resources which are critical for the pursuance of a successful Differentiation Strategy are: Strong marketing capabilities, including support of marketing channels. Sound capabilities for research and product engineering. Corporate reputation for technical and professional leadership. Good reputation for high standard of products and consistent quality. Strong relations with the suppliers of major inputs and services. Tradition of positive and prompt response to customers queries. Incentives based on subjective measures Stress continuous improvement and innovation (41) Question Background: Winter 2011, Q # 5 (a). Syllabus Topic: Explain what is meant by Scenario Planning. Suggested Answer:Scenario Planning is a technique which involves the process of identifying alternative scenarios in the future, and on the basis of different assumptions that the strategists may anticipate in the future, formulate corporate strategy. The process of scenario planning on the basis of different assumptions enables the company to realign its corporate strategy quickly in the changing business conditions. The purpose of scenario planning is to avoid formulating corporate strategy on the basis of a single future outcome which may not materialize. Rather, the objective is to re-evaluate the relevance of the strategic objectives which would be valid for different outcomes/events as they unfold from time to time. (42) Question Background: Winter 2011, Q # 5 (b). Syllabus Topic: In highly competitive business environments dominated by relatively few equally powerful participants make concerted efforts to implement effective Marketing Intelligence Systems. (i) What is meant by the term Marketing Intelligence System? (ii) List five different sources which help in the creation of an effective Marketing System. Suggested Answer:(i) Marketing Intelligence System is an ongoing and organized procedure to generate, organize, store, disseminate, analyze and retrieve large amount of data from internal as well as external sources for use in making marketing decisions. (ii) The different sources would facilitate in the creation of an effective Marketing Intelligence System are: (a) Well trained and motivated sales force to provide inputs on the improvements required in the companys current marketing mix as well as identify new market opportunities. (b) Motivated distributors, retailers and other intermediaries who would obtain important information and pass it on to the company to improve the overall quality of products and consumer services. players, the (03 marks) Intelligence (05 marks) (03 marks)

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(c) Obtain feedback from customers regularly to improve the quality of the products and services in order to offer more value to the customers. (d) Participation in trade shows and examination of competitors products and their advertisements etc. (e) Collect information from competitors published reports, suppliers, couriers and transporters. (f) Published government statistics relating to population, agricultural production, manufacturing data, etc. to extract information which can be incorporated usefully in the Marketing Intelligence System. (g) Purchase of information from professional suppliers of data and information. These external firms have access to useful data and sell them to the interested parties. (43) Question Background: Winter 2011, Q # 6 (a). Syllabus Topic: Explain what is meant by Geocentric Orientation in the context of global business companies. (05 marks) Suggested Answer:A Geocentric orientation is an approach followed by companies having global scale of operations. The management of such companies considers a worldwide focus both at the headquarters and also in the host countries to obtain optimal advantages. Major issues such as raising of funds, building of plants, research and development are centralised in the entire global perspective. At the same time, the company also considers designing its products and services to cater to the local differences in tastes and cultures to add maximum customer value and achieve optimal results. (44) Question Background: Winter 2011, Q # 6 (b). Syllabus Topic: Alpha Equipments is a Taiwanese manufacturer of various types of photocopiers and has recently decided to export its products to Pakistan. Alpha Equipments is considering appointing a Single Distributor in Pakistan who would represent the exporter and would be responsible for the entire marketing operations in this country. State six different advantages that Alpha Equipments would achieve through the appointment of a Single Distributor for import and distribution of its products in Pakistan (06 marks) Suggested Answer:The advantages of appointment of a Single Distributer in Pakistan by Alpha Equipments are: (i) The large volume of business would attract a competent and resourceful distributor who would wield considerable influence in the local business community in Pakistan. (ii) The appointment of a knowledgeable Single Distributor who is conversant with the local business practices, culture and marketing channels would ensure smooth handling of all marketing operations in a more professional and purposeful manner. (iii) The Single Distributor would be able to coordinate promotional efforts and exchange vital information with Alpha Equipments on a continuous basis and in a purposeful manner. (iv) Training and marketing efforts of the retailers located in the various cities in Pakistan would be coordinated in a much more effective manner. (v) The Single Distributor would be able to maintain sufficient level of inventories as he would have a better perception of the market demand and as a result make prompt dispatches of supplies to the retailers as and when required. (vi) The Single Distributor would have high stakes in the business which would lead to greater effort and a better principal distributor relationship. (vii) The logistics of exports including transportation costs would be less cumbersome and more economical.
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(45) Question Background: Winter 2011, Q # 7 (a). Syllabus Topic: Foresight Electronics is a knowledge-based company and is known for its ability to manufacture innovative and new-to-the-market electronic products and sell them in specifically identified niche markets. The company follows a Market Skimming Strategy to achieve its profitability objectives. Narrate four conditions which are essential for Foresight Electronics to be able to successfully adopt its Market Skimming strategy. (06 marks) Suggested Answer:Foresight Electronics would be able to adopt its Market Skimming Strategy successfully in the following conditions: (i) When the niche market for its products comprises of customers who can afford and are willing to buy the product at the high prices. (ii) When the firm is in a position to obtain the advantage of initial high price of its products for the duration that it intends to pursue its market skimming pricing strategy. (iii) When the high price would create and convey an image of superior quality products among the buyers. (iv) When the unit cost of manufacturing a small quantity of output is not so high so as to offset the advantage of selling the product at the high price. (v) There should be a high entry barrier of the industry. (46) Question Background: Winter 2011, Q # 7 (b). Syllabus Topic: Household Furniture Co. is manufacturers of a wide range of furniture products used primarily by customers in the middle income group. Identify four different types of conditions in which it would be advantageous for the firm to pursue Market Penetration Strategy. (04 marks) Suggested Answer:It would be advantageous for Household Furniture Company to pursue a Market Penetration Strategy in the following situations: (i) When the demand for household furniture is price elastic. (ii) When the firm is in a position to achieve significant economies of scale by producing and selling a large volume of output. (iii) When the quality of the furniture sold by Household Furniture Company and its promotional strategies are designed to capture a large share of the expanding market. (iv) When there is intense competition in the market and Household Furniture Company wants to retain/expand its share of the market to derive benefits in future. (47) Question Background: Winter 2011, Q # 8. Syllabus Topic: Horizon Limited (HL) is engaged in the business of manufacturing and marketing of a wide range of consumer durable products. The companys products are in different stages of their Product Life Cycles. Consequently, HL pursues different promotional strategies for products depending on the stage of their Product Life Cycles. State the types of Promotional Strategies which HL may pursue for marketing of its wide range of products in the (i) Introduction, (ii) Growth, (iii) Maturity and (iv) Declining stages of their Product Life Cycle. (07 marks)
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Suggested Answer:Horizon Limited may pursue Promotion Strategies in the marketing of its consumer durable products in their different stages of Product Life Cycles as follows: (a) Introduction Stage (i) Inform and educate the potential customers of the existence of the product (ii) Encourage trial of product and create awareness of the benefits that would accrue to the customers by using the product and how it should be used (iii) Secure distribution in leading retail outlets (iv) Place heavy emphasis on personal selling and promotion in trade shows and exhibitions. (b) Growth Stage (i) Stimulate demand in selected market segments and promote the particular brand as competition increases (ii) Increase emphasis on advertising to capture a large share of the growing market. (iii) Enter new markets and expand coverage (iv) Identify new distribution channels (v) Shift emphasis from product awareness to the individual firms brand preference through aggressive advertising. (vi) Promote differentiation (c) Maturity Stage (i) Focus on promotion and advertising to persuade the customers to purchase the particular brand rather than to provide information about the product (ii) Selective promotion only as intense competition and increase in promotion expenditures would result in lower profits (iii) Increase R&D budgets to improve product quality vis-a-vis competitors (iv) Extend product lines to meet niche customer demand. (d) Declining Stage (i) Reduce promotion expenses as the size of the market is shrinking (ii) Focus of promotion towards reminding remaining customers. (iii) Rejuvenate old products to make them look new. (48) Question Background: Winter 2011, Q # 9 (a). Syllabus Topic: In your opinion what important factors have led leading Japanese companies to establish automobile assembling/manufacturing plants in selected developing countries? Identify five factors and substantiate them with brief explanations. (05 marks) Suggested Answer:The leading Japanese companies have established automobile assembling or manufacturing plants in selected developing countries due to the following reasons: (i) The developing countries are witnessing significant economic growth and increase in population which has created very large markets for various types of vehicles. Establishment of automobile assembly/manufacturing plants locally would fulfill the demand/supply gaps in these countries. (ii) Labour and other manufacturing costs are on the high side in Japan and the high prices of imported vehicles from Japan would be beyond the reach of a large segment of the market.
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(iii) The strong Japanese Yen makes the price of imported vehicles very expensive in the developing countries and would restrict the size of the market (iv) Transfer of technology and creation of job opportunities are viewed favourably by the governments in the developing countries and they offer liberal tax concessions to the Japanese companies to establish assembling/manufacturing facilities in their countries (v) The domestically assembled/manufactured vehicles of various types and models are adapted to meet the local requirements in terms of prices and their suitability for the particular developing countries. (49) Question Background: Winter 2011, Q # 9 (b). Syllabus Topic: Describe briefly the Political Factors which should be taken into consideration by a multinational corporation while evaluating a decision to make substantial direct investment in a foreign country. (03 M) Suggested Answer:The following Political Factors should be taken into consideration by a multinational company while evaluating a decision to make substantial direct investment in a foreign country: (i) Form of the Government and its Stability - a government having the support of its citizens and enjoying political stability would provide continuity to its economic and financial policies which would be beneficial for MNC. (ii) Attitude towards Private and Foreign investment - a government which pursues policies of encouragement towards private investment, including foreign investment, would be considered favourably as against policies which pursue government ownership of business enterprises. (iii) Relations with other countries - a country which has good relations with other countries would be considered favourably as it would provide stability and sustained long-term operations for MNCs business. (50) Question Background: Winter 2011, Q # 10 (a). Syllabus Topic: Selection and recruitment of candidates requires careful assessment of the diversified attributes of the prospective candidates. Besides interviews, different types of tests are administered to ascertain the suitability of candidates for the positions for which they are being considered for appointment. (a) Explain briefly the purpose of each of the following types of tests which are administered to candidates in the selection process. (i) Intelligence Tests (ii) Proficiency Tests (iii) Aptitude Tests (03 marks) (b) State two qualities of a well-conceived Selection Test and indicate why they are important. (02 marks) (c) Identify the different situations in which it may be considered necessary for an organisation to dismiss an employee. (05 marks) Suggested Answer:(a) The purpose of different types of tests administered to the prospective candidates is: (i) Intelligence Tests: Intelligence Tests are administered to measure the candidates ability to think logically, analyze the pros and cons of problems and make rational decisions. Intelligence Tests may also be used to determine the candidate understands of social values and customs. (ii) Proficiency Tests: Proficiency Tests are designed to evaluate the candidates level of skills, expertise and competence to perform the particular task for which the individual is being considered for recruitment. (iii) Aptitude Tests: Aptitude Tests are conducted to ascertain the candidates ability to work with others in a team environment, handle work-related stress and cope with the various demands of the job.
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(b) A well-conceived Selection Test should have the following qualities: (i) A high degree of validity - that is it should be capable of measuring attributes which it seeks to evaluate in the candidate (ii) A high degree of reliability that is should provide results which have a high degree of consistency among the various candidates. (c) It may be necessary for an organisation to dismiss an employee in the following situations: (i) The abilities of the employee have been impaired and it is not possible for the individual to continue to perform the assigned duties satisfactorily. (ii) The employee has indulged in serious misbehaviour/indiscipline with the supervisor or peers and this conduct is not conducive to the good working environment of the organisation. (iii) The employee cannot continue to work as it would be in contravention of the legal requirements/ laws of the country. (iv) The employee is involved in corruption/misappropriation of the employers properties. (v) The employee has divulged companys confidential/proprietary information to competitors. (vi) The employee has attempted or made unauthorized access in the companys confidential information network with malicious intent. (51) Question Background: Summer 2011, Q # 1 (a). Syllabus Topic: A leading manufacturer of automobiles attaches high degree of importance to the competencies and skills of its front-line operational managers in the manufacturing and assembly lines. Identify and briefly explain the different types of competencies and skills required for effective performance by these managers. (05 marks) Suggested Answer:The different types of competencies and skills required by front-line operational managers of an automobile manufacturing and assembly unit are: Technical Competencies and Skills: Technical competencies and skills are necessary for knowledge of procedures and rules, performance and management of day-to-day activities and for understanding the manufacturing operations. Technical skills are essential for applying the procedures for routine work, such as setting work priorities, quality control, meeting schedules and conserving resources at the floor level. These skills are important for the front-line managers because they have to guide and supervise the production workers. Human Competencies and Skills: These are interpersonal competencies and skills which enable managers to work effectively with other employees as team players. Human competencies and skills also include communication skills and the ability to motivate and lead subordinates and ensure discipline. Human Skills are important for front-line managers because they have to liaise with the workers as well as with other managers. (52) Question Background: Summer 2011, Q # 1 (b). Syllabus Topic: Employee Participation is often considered to be vital for the growth and development of individuals and teams to enable them to make effective contribution towards achievement of the goals of the organisation. List five advantages which employers seek to achieve by encouraging Employee Participation in the affairs of the organisation. (05 marks)
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Suggested Answer:The advantages of Employee Participation in the affairs of the organization are: (i) Employee Participation would improve decision making as the employees would acquire the necessary knowledge and insight to contribute effectively in this process. (ii) Employee Participation would make the workers more willing to implement the decisions in which they have also been involved. (iii) Employee Participation would help to improve internal communication and coordination and contribute towards better working relationships at all levels. (iv) Employee Participation would tend to reduce the extent of supervision as the workers would be more conversant with the actual work because of their close involvement. (v) Employee Participation would enable the employees at all levels to acquire new skills and develop leadership qualities. (vi) Create an attitude change and ownership of the organization and tasks improving the productivity. (53) Question Background: Summer 2011, Q # 2 (a). Syllabus Topic: Identify the force of competition which is relevant in the context of Michael Porters Five Forces Model of Competition in each of the scenarios presented below. Substantiate your answer by highlighting the salient features of the Model of Competition selected by you in each of these scenarios. (i) Four companies of similar size and strength are engaged in the manufacture of detergent powder for washing clothes. These companies are key market players and jointly share 95% of the aggregate market which is not expected to witness any significant growth in the foreseeable future. (ii) Sound health Pharmaceuticals and Good care Pharmaceuticals are manufacturers of two new medicines for treatment of cancer. The medicines have been developed after a long period of research at a very substantial R&D cost and are highly effective. Both the existing manufacturers are earning exceptionally high profits in a market which is expected to witness growth in the future. (iii) Lucky Coal Mines Limited is the sole supplier of coal to a cement plant located in close proximity to the mines. The cement plant requires substantial quantities of coal for firing of its kilns. Quality of this coal is most suitable for the cement plant and also cost-effective due to low transportation costs. Lucky Coal Mines has several buyers who are willing to purchase the coal because of its high calorific value. (09 marks) Suggested Answer:(i) Rivalry among Existing Firms: Since companies of equal size and strength are involved in competition in a market which is not expected to show any growth, the strategies pursued by any one company can be successful to the extent that it has competitive advantage over the strategies of its rivals. Price competition, campaigns for creation of perceptions of quality differentiation, more convenient and attractive packaging features and aggressive promotion would be observed among the competing firms. (ii) Potential Threat of Entry of New Competitors: Since the market has significant growth prospects and present firms are earning lucrative profits, there would be a strong attraction for other resourceful companies to enter this market. Although a new entrant would have to incur huge research and development costs to develop the specialized products, yet threats from successful and experienced companies would always be present. (iii) Bargaining Power of the Supplier: Lucky Coal Mines is in a strong bargaining position. It can sell its coal to many other buyers whereas the cement plant would have to incur high transportation costs - switching costs Page 30 of 81 For More Notes and Study Material visit our website

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if it were to procure coal from other mines which are located at a considerable distance. Furthermore, the quality of coal from other sources may not be as suitable for the cement plant. Lucky Coal Mines can therefore dictate its terms e.g. price, advance payments on placement of orders and recovery of transportation costs from the cement plant. (54) Question Background: Summer 2011, Q # 2 (b). Syllabus Topic: Unique Textile Mills are leaders in the designing and manufacturing of cotton fabrics for ladies fashion clothing. Identify four Strategic Objectives which in your opinion may be included in the strategic planning process of Unique Textile Mills. (03 marks) Suggested Answer:Unique Textile Mills should include the following objectives in its strategic planning process: (i) Maintain and consolidate its leadership status as designers and manufacturers of high fashion fabrics. (ii) Innovate; Bring new designs in the market well in advance of the competitors. (iii) Minimize the time involved in the stages of Designing, Manufacturing and marketing of the products. (iv) Play a pioneering role in introducing the latest technologies and textile machinery in the country. (v) New distribution channels: Create a network of company-owned retail outlets for distribution of exclusive high-value fabrics. (vi) Reduce the cost of manufacturing and venture into vertical integration (55) Question Background: Summer 2011, Q # 3. Syllabus Topic: Symco Bank Limited has introduced significant changes in its organizational structure and downsized its operations so that it may be able to provide more efficient services to its customers and meet intense competition from other banks. (a) Define Downsizing and very briefly describe its impact on the Banks organizational structure. (03 marks) (b) List the important considerations which should be kept in perspective by the HR Manager of the bank while pursuing a policy of downsizing. (05 marks) Suggested Answer:(a) Downsizing is the process of reducing the number of employees with the purpose of making the organization more efficient and responsive to the changes in its business environment. It results in more flat organizational structures, greater delegation of authority and responsibilities, improved communication within the bank and more functions being performed at the lower echelons in the organization, close to the points of interaction with the customers. (b) HR Manager of the bank should keep the following considerations in perspective while pursuing a policy of downsizing and lying off of employees: (i) The downsizing process should be transparent and objective and not convey any impression of favouritism or create a feeling of victimization. (ii) The laying off of employees should not demoralize the surviving employees or pose a threat to their job security concerns which would affect their morale and performance. (iii) The layoffs should not result in loss of all employees who are performing important functions and are conversant with the internal procedures of the bank.
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(iv) The remaining staff should not be excessively overburdened as they would have to carry the additional workload which was handled by the employees who have been laid off. (v) The downsizing should not lead towards excessive consolidation of duties and responsibilities which may result in compromising the important controls and security aspects of the banks operations. (vi) The bank should not have negative image in the financial circles nor should the customers have any apprehensions about the goodwill and long-term financial standing of the bank and its ability to continue to render good service to the customers. (vii) Before downsizing there should be a fresh appraisal / performance competence done and results taken in consideration (56) Question Background: Summer 2011, Q # 4. Syllabus Topic: (a) What is meant by Market Research? (b) Give four basic reasons why companies conduct market research. Suggested Answer:(a) Market Research is the systematic designing, collection, analysis and reporting of data relevant to distribution and selling of goods and services in a specific marketing environment facing an organization. (b) The basic reasons for undertaking market research are as follows: (i) To identify market opportunities and problems and determine the need for changes in marketing plans; (ii) To evaluate and predict consumers behavior which may influence their decisions for purchase of various goods and services; (iii) To analyze the marketing strategies of competitors and their impact on the firms business; (iv) To formulate product development, pricing, promotion and distribution strategies to achieve optimal results. (57) Question Background: Summer 2011, Q # 5. Syllabus Topic: You have recently been appointed as Human Resource Manager of Fine Electrical Company Limited (FECL), a leading manufacturer of a wide range of household appliances. The company has over 800 employees working in the various departments involved in the manufacture of its different product lines. You have observed that FECL does not have a system of Formal Succession Planning Scheme in the company. Required: (a) Explain briefly what is meant by Formal Succession Planning (03 marks) (b) Briefly explain to the management of FECL the advantages of introducing a Formal Succession Planning Scheme in the company. (05 marks) Suggested Answer:(a) Formal Succession Planning is an important HR function as it ensures availability of sufficient number of appropriately qualified and competent employees from internal sources to meet the future HR needs of the organization. Suitable employees are identified in the early stages of their careers and are groomed through a process of job rotation and training, to assume more responsible positions in the organization arising due to promotions, transfers, retirement or death of key employees. (b) The main advantages which would accrue to FECL by introducing a Formal Succession Planning Scheme are as follows: (i) It would enable FECL to anticipate HR requirements in advance and avoid awkward problems arising due to delays in identifying and recruiting suitable employees from external sources to fill in key vacancies.
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(ii) It would enable the company to identify high-potential employees at an early stage whose career paths can be planned for promotion to higher levels in the organization hierarchy. (iii) It would align the HR function of career path planning of employees with the overall corporate and strategic planning objectives. (iv) It would increase the managerial depth within the organization which can readily fill in the positions when necessary. (v) It would provide internal promotion opportunities for the employees to increase their level of motivation and commitment towards the company. (vi) It would reduce the risk of inducting employees from external sources at higher levels who may not be able to assimilate in the corporate culture of FECL and work in a cohesive team environment. (vii) Positive goals for key personnel, which will help keep them with the company and will help assure the continuing supply of capable successors for each of the important positions included in the succession plan. (viii) Defined career paths, which will help the company recruit and retain better people. (58) Question Background: Summer 2011, Q # 6 (a). Syllabus Topic: What is Market Penetration Policy? Identify the conditions in which Market Penetration Policy may be pursued to achieve optimum results. (06 marks) Suggested Answer:Market Penetration Policy aims to charge low prices of the product to capture a large share of the market or achieve large volume of sales. Market Penetration Policy may be pursued to achieve optimal results under the following conditions: (i) Discourage existing and potential competition in a highly competitive market. (ii) Sufficient production capacity exists and the firm is prepared to sacrifice short- term profits to capture a major share of the market. (iii) Market is price sensitive and a low price would result in rapid growth of the market. (iv) Manufacturing and distribution costs would show a downward trend with increase in production and the size of the market. (59) Question Background: Summer 2011, Q # 6 (b). Syllabus Topic: Explain briefly what you understand by the term Market Segmentation. State the criteria which are essential for classification of markets in different segments. (05 marks) Suggested Answer:Marketing Segmentation is a process of dividing the total market into several distinct groups with each group having certain homogeneous characteristics. The groups can be formed on the basis of their geographic locations, income levels, age groups, educational qualifications, psychological behavior, buying habits and cultural backgrounds, etc. The markets can be divided into segments if the segment fulfills the following criterion: (i) The market segment must be capable of classification as a distinctly identifiable and measurable group having common characteristics. (ii) The market segment must be of a size which is sufficiently large to elicit interest of the seller in term of its sales revenue and profit potential.
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(61) Question Background: Summer 2011, Q # 7. Syllabus Topic: Highly Creative Strategic Planners in progressive organizations have innovative mindsets and do not merely project past strategies in the future but are continuously engaged in out of the box thinking to explore new opportunities beyond the existing strategy framework. Identify the distinguishing characteristics of organizations which pursue innovative corporate strategies. (09 marks) Suggested Answer:The distinguishing characteristics of organizations which pursue innovative corporate strategies are: (a) They compete in the market on the basis of their differentiated superior products/services as compared to the offerings of other companies; (b) They are continuously searching for new growth platforms for their business and are several steps ahead of their competitors; (c) They are able to anticipate threats from competitors and seek to respond with new or better products/services to sustain their competitive advantage; (d) They are always making efforts to develop new and innovative products to provide greater customer value; (e) They are forward looking visionaries and are continuously searching for means to change their strategic direction; (f) They value management cohesiveness at all levels and both the strategy planners and those involved in implementation of the strategy work in close collaboration. (62) Question Background: Summer 2011, Q # 8 (a). Syllabus Topic: Distinguish between a global business strategy and a multi-domestic/adaptive business strategy. Identify a real life example of each strategy and give reason for your choice. (06 marks) Suggested Answer:A global business strategy specifies a standardized worldwide product and marketing strategy by which a firm sells the same product in essentially the same manner throughout the world by highlighting its main features such as quality, specifications, warranty, packaging, etc.A multi-domestic or adaptive business strategy is one in which the firm treats each market in a different manner and develops products and marketing strategies which appeal to the varying customs, tastes and buying habits in the different national markets. Real Life Example of a Global Business Strategy - photocopiers, medical equipments, chemicals, cement, steel, etc are not sensitive to differences in cultures and are sold in different markets highlighting similar features and attributes such as quality and convenience, etc. Real Life Example of Multi-domestic or Adaptive Products strategy - Food products such as fast foods, apparel and clothing, cosmetics, etc. which are adapted to meet the consumption habits, tastes and cultural sensitivities and unique requirements of the different markets (63) Question Background: Summer 2011, Q # 8 (b). Syllabus Topic: What are the key financial decisions which should be made by the management while contemplating direct investment in a foreign country by formation of a subsidiary company? (05 marks)

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Suggested Answer:The key financial decisions which should be made by the management while contemplating investment in a foreign subsidiary company are: (i) Should the parent company invest in the subsidiary as a wholly owned company or should the parent company retain only a majority interest in the subsidiary? (ii) If the parent company decides to retain only a majority interest, then should the subsidiary raise equity through a resourceful local investor in the host country or should it make a public offering of its shares? (iii) Should the subsidiary be financed substantially through equity investment or should it raise debt financing to meet a large proportion of its capital costs? (iv) Should the subsidiary make the borrowings in the local currency of the host country or in any other currency to avail benefits of exchange fluctuations? (v) Should the subsidiary distribute a large portion of its profits as high dividends or should it retain a substantial portion of its earnings to meet the cost of its expansion strategy? (vi) Should the subsidiary raise the bulk of its working capital requirements through borrowings from banks or should it place heavy reliance on trade credit? (64) Question Background: Summer 2011, Q # 9. Syllabus Topic: A multinational company which has its headquarters in the UK pursues a strategy of exercising very close control and centralization of all important decision-making processes of all of its four overseas subsidiary companies. Identify four factors which in your opinion may have influenced the MNCs strategy of implementing highly centralized decision making policies for its subsidiary companies. (10 marks) Suggested Answer:The factors responsible for the MNCs policy of close control and centralized decision making for the subsidiary companies are: (i) Large size of the subsidiary companies and Substantial Capital Investment - Due to the large size of the individual entities and substantial investment of the MNC in the subsidiary companies, their performance can have far-reaching implications on the financial standing and profitability of the MNC. (ii) Access to technology and manufacturing process - The manufacturing process in the subsidiary companies involves sophisticated technology which has been developed by the MNC at a very high R&D cost. The technology is closely-guarded and the parent company wants to ensure maximum security and confidentiality of this technology. (iii) Operations of the subsidiary companies are closely integrated and inter-dependent - The operations of the subsidiaries are closely integrated and interdependent and unsatisfactory performance of any one company can have adverse impact on the performance of other group companies, including the MNC itself. There is therefore the need for more centralized control and supervision of the subsidiaries. (iv) Stringent Targets - If the products manufactured by the subsidiaries have to conform to stringent quality control requirements stipulated by the parent company or if the operations are of a highly environmentally sensitive nature, then the parent company would want to exercise more close control of the subsidiary companies. Any lapse or mishap by the subsidiary can have far-reaching adverse impact on the standing and reputation of the parent company.

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(65) Question Background: Summer 2011, Q # 10. Syllabus Topic: List ten responsibilities/obligations which employers must fulfill to ensure that the issues of Health and Safety are addressed adequately in a manufacturing environment. (05 marks) Note: Explanations are not required Suggested Answer:(i) The plant and equipment must be maintained according to the specified standards. (ii) The employees must be provided training for compliance with the safety procedures. (iii) The Safety Policy should be communicated to all the employees (iv) Instructions for proper handling of equipment should be displayed prominently in the work areas. (v) Employees who are exposed to risks should be provided proper safety gear. (vi) All moving parts which may cause injuries to the workers should have protective fencing. (vii) All slippery floors areas should display adequate warning signs. (viii) First aid boxes with necessary supplies should be provided at various points. (ix) Fire Alarms and firefighting facilities should be provided and checked and refilled at regular intervals. (x) Health and Safety Advisors should conduct Workshops and Seminars at regular intervals. (xi) Employees should immediately report all accidents on the prescribed Accident Reporting Forms. (66) Question Background: Summer 2011, Q # 11. Syllabus Topic: Briefly discuss the following: (a) Business Ethics (c) Tactical Planning Suggested Answer:(a) Business Ethics is a code of moral principles that management and employees follow with respect to what is right and what is wrong from the standpoint of the organizations dealings and interactions with its stakeholders. Besides generally acceptable values and norms, the organizational culture and internal policies of individual organizations play a very important role in determining the ethical policies that are followed in the company. The guidelines for proper ethical conduct are embodied in the companys Formal Code of Ethics. (b) Environmental Scanning is the process of collecting information about the external marketing environment in order to identify and interpret potential trends. It includes analysis of collected information to anticipate whether the trends represent opportunities or threats. Environmental scanning includes assessment of political developments, economic trends and social and cultural influences which would affect the organization. (c) Tactical Planning refers to the day-to-day plans regarding implementation of the different work activities required to achieve the objectives of the strategic plans. Tactical Plans pertain to the current and short-term activities performed by low-level managers which are nevertheless of vital importance for implementation and achievement of the objectives of the overall strategic plans. (d) Backward Integration Strategy seeks the ownership or increased control of the firms sources of important raw materials and other critical inputs and supplies. Backward integration strategies are pursued in situations where the suppliers are unable to adhere to the buyers specifications of quality, or are unreliable in meeting their commitments or are few in number and dictate unreasonable terms or charge exorbitantly high prices to take advantage of the buyers who are heavily dependent on the inputs from these suppliers.
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(2.5 marks) (2.5 marks)

(b) Environmental Scanning (d) Backward Integration Strategy

(2.5 marks) (2.5 marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(67) Question Background: Winter 2010, Q # 1 (a). Syllabus Topic: Dental Equipments Limited (DEL) is engaged in the business of manufacture of a wide range of equipments used by private dentists as well as leading hospitals. The Company strives hard to achieve sustainable growth and meet the requirements of highly demanding dentists who want the very best and the latest equipments to serve their patients.DEL has recently observed a trend of unethical practices followed by its sales representatives. The sales representatives who are not able to meet their targets, book fictitious sales at year ends and later record them as sales returns. They also share a portion of their commissions with the purchase representatives of the major hospitals. State what policy measures DEL should adopt to eliminate the unethical practices of the sales representatives. (06 marks) Suggested Answer:DEL should adopt the following policy measures to eliminate the unethical practices followed by the sales representatives: (i) Create a written Company Code of Ethics and circulate it to each member of the sales department. This would eliminate the ambiguities and help the employees to differentiate between what is considered to be acceptable behaviour and what is unethical behavior. (ii) Issue clear and specific instructions, requiring adherence to the norms of ethical behaviour. These instructions would be deterrent for the sales representatives and dissuade them from engaging in unethical practices. (iii) The consequences of indulging in unethical behavior should be stated clearly in the Code of Ethics. (iv) Sales Representatives who are unable to achieve their allocated targets fully should also be rewarded on an appropriate basis. (v) DEL should sponsor and organize seminars and workshops on Ethics to emphasize the importance of ethical behaviour. (68) Question Background: Winter 2010, Q # 1 (b). Syllabus Topic: State the situations in which an MNC would prefer to operate in a foreign country as a branch instead of establishing a subsidiary company. (04 marks) Suggested Answer:It would be advantageous to establish branch operations in a foreign country instead of an overseas subsidiary company in the following situations: (i) If the foreign business is not expected to be profitable in the initial years and therefore the losses of the subsidiary company can have a negative effect on the image of the MNC. (ii) If the legal and accounting formalities of the branch operations are more simple vis--vis those involved in a subsidiary company. (iii) If the MNC does not intend to have a long term presence in the foreign country, it would prefer to establish branch operations. (iv) If the amount of investment involved in the foreign country is of a nominal amount and it may be advisable to set up branch operations instead of a subsidiary company. (v) If it is advisable to have a low operating profile to achieve the business objectives.

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(69) Question Background: Winter 2010, Q # 2. Syllabus Topic: List and explain briefly four factors which in your opinion create Exit Barriers and prevent existing participants from quitting a loss-incurring industry. (08 marks) Suggested Answer:The factors which create Exit Barriers and prevent existing participants from quitting a loss-incurring industry are: Substantial Investment in Highly Specialized Fixed Assets: This is particularly relevant in capital-intensive industries which require very large investments in specific-purpose building and machinery. These assets do not have alternative uses and their salvation value is usually low. The substantial initial capital costs and low salvation value of the assets would result in heavy losses and create exit barriers. High Redundancy Costs: Organizations having a large workforce with high salaries or contracts that stipulate high redundancy payments have to incur substantial costs by way of severance payments to its employees to exit from the industry. These payments require heavy cash outflows and act as exit barriers. Ancillary Costs of Closure of Business: The organization may have entered into long-term contractual agreements with important suppliers or buyers and tenancy agreements carrying substantial penalties in the event of premature termination of these agreements. The high costs of premature termination of agreements are exit barriers as the closure of business would cause huge losses. High Fixed Operating Costs: An organization which has very high fixed operating costs and is faced with unfavourable business conditions may continue operations if it is able to recover its variable costs fully and a portion of its fixed costs. This is particularly relevant if the unfavourable conditions are considered to be of a temporary nature and the firm is optimistic about the prospects of an upturn and recovery from its current difficulties. This type of composition of preponderance of fixed costs acts as an exit barrier. (70) Question Background: Winter 2010, Q # 3. Syllabus Topic: Identify the business strategy/policy/tool which an organisation is pursuing in each of the following situations: (a) In 1990, Sony launched the first High Definition (HD) TV in the market at a price of $43,000per set. These TV sets were purchased by customers who could afford to pay the high price for the new technology. After reaping the maximum profits and recovery of the sunk R&D costs, the price was gradually reduced in 1993 to $ 6,000 for a 28 TV set to attract new customers. This strategy is called __________. (b) The management tool that enables a firm to classify its range of products according to their current market share and expected growth is called __________. (c) The assessment tool used to compare and identify the variance between a firm's current market coverage and potential market opportunities for its products is called __________. (d) A company which has capabilities to manufacture a complete line of superior quality ball bearings for a wide range of original equipment manufacturers and industrial users is pursuing a strategy of __________. (e) If a company engaged in the textile manufacturing business acquires majority holdings in a sugar mill, a motor car manufacturing plant and a private airline; it is pursuing a __________strategy. (f) The chief executive officer who makes alternative plans to deal with emergencies or unexpected situations prior to their occurrence is pursuing a __________ strategy.

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(g) A firm uses different brands of essentially the same product to target different market segments is pursuing a __________strategy. (h) A bank which strives to develop better understanding of the customers needs and satisfy them to create customer loyalty is adopting a policy of __________. (i) A method of demand forecasting in which a firm markets its new products in a limited geographical area to ascertain consumer response and from this sample develops projections of the size of market over a larger area is called __________. (09 mark) Suggested Answer:The business strategy/policy in each of these situations is: (a) Market Skimming Pricing Strategy (b) BCG Matrix (c) Gap Analysis (d) Product Specialization (e) Conglomerate Diversification or Conglomerate Expansion Strategy (f) Contingency Planning Strategy (g) Multi-brand Strategy (h) Relationship Marketing (i) Test Marketing (71) Question Background: Winter 2010, Q # 4 (a). Syllabus Topic: Recruitment of the right type of staff is of critical importance for the short term as well as the long-term success of an organisation. Induction of unsuitable employees creates difficulties for an organization in the achievement of its goals, undermines the morale of other employees and has adverse effects on the individuals themselves as they are misfit and unable to make worthwhile contribution towards the organization. Required: Briefly describe qualities that a skilled recruiter should possess in order to be able to evaluate prospective candidates for recruitment in a performanceoriented organization (06 marks) Suggested Answer:A skilled recruiter should: (i) Possess knowledge about the job to be filled The recruiter should have a clear understanding of the job and be able to ascertain whether it is necessary to induct a new employee or the work can be handled adequately by reorganizing or reallocating other jobs. If the job is necessary then the duties and responsibilities attached to the job should be clearly spelt out. (ii) Possess insight in the attributes and qualities of the individuals to perform the job The recruiter should be aware of the qualifications, experience and skills necessary to perform the job. (iii) Have knowledge of the sources and the means of attracting a range of suitable candidates In case it is necessary to recruit from external sources, the recruiter should be aware of the sources where suitable applicants are available, identify the potential candidates and adopt appropriate methods of recruitment. (iv) Possess skills to evaluate the candidates who are most suitable for the job The recruiter should have insight in the methods of obtaining information about the candidates and be able to apply the appropriate methods for selection of the right candidate. (72) Question Background: Winter 2010, Q # 4 (b). Syllabus Topic: A leading hospital which has a network of facilities at several locations in Karachi and also in other cities intends to invite applications for the posts of Laboratory Technicians at its various facilities. List six important items that should be contained in an advertisement to be placed by the hospital in a newspaper having wide circulation in several cities in the country. (03 marks)
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Suggested Answer:The advertisement should contain the following information: (i) Requirements of the job specifications stating main tasks to be performed and the responsibilities associated with the position. (ii) Outline of the hospitals network and its reputation, working conditions, the facilities available in the hospital and professional capabilities of the staff. (iii) Location(s) at which the technicians would be posted. (iv) Compensation package including fringe benefits. (v) Specifications of job requirements such as education, professional training, particular skills and experience. (vi) Name /designation of the individual to whom the application should be sent and last date for receipt of applications. (73) Question Background: Winter 2010, Q # 5 (a). Syllabus Topic: List the following methods of payment for the imported products which are most advantageous from the perspective of an importer in descending order. (i) Open Account (ii) Sight Letter of Credit (iii) Consignment (iv) Usance Letter of Credit (02 M) Suggested Answer:The methods of payment in the order of preference for the importers are: (i) Consignment (ii) Open Account (iii) Usance Letter of Credit (74) Question Background: Winter 2010, Q # 5 (b). Syllabus Topic: State six constraints which in your opinion act as impediments towards attracting foreign investments in an underdeveloped country (03 marks) Suggested Answer:The constraints which act as impediments towards attracting foreign investment in an underdeveloped country are: (i) Poor infrastructure facilities of roads and communications. (ii) Currency depreciation of the underdeveloped country. (iii) High costs of energy inputs and their unreliable availability. (iv) Absence of laws relating to patents, copyrights and intellectual properties. (v) High Risk of political instability in the country. (vi) Widespread corruption in the government and other social sectors. (vii) Lack of education and non-availability of a skilled and competent work force. (viii) Absence of generally accepted accounting principles. (ix) Uncertain long-term economic and financial policies. (75) Question Background: Winter 2010, Q # 5 (c). Syllabus Topic: List four advantages of adopting market-based transfer pricing policies. Suggested Answer:Page 40 of 81 For More Notes and Study Material visit our website

(iv) Sight Letter of Credit

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The advantages of market-based transfer pricing policies are: (i) The individual units would achieve high level of efficiency as they can negotiate most favourable marketbased prices as if they were independent units. (ii) The selling unit would make efforts to improve the quality of the products in accordance with the requirements of the purchasing unit. (iii) The performance of the individual units can be evaluated more objectively. (iv) The tax authorities would accept more favourably a market-based transfer pricing policy. (76) Question Background: Winter 2010, Q # 6 (a). Syllabus Topic: A well-established and successful Chinese company engaged in the business of manufacturing of a wide range of home appliances such as refrigerators, washing machines, microwave ovens and assorted juicers and blenders intends to launch its products in Pakistan. The Companys management is of the opinion that its products have significant cost and quality advantages and can capture 4-5 percent share of Pakistans market in 5 years. Identify and list at least twelve key parameters which should be considered by the company for an objective evaluation of the Export Market Potential. (06 marks) Suggested Answer:(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) Current Market Size: Population Size and Growth GDP Size and Growth Domestic Production of Appliances Volume of Import of Appliances Sources of Import of Appliances Market Accessibility: Import duties and tariffs Existing distribution channels Pricing methods and credit terms Promotional and advertising practices Resourcefulness of potential distributors (xi) (xii) (xiii) Economic Stability: Balance of Payments Position Taxation Policy Monetary and Trade Policy Regulations

(xiv) (xv) (xvi) (xvii) (xviii)

Miscellaneous : Non-tariff barriers Attitude towards Chinese products Political stability Cultural differences within the country Level of education

(77) Question Background: Winter 2010, Q # 6 (b). Syllabus Topic:

Some companies enter into Licensing Arrangements with the overseas companies as an alternative to direct exporting. Identify the advantages that such companies seek to achieve by following this strategy. (05 marks)

Suggested Answer:Companies enter into Licensing Arrangements with overseas companies instead of direct exporting to obtain the following advantages: (i) Direct Exporting may be unattractive because of tariffs, quotas or other import restrictions in overseas markets. (ii) Licensing may allow fairly rapid penetration of overseas markets. (iii) Licensing does not require substantial financial resources. (iv) Political risks are reduced since the licensee is likely to be a local company. (v) Local production may be the only feasible option in the case of bulky products such as cement and flat glass.
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(78) Question Background: Winter 2010, Q # 7 (a). Syllabus Topic: Explain the meaning of Brand Equity. Suggested Answer:Brand Equity is the differential effect of awareness and familiarity of the brand name on the customer response to the quality of a product or service. It is a measure of the brands ability to capture and retain the preference and loyalty of the consumers. A brand has positive brand equity when consumers react more favourably to it than to any generic or other branded versions of the same product. (79) Question Background: Winter 2010, Q # 7 (b). Syllabus Topic: Silkfinish Paints Limited (SPL) are manufacturers of a wide variety of superior quality paints which are used in interior and exterior finishing of residential, commercial and industrial buildings. SPL intends to launch an aggressive Pull Strategy to counter competition from new entrants who are offering lucrative margins to the retailers to promote their products which are inferior in quality and priced much below the prices of SPLs products. (i) What is meant by Pull Strategy? (02 marks) (ii) Explain briefly what advantages SPL is seeking to achieve by launching an aggressive Pull Strategy. (03 marks) Suggested Answer:(i) A Pull Strategy is a promotional strategy in which considerable expenses are incurred in advertising and customer promotion to attract the final consumers who seek to purchase the products on the strength of its brand name. (ii) SPL intends to launch an aggressive Pull Strategy to achieve the following advantages: Further strengthen the brand image for its products and create greater brand awareness among the quality conscious customers. Differentiate its products from those of the competitors and create value for the customers who would be willing to pay a premium price for the products. Create customer loyalty by emphasizing that the long-term advantages of superior quality paints far outweigh the apparent savings offered by competitors by way of lower prices. (80) Question Background: Winter 2010, Q # 8 (a). Syllabus Topic: The role of Human Resource Managers in companies which have a very large workforce has assumed increasing importance and they are now more closely involved and proactive in the Formulation and Implementation of Strategies at the corporate level. State the areas of specific responsibilities which fall in the domain of a Senior Human Resource Manager involved in the Formulation and Implementation of overall Corporate Strategy of an integrated textile mill having over 15,000 employees in various cadres. (10 marks) Suggested Answer:A Senior Human Resource Manager involved in the Formulation and Implementation of Strategy at the corporate level of a textile mill having 15,000 employees should have responsibilities to achieve the following objectives:
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(02 marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(i) The organizational structure should be appropriately designed to achieve the overall corporate objectives. The organizational structure should capitalize on internal strengths and strive to remove internal weaknesses which may be impediments to the achievement of the objectives. (ii) The companys objectives and goals should be communicated and well understood by the employees at all levels. (iii) The various divisions and departments should work in close coordination to achieve the main goals and objectives of the company. Areas of friction and conflict which may undermine performance should be identified and rectified at appropriate levels. (iv) The managers at all hierarchical levels should make effective plans to achieve the business and operational goals and targets entrusted to their respective departments. (v) The job descriptions and job specifications should be precisely defined and clearly understood by the employees at all levels. (vi) The organizations reward system, including benefits and policies of promotion should be fair and equitable and designed to achieve optimum employee performance at all levels. (vii) The policy issues of training, job rotations, career path and succession planning should be accorded the necessary degree of importance and be implemented in an objective and fair manner. (viii) The employees should be kept fully motivated and their morale and commitment should be high at all times. The employees should take pride in their association with the company. (81) Question Background: Winter 2010, Q # 8 (b). Syllabus Topic: What is meant by a Strategic Business Unit (SBU)? Suggested Answer:A Strategic Business Unit (SBU) is an independent unit within a large organization and has its own staff, financial resources and products. A separate SBU pursues its own marketing strategy and is established on the premise that a single strategic approach is not always appropriate in a large diversified organisation which markets different products to serve the needs of a wide range of customers. (82) Question Background: Winter 2010, Q # 9. Syllabus Topic: Management has to expend considerable efforts in devising business strategies to achieve corporate objectives and goals effectively. (a) Why do companies accord importance to the pursuance of a formal Strategic Planning Process? (06 marks) (b) Explain the different steps which the management has to undertake in the formulation and implementation of a well-considered business strategy. (09 marks) Suggested Answer:(a) Companies accord importance to the pursuance of a formal Strategic Planning Process to achieve the following objectives: (i) A formal Strategic Planning Process helps to identify the opportunities and risks involved in the companys business. The company can make well-considered strategies and adopt measures to seize the opportunities accruing from its internal and external strengths and also reduce the various business risks.
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(03 marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(ii) A formal Strategic Planning Process enables the companys top management to be involved in proactive thinking of the business objectives and taking coordinated actions relating to deployment of resources to achieve its strategic goals. (iii) A formal Strategic Planning Process ensures the participation of management and the staff who are seized with the task of achievement of the business objectives. The staff at all levels develop understanding of the productivity-reward relationship in the strategic plans which increases their motivation and reduces the adverse impact of resistance to change. (iv) A formal Strategic Planning Process is essential to create alignment of the companys short-term, mediumterm and long-term targets for achievement of the companys objectives. (v) A formal Strategic Planning Process is essential for optimum coordination of the corporate, business and functional strategies for achievement of the Companys objectives. (b) In the formulation of a well-considered Business Strategy, the management conducts an Appraisal of the companys internal and external environment. For this purpose SWOT Analysis may be carried out in or der to find ways for (a) exploiting the companys strengths to help achieve short-term and long-term objectives and (b) reviewing the weakness and threats faced by the company from the following standpoints. The steps in the implementation of a well-considered Business Strategy are: (i) Organizational Structure: Organization Structure is suitably integrated for achieving harmony among the various departments and functions and co-ordination at all levels. (ii) Human Resources: Human resources with necessary skills and proper motivation are deployed in appropriate positions for effective implementation of strategy. (iii) Availability of Financial Resources: Adequate financial resources should be made available in time for implementation of the strategy. (iv) Technology: Appropriate technological inputs are made available to support the performance necessary to achieve the objectives of the strategic plans. (v) Decision Process: Sound policies and processes are developed to ensure that all significant decisions are taken on time and in a coordinated manner. (vi) Monitoring and Control Systems: Appropriate systems are established to ensure that progress is monitored against the established standards on a continuous basis and deviations if any are identified for taking timely corrective actions for implementation of the strategic plans. (83) Question Background: Winter 2010, Q # 10. Syllabus Topic: One common factor which distinguishes well-managed and highly profitable service-oriented companies from their competitors is the competence and commitment of their human resources. The top companies assign very high priority towards the training and development of their staff and genuinely consider their human resources as their key strategic assets. In these companies, training and up-gradation of the quality of human resources, at all levels, is a continuous endeavor with active involvement of the senior management. Explain what competitive advantages these service-oriented companies expect to derive by committing resources towards training and development of a competent and committed workforce. (09 marks) Suggested Answer:The well-managed serviceoriented companies give high importance to staff training and development and create a cadre of competent and committed employees to derive the following advantages:
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(i) The cadre of properly trained and competent staff who are fully knowledgeable of their duties and responsibilities can handle customers in a highly professional and courteous manner The competent staff inspires confidence in the customers and helps to retain their loyalty which brings repeat business. (ii) Success of even the well-conceived corporate and business strategies of service-oriented companies depend to a considerable extent on the competence of their staff at various levels to deal with a variety of situations where proper handling is of vital importance towards the achievement of the corporate goals. (iii) Properly trained and competent employees are able to avoid and handle accidents and mishaps and contribute towards the safety and security of customers, other members of the staff as well as the valuable physical assets. (iv) A well-trained and competent work force at all levels requires less directions and supervision and is able to handle the various day-to-day issues promptly in a responsible manner to the satisfaction of the management. These companies can operate efficiently with relatively flat organization structures and lower operating costs. (v) A competent, committed and motivated workforce is able to create a high degree of cohesion and team effort among the staff at various levels. (vi) A well-trained and competent workforce with multi-skilled capabilities is able to handle varied and different assignments. (vii) The new inductees who undergo formal training programs are better absorbed in the culture of the organization. (88) Question Background: Summer 2010, Q # 1. Syllabus Topic: Dandy Candies Limited (DCL) are manufacturers of a wide range of chocolates, candies and sweets catering primarily to the market segment comprising of children in the age group of 6-15 years. DCLs products are well accepted in the market in Karachi and its adjoining metropolitan areas and two of its main brands are quite popular in the middle class segment of the market. The management has now realized that in spite of substantial capital investment in fixed assets and good quality of its products, DCL has not been able to exploit the full potential of the rapidly growing size of the market and achieve high level of operating capacity. The Board has recently appointed a new Marketing Director and has given him a target to increase DCLs annual sales from the current level of Rs. 600 million approximately in each of the preceding 2 years to Rs. 1200 million in the next 3 years. Achievement of this target would launch DCL in the league of key market players and also significantly increase its profitability. The incoming Marketing Director has a track record of good performance in the consumer goods industry and achieving high sales targets by pursuing aggressive marketing policies through deep insight of the market dynamics. The Marketing Director is confident that he would be able to achieve the sales target set by the Board of DCL. Briefly explain the Marketing Penetration Strategies which the Marketing Director should pursue to achieve the sales target set by the Board. (10 Marks) Suggested Answer:The incoming Marketing Director of DCL may pursue the following Marketing Penetration Strategies to increase the Companys annual sales from Rs 600 million to Rs 1200 million in the next 3 years. (a) Pricing: DCL should reduce its prices to achieve a larger share of the growing market. This strategy would be particularly rewarding as the target market for children is assumed to be highly price sensitive and will result in substantial increase in the sales revenue. Besides, DCLs average cost would decline with increase in production and better utilization of existing capacity. Pursuance of this pricing policy would therefore contribute towards increase in sales revenue as well as overall profitability of DCL.
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(b) Increase in Promotion and Distribution Support: DCL should launch well-conceived advertising and promotion campaigns to attract those segments of the market in which its products are not consumed at present. It would also be necessary to identify and appoint competent new distributors who would aggressively promote DCLs products. DCL should provide support to the retailers by way of prizes and gifts for distribution among the children and also sponsor special events to increase awareness of its products in the target market. DCL might have to explore both the push and pull marketing strategy along with media advertising (c) Product Modifications: DCL should introduce further product improvements and change design features from time to time to make the products more attractive for the children. This strategy would enable DCL to gain a larger share of the market as the consumers would increase the frequency of their purchases. (d) Incentives to Marketing Staff: DCL should offer performance related incentives and special benefits to the marketing staff that are able to achieve and exceed the sales targets given to them. (e) Market Development: DCL should introduce its products in new geographic areas besides Karachi which offer good opportunities of achieving larger share of the market and increase in sales revenue. (89) Question Background: Summer 2010, Q # 2 (a). Syllabus Topic: Identify the important functions which have to be performed by the Human Resources Department of a commercial bank which has a strength of 17,500 employees deployed in a network of 800 branches located throughout the country. The commercial bank is a well-reputed organization known for its fair business policies, progressive outlook and concern for development of a competent and well motivated cadre of employees. (06 Marks) Suggested Answer:The important functions which have to be performed by the Human Resources Department of the commercial bank are: (i) Human Resource Planning (ii) Recruitment, selection and induction of employees (iii) Organization of departments and design of work flows (iv) Preparation of job specifications and job descriptions of employees (v) Salary and wage administration, including reward systems (vi) Planning for posting and transfers of suitable staff in the various branches (vii) Training and development of staff (viii) Measuring and monitoring of staff performance (ix) Instituting measures for improving motivation and morale of employees (x) Succession planning of competent staff (xi) Handling of employee grievances and complaints (xii) Employee welfare, health and safety (xiii) Compliance with employment legislation and other legal requirements. (xiv) Maintenance of centralized records of all the branches. (xv) Ensuring equality amongst all the branches, policies should be made at central level with equal remuneration and training opportunities for all the 17500 employees.

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(90) Question Background: Summer 2010, Q # 2 (b). Syllabus Topic: Research Studies by Human Resource experts have shown that successful organizations create internal work environments in which the employees are able to operate at their optimal levels of productivity. What are the important Human Resource Management practices which, in your opinion, contribute towards workforce optimization in a manufacturing plant with several integrated workshops and departments? (09 Marks) Suggested Answer:The important Human Resource Management practices which contribute towards workforce optimization in a manufacturing plant with several integrated workshops and departments are: (i) Hiring of Workers: Workers are selected carefully on the basis of their skills to undertake the specialized jobs they are required to perform. (ii) Workforce Planning: The strength of workers in various categories are determined in anticipation of the expected workload and measures are taken for ensuring their availability at the required point of time (iii) Work Processes: Work processes are well-defined and training is provided to the employees to enable them to perform their tasks in an efficient manner. (iv) Working Conditions: The internal working conditions are conducive for maximum achievement and the management supports high levels of performance. (v) Performance Management Systems: Well-designed employee performance systems are instituted in the organizations which are communicated and accepted by all the concerned employees. (vi) Conflict Management: Conflicts due to differences in perceptions, role ambiguities and competition for resources must be contained and resolved by management in a fair and equitable manner to promote team effort for the achieving the organizational objectives. (vii) Reward System: High level of performance is expected from the workers and they are adequately rewarded in a transparent manner for their good performance. Also reduce Staff turnover rate by providing adequate compensation and support. (viii) Employee Service: Make sure that the staff is provided with healthcare incentives, proper maintenance of records and information system. (91) Question Background: Summer 2010, Q # 3 (a). Syllabus Topic: Identify and explain briefly six factors which have contributed to the significant increase in importance of International Trade in the preceding 3-4 decades. (09 Marks) Suggested Answer:The factors which have contributed to the increase in importance of International Trade in the preceding 3-4 decades are: (i) Reduction in tariffs, quotas, exchange controls and liberalization of trade and investments have resulted in making the imported products competitive in local markets. (ii) Phenomenal improvement in communication and transportation technologies have resulted in rapid movement of goods and consequent reduction in transportation costs. (iii) Development of free-trade zones such as European Union and North American Free Trade Agreement have resulted in increase in international trade owing to preferential movement of goods and dismantling of high tariff regimes.
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(iv) Global standardization and worldwide brand building with local adaption have created significant market opportunities in different countries. (v) Substantial expenditures have been incurred on R&D and standardization of manufacturing and marketing techniques by global companies in industries such as manufacturing of pharmaceutical products, energy development, telecommunications, fast food, etc and such companies seek opportunities to apportion these costs to markets in different countries. (vi) Important raw material exporting countries now have a growing class of affluent citizens and foreign residents which have resulted in the creation of substantial markets for import of vehicles, construction materials, equipment, edible products and luxury goods. (92) Question Background: Summer 2010, Q # 3 (b). Syllabus Topic: According to Michael Porter the nature of competitiveness in any industry is a composite of Five Forces. The Competitive Analysis model developed by Porter is widely followed for formulating business strategies in many industries. List the five Competitive Forces stated by Michael Porter. (05 Marks) Suggested Answer:The Competitive Forces stated by Michael Porter are: (i) Potential threat of entry of new competitors (iii) Bargaining power of buyers (v) Rivalry among existing competitors (ii) Potential threat of substitutes (iv) Bargaining power of suppliers

(93) Question Background: Summer 2010, Q # 4. Syllabus Topic: Fine Sugar Mills Limited (FSML) owns and operates a sugar cane crushing plant for manufacture of refined sugar. The affairs of FSML are looked after by a team of professional management and the company ranks third amongst all the sugar mills in the country in terms of its sales and profitability. The Company has developed an extensive network of growers spread over a wide area who deliver cane at the factory site which is then crushed in the minimum possible time to achieve high rates of sucrose recoveries. Identify the key stakeholders of FSML and explain briefly why you consider each of these constituent stakeholders to be of vital importance for the sustainable and long-term profitable operations of the Company. (09 Marks) Suggested Answer:Key stakeholders of FSML and their importance for the sustainable and long-term profitable operations of the Company are: (a) Shareholders: The shareholders are the ultimate owners of the Company and it is important to maximize their wealth through sustained growth in real earnings and profitable expansion of the business. (b) Distributors and Customers: The distributors and customers are important as the Company can operate profitably only if it is able to build long-term relationship with the distributors and the ultimate customers by offering quality products and value for money. (c) Cane Growers: The sugar cane farmers are critical stakeholders as the Company has to build ongoing relationship with them for supply of good quality cane according to the pre-determined delivery schedules. (d) Employees: The employees are important as the staff have to be trained and motivated to enable the Company to maintain and strengthen its reputation as a progressive company and be able to continue to operate as a profitable entity.
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(e) Creditors: The creditors, including the banks, are important stakeholders as substantial amounts of finances are required by FSML for making payments to the cane growers, financing of stocks of sugar manufactured during the crushing season, purchase of components, parts and spares, etc The creditors are important stakeholders as they have to provide funds to meet FSMLs requirements. (f) Government: The government officials at various levels play an effective role for the smooth operations of FSML for movement of heavy traffic, maintaining law and order particularly during the crushing season, its role for fair pricing of sugar and ensuring its availability for the consumers throughout the country. (g) Community: The neighboring community has to accept the Company as a socially responsible and conscientious corporate citizen mindful of its obligations to the community and its overall welfare. (94) Question Background: Summer 2010, Q # 5 (a). Syllabus Topic: What are the four main types of information that a properly designed Job Application Form is expected to provide to the recruiter in the preliminary process of screening of a prospective candidate? (04 Marks) Suggested Answer:A properly designed Job Application Form is expected to provide the following information to the recruiter in the process of preliminary screening of a prospective candidate: (i) Enable the recruiter to assess whether the applicant has the basic educational qualifications, and technical skills to meet the requirements of the job. (ii) Enable the recruiter to evaluate whether the applicant has relevant work experience to meet the requirement of the job. (iii) Enable the recruiter to draw tentative conclusions about the applicants suitab ility for the position under consideration on the basis of previous work record. (iv) Enable the recruiter to predict whether the applicant would fit in the cultural and social structure of the organization. (v) Enable the recruiter to reach a decision whether it would be worthwhile to process the application further and call the applicant for test or interview. Question Background: Summer 2010, Q # 5 (b). Syllabus Topic: State five different situations in which it would be advisable for a firm to pursue policies of Unrelated Diversification. (05 Marks) Suggested Answer:It would be advisable for a firm to pursue policies of Unrelated Diversification in the following situations: (i) The firm operates in an extremely competitive market or in a no-growth industry characterized by declining industry-wide profitability and low returns on investments. (ii) The firm considers it advantageous to control sources of supplies or marketing channels by backward or forward integration. (iii) The firms existing channels of distribution can be gainfully utilized to market the new products and services. (iv) The firm has an opportunity to purchase an unrelated business at a very low cost with prospects of attractive rate of return on investment. (v) The new products offer counter cyclical sales patterns compared to the firms existing product lines.
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(96) Question Background: Summer 2010, Q # 6. Syllabus Topic: In any market of significant size for products which have a widely diversified and dispersed customer base there are a large number of firms, each, competing for its respective share of the market by pursuing different competitive marketing strategies. In such a market environment, an individual firm has to identify its distinctive role and positioning which then determines the type of marketing strategy which it would pursue to achieve its objectives. You are required to list the distinctive characteristics of a firm which pursues Competitive Marketing Strategies of: (a) A Market Leader (b) A Market Challenger (c) A Market Follower and (d) A Niche Marketer. (09 Marks) Suggested Answer:A Market Leader: (a) Develops strategies to expand the total size of the market (b) Pursues strategies to expand its own current market share (c) Defends its own market share vigorously (d) Is customer driven and innovative (e) Flexible and adaptive (f) It tends to be on the cutting edge of new technologies and new production processes. It sometimes has some market power in determining either price or output A Market Challenger: (a) Retains a substantial portion of the market share (b) Launches direct and indirect attacks on the Market Leader in areas in which there are apparent signs of weakness of the Market Leader (c) Attacks firms other than the Market Leader to increase its own share of the market (d) Offers price discounts and reduces own cost. (e) Chooses only one target at a time, assesses the strength of the target competitor. Considers the amount of support that the target might muster from allies A Market Follower: (a) Imitates and attempts to adopt the policies of the Market Leader (b) Adopts a secondary or runner-up position as it lacks the resources to challenge the Market Leader (c) Follows its particular strengths and skills to maintain its market share and profitability as it considers that pursuing any other strategy would result in a less favourable outcome. (d) No expensive R&D failures as best practices are already established. (e) Employ play it safe strategy, the rationale is that by developing strategies that are parallel to those of the market leader, they will gain much of the market from the leader while being exposed to very little risk. A Niche Marketer: (a) Is a relatively small or a medium-sized firm (b) Specializes in a narrow segment of the market according to customer size or fulfilling specific customer requirements (c) Meets the requirements of a particular geographical area. (d) They tend to market high end products or services, and are able to use a premium pricing strategy (e) They tend to keep their operating expenses down by spending less on R&D, advertising, and personal selling. (f) The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency.
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(97) Question Background: Summer 2010, Q # 7. Syllabus Topic: Management of Business Organizations are invariably seized with numerous problems and expend a considerable proportion of their energy and time in making decisions to solve these problems. Explain briefly the various stages involved in the Decision Making Process. (09 Marks) Suggested Answer:The various stages of the Decision Making Process are: (a) Identification of the objectives: The first stage in the decision making process involves identification of the objectives which may vary considerably. It is important at this stage to specify the criteria for measuring the extent to which the objective has been achieved. (b) Collection of information and ideas: The importance of outcome of the decision would determine the extent of the efforts that should be made to collect the information and ideas and the degree of accuracy of the input data required to reach a well-considered decision. (c) Analyses of information and ideas: The information and ideas collected have to be analyzed to assess the alternative courses of action. Decisions which cannot be reversed readily and have serious long-term consequences require more in-depth and accurate analysis of the data and evaluation of the ideas obtained from the different sources. (d) Making of the Decision: This is the most important stage of the decision making process as the decision maker has to select a particular course of action. Reaching the right decision is important because this process involves selection of a particular course of action to the exclusion of the various other alternatives. At times the decision maker may require additional information to reach a well-considered decision. (e) Communication of the Decision: Quite often the persons making the decision are different from those who have to implement the decision. Consequently it is necessary to issue instructions to all individuals who would be affected by the decision or who would be required to implement the decisions. (f) Evaluation of the results of the decision: Decision makers have to evaluate the outcome of the decision. It enables them to modify the course of action or revise the objectives etc. (98) Question Background: Summer 2010, Q # 8 (a). Syllabus Topic: Accurate Engineering Limited is a company located in Europe and is engaged in the business of manufacturing a wide range of high precision metallurgical components for the automobile, medical equipment and miscellaneous engineering industries. The Companys customers are sensitive to quality and require components conforming to most stringent tolerance standards. The Company is presently incurring high labour costs and is considering a proposal to locate a portion of its facilities in Asia to achieve cost economies. Narrate at least six different types of Political Risks which should be considered by Accurate Engineering Limited while evaluating an investment involving substantial capital with long-term implications (06 M) Suggested Answer:The different types of Political Risks which should be evaluated by Accurate Engineering Limited are: (i) The assets may be nationalized or expropriated by the government of the host country. (ii) The Asian country may impose stringent exchange control restrictions which would make it difficult to repatriate the profits and investments. (iii) The country may face domestic instability such as revolution, social and political unrest and terrorist activities which would be detrimental to the interests of Accurate Engineering Limited.
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(iv) The country may be involved in conflict, disputes and war with other countries which would cause disruptions in business. (v) Deterioration of relationships between the investor country and the country in which the investment is proposed would pose difficulties in the business operations of Accurate Engineering Limited. (vi) Frequent changes in the government with far reaching shifts in its policies. (vii) Risk of sovereign default by the host country. (viii) Maintenance of the tolerance standards, relaxation in any way could impact the demand. (99) Question Background: Summer 2010, Q # 8 (b). Syllabus Topic: A Multinational Corporation has subsidiaries in several developing countries with majority shareholdings in each of them. The MNC pursues a policy of centralized financial decision making and the subsidiary companies are required to retain only minimum balances to meet their immediate operating requirements and transfer surplus funds to the parent company. List various advantages the MNC seeks to achieve by pursing such a centralized financial decision making policy. (06 Marks) Suggested Answer:The MNC seeks to obtain the following advantages by pursuing a centralized financial decision making policy: (i) The parent Company has superior fund management skills which are not available in the subsidiaries. (ii) The risks of losses on account of devaluation in the currency of the host countries are minimized. (iii) The funds can be promptly invested in avenues which offer optimal returns. (iv) The risks of expropriation of funds by the governments of the host countries are reduced considerably. (v) The pooling of funds can help to implement a more coordinated and effective overall fund management strategy. (vi) The parent company can obtain facilities on more favourable terms from the bankers due to the substantial size of the pooling of funds. (100) Question Background: Summer 2010, Q # 9 (a). Syllabus Topic: Describe briefly the following methods of selection of candidates: (i) Group/Panel Interview (ii) Structured Interview Suggested Answer:Group/Panel Interview consists of multiple interviewers who independently record and rate the applicants responses during the interview session. The panel normally includes the immediate supervisor, a representative of the HR Department and a Job Expert. Structured Interview is a procedure in which interviewers ask the same set of questions in the same order to all the candidates. The questions are based on job analysis of the position and the responses from the candidates are reviewed for their relevance, accuracy and bias. (101) Question Background: Summer 2010, Q # 9 (b). Syllabus Topic: State two advantages of each of the Group & Structured interviews Suggested Answer:Page 52 of 81 For More Notes and Study Material visit our website

(05 Marks)

(04 Marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

The advantages of Group/Panel Interview are: (i) Reduces the biases of an interview conducted by a single interviewer. (ii) Increases the reliability and validity of the interview. (iii) The candidate is simultaneously evaluated by all those individuals who are relevant to the appointment. (iv) Less time consuming and can provide the candidate insight of how the staff works together and interacts The advantages of Structured Interview are: (i) The interview is highly focused and all the candidates are assessed according to their responses to the specific job related questions. (ii) It is easy to ensure that all relevant information has been collected. (iii) Ensures that answers can be reliably aggregated and that comparisons can be made with confidence between subgroups or between different survey periods. (102) Question Background: Summer 2010, Q # 10. Syllabus Topic: List eight Health and Safety hazards which are often faced by workers in a typical manufacturing environment. (04 Marks) Suggested Answer:The Health and Safety hazards which are faced by workers in typical manufacturing environment are: (a) Contact with chemicals and other harmful materials. (b) Excessive noise and vibrations of heavy machines. (c) Extreme temperatures. (d) Poorly designed equipment which affects postures of workers. (e) Slippery floors and passage ways. (f) Absence of safety guards on moving parts of equipment. (g) Poor illumination e.g. light glare, insufficient light. (h) Improper ventilation. (i) Lack of safety rules and regulations (j) Faulty /Outdated safety equipment (k) Improper machine maintenance (l) Excessive humidity (103) Question Background: Winter 2009, Q # 1. Syllabus Topic: Red Balloon Clothing Limited (RBCL) is engaged in the business of manufacturing a wide range of children clothing since the past six years. The Company has built a reputation for good quality products of latest designs and its brand name is very popular in the middle class segment of the market. The Company strongly believes in a policy of giving value for the customers money. At present, RBCL markets its products through a widely dispersed network of independent retailers who sell the companys brands along with the products of other manufacturers. RBCL is considering a proposal of forward integration and establishing its own chain of retail outlets for sale of its products. RBCL would however, continue to sell its products through the network of existing retailers also. You are required to identify and explain briefly the different factors which RBCL should examine while evaluating the proposal for establishing its own network of retail outlets. (10 Mark) Suggested Answer:RBCL should consider the following factors while evaluating the decision to establish its own network of retail outlets: (i) Examine the existing network of retailers of RBCL to ascertain the extent to which they have advantages of location of their shops in important shopping centers.
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(ii) Compare the capital expenditure involved in the establishment of retail stores and their recurring operating expenses and inventory carrying costs with the costs incurred under the existing set-up. (iii) Estimate the envisaged number of RBCLs own retail stores to be established to cater to the requirements of the target segment of the market. (iv) Determine the ability of RBCL to mobilize sufficient financial resources required to establish and operate the business of retail marketing of its products (v) Examine whether sufficiently experienced and trained staff at various levels would be available to manage and operate the retail outlets. (vi) Ascertain the profit margins currently earned by the independent retailers on the Companys products and the impact of the self-owned retail outlets on the companys profitability. (vii) Consider the impact of the decision to establish own retail outlets on the Companys future relationships with the independent retailers. (viii) Examine the need to revise the terms and conditions relating to sales to be offered to the independent retail outlets. (ix) Enquire into the business policies of competitors who have their own retail network and whether RBCL would be able to enjoy a competitive advantage over the independent retailers. (x) Examine the extent to which the availability of more reliable information of future market and fashions trends would be an advantage after RBCL establishes its own retail outlets. (xi) Analysis of the industry growth expected and the market share to be captured, carry out a viability study of the share of market available (xii) Analyze the value addition by gaining ownership of retail outlets; evaluate the possibility of brand dilution in independent retail houses. (104) Question Background: Winter 2009, Q # 2. Syllabus Topic: Although Strategies of Cost Leadership and Product/Service Differentiation appear to be highly attractive, many companies are often not able to achieve much success because they lack the necessary capabilities to implement these strategies successfully. (a) Explain what you understand by the term Cost Leadership Strategy. (02 Marks) (b) What is meant by Product/Service Differentiation Strategy? (02 Marks) (c) In your opinion what kind of capabilities are of crucial importance for the successful implementation of a Product/Service Differentiation Strategy? (04 Marks) Suggested Answer:(a) Cost Leadership is a strategy that seeks to establish long-term competitive advantages by emphasizing that value chain activities can be achieved at costs which are substantially below what competitors are able to match on a sustained basis. This allows a firm to compete primarily by charging a price lower than the competitors and still earn satisfactory levels of profits. (b) A Product/Service Differentiation Strategy is a strategy which promotes and emphasizes that the product/service offered by the firm is different from other available products/services of a similar nature. The differences are based on certain desirable features and performance attributes and therefore the high prices are justified. (c) The capabilities which are most important for the success of a Product/Service Differentiation Strategy are:
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(i) Strong and functional research and development department, able to correctly anticipate and assess the consumer behavior and desire. (ii) Strong coordination between research and development, Marketing and Technical departments. (iii) Innovative Management allowing better ideas to be cultivated. (iv) Deep insight of the market and close association with the distribution channels. (v) Strong brand name. (vi) Strong connection and cooperation from well-established vendor network. (vii) Capital Allocated for attracting technical and creative human resources enabling ability to create a unique value/attribute that is hard to copy by competitors. (viii) Protection of research should be available in order to ensure that resources are not imitated. (105) Question Background: Winter 2009, Q # 3 (a). Syllabus Topic: List and explain briefly any four important packaging features which would influence the decision of a consumer to purchase an edible consumer product. (06 Marks) Suggested Answer:The packaging features which would influence a consumers decision to purchase an edible cons umer product are: (i) Convenience of the Size of the Package The consumer should be able to chose from a range of sizes available, that is, a sachet for a single use, or a size which would meet the requirements for a period of say, one month or an economy package for a large family. (ii) Preserve the Quality of the Product The packaging should be capable of preserving the quality of the edible product from the elements e.g. sunlight, humidity or moisture. (iii) Product InformationThe packaging should provide vital information regarding the ingredients of the food item, their nutritional value and expiry date (iv) Attractiveness of the Package The packaging should be attractive in its presentation and colour scheme to draw the attention and interest of the customer at the point of display of the product on the shelves in the retail outlets. The design and color should be in line with the brand and brand name should be displayed prominently (v) Convenience of Handling the Package The packaging should make it easy to take out the edible product for use and also close the package easily after use. (vi) Convenience of Storage The package containing the edible product can be stored conveniently and occupy minimum storage space. (vii) Disposal of the Package The package, after consumption of the contents, can be disposed of safely from the environmental viewpoint (106) Question Background: Winter 2009, Q # 3 (b). Syllabus Topic: Market researchers often place reliance on external databases as the information can be obtained readily with minimum of effort and at a low cost. However, experienced market researchers are aware of the limitations of the external databases and use them discreetly on a selective basis realizing fully the shortcomings of the information. (i) State four limitations of using external databases. (ii) Identify one specific situation in which it may not be advisable to use external databases. Give reason for your selection of the particular example. (06 Marks)
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Suggested Answer:The limitations of external databases are: (i) The external database may not be accurate and it may not be possible for the user to determine the extent to which the database is inaccurate. (ii) The external database may not be current for the purpose of arriving at the decision in the present changed circumstances. (iii) The external data may not be impartial and may have been prepared with a bias for a particular purpose. (iv) The information required to reach reliable and rational conclusions may not be available in the external databases. (v) The data might be unrepresentative as every research has a different criteria for the target segment depending on the in its objectives. Examples: Launching of a new food product in which reliable feedback and consumer reactions for taste, eating habits, price considerations, type of packaging, etc are very important information. The external database may not be able to address to the issues required to evaluate these factors for the particular type of food product.
OR

Obtaining information of prospective subscribers and circulation of existing magazines for launching a new high fashion magazine. Information regarding income, age, educational profiles of the prospective subscribers may be available but information regarding their particular interests would not be available in the external databases. (107) Question Background: Winter 2009, Q # 4. Syllabus Topic: It is observed that work-related stress often pose a heavy burden in organizations and is manifested by frequent absenteeism, late-coming, accidents and decline in the ability of employees to perform in an efficient manner. In these situations, Employee Counseling can help to create a secure and an enabling environment for mitigating the adverse effects of stress on employees and enabling them to perform at peak levels of efficiency. Identify the scope of Employee counseling and explain briefly how such counseling sessions can help employees to reduce work stress. (08 Marks) Suggested Answer:Employee-Counseling includes working with individuals to promote and nurture relationships which are supportive, psychotherapeutic, providing guidance for dispelling fears and apprehensions and resolving of work-related problems. The scope of Employee Counseling could be to: 1. Help the employee identify areas that need improvement. 2. Support the psychological equilibrium of employee 3. Bring in focus the nature of problem 4. Explore the impact of the problems and exploring all possible solutions. 5. Create a constructive environment mutually beneficial to employees and organization. Functions of Counseling: (i) Provide Reassurance: Offering reassurance to employees by inspiring them and giving confidence to handle problems and inculcating in them a sense of direction and purpose in the discharge of their responsibilities and duties.
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(ii) Help to release of Emotional Tensions: Employee Counselor can help to create a conductive non-critical and objective attitude by providing suitable opportunities to employees to communicate and explain their problems to counselors who are receptive and sympathetic to the problems faced by the employees so that the tensions are released. (iii) Clarification of Thought Process: Enable employees to clarify their thought process and motivate them to accept responsibilities and adopt a realistic approach in dealing with work-stress. It revives the employees level of aspirations and motivates them to high levels of actual achievement. (108) Question Background: Winter 2009, Q # 5. Syllabus Topic: (a) Why missionoriented business strategists do not view the Short-termism approach favourably? (02 Marks) Give two examples of typical business situations to highlight the defects of pursuing a policy of short-termism. (03 Marks) Suggested Answer:(a) Mission-oriented business strategists do not view the strategy of short-termism outlook favourably because it

ignores the principle that long-term economic maximization of wealth and pursuit of objectives on a sustainable basis cannot be achieved by maximizing economic wealth in each of the individual short-term periods. (b) Examples: A pharmaceutical company may not incur expensive R&D costs and be satisfied with its existing line of products which are popular. Although this would result in high profits in the short-term, the long-term performance would suffer as new and more effective medicines are introduced in the market by the competitors. A beverage company may prefer to defer advertising expenditures to reduce the costs and report high profits. However, in the long-run, the company may lose the efficacy of its brands and competitive advantage to other more aggressive competitors. (109) Question Background: Winter 2009, Q # 6. Syllabus Topic: Superb Engineering Limited (SEL) manufactures parts and components for assembly/manufacture of automobiles. During the past few years, the company has witnessed phenomenal growth in its product lines and sales revenues have registered significant growth. However, the overall profitability has not shown a corresponding increase. SEL considers that a substantial proportion of the efforts and energies of the management and staff at various levels are expended in handling a very wide range of diversified activities. SEL is, therefore, examining the feasibility of outsourcing certain activities of its operations to outside parties. You are required to identify four advantages and disadvantages each of Business Process Outsourcing in the above situation for SEL. (06 Marks) Suggested Answer:The advantages of Business Process Outsourcing are: (i) Outsourcing would enable the managers and the staff to concentrate in activities which are of critical importance for the achievement of the corporate mission, thus improving their core competencies and the overall productivity. (ii) Outsourcing may help to reduce the operating costs of SEL. (iii) Outsourcing would enable SEL to reduce the amount of capital investment that it would otherwise have to incur in the facilities which would be provided by the outsourced agency. Also enable SEL to improve core activities performance.
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(iv) Careful selection of outsourcing companies would help to acquire new know-how and expertise from the outsource agencies as they would be providing similar services to their several customers. The disadvantages of Business Process Outsourcing are: (i) Outsourcing involves loss of some control and places excessive reliance on outsiders. (ii) Outsourcing can result in loss of valuable in-house skills. (iii) Outsourcing may result in creation of competition in future. (iv) Outsourcing may result in disclosure of critical confidential information to outsiders. (v) If the level of the performance is not the same then it might result in brand dilution and shift in brand loyalty. (110) Question Background: Winter 2009, Q # 7. Syllabus Topic: Strategic Planning and Management is an exercise undertaken at the highest levels of the management hierarchy and involves decisions concerning formulation, implementation and evaluation of cross-functional activities which would enable an organization to achieve its stated objectives. In spite of the cumulative skills and considerable experience of the senior management team, it has been observed that a number of organizations are not able to achieve significant success and the actual performance often falls short of the set goals. Explain the key factors, which in your opinion, are responsible for the managements inability to achieve all of the goals envisaged in the Strategic Plans. (09 Marks) Suggested Answer:The key factors which contribute towards the achievement of only a limited number of goals envisaged in the Strategic Plans are: (i) Inadequate understanding of the strategic plans and failure at the business and functional levels to realize that sustained and coordinated efforts are required to achieve the goals. (ii) Poor allocation of resources, organizational as well as human. Lack of support from the management in providing adequate resources for the achievement of the goals set in the strategic plans. (iii) Weak organizational culture, leading to lack of involvement of the management at the business and operational levels who feel that they are not on board in the strategic planning exercise and therefore there is lack of ownership of the plans and goals from their side. (iv) Consideration of the strategic planning as a ritual exercise and not as a day-to-day sustained effort for achievement of the objectives of the plan, indifferent attitude and lack of commitment and motivation on the part of the line managers towards the achievement of the goals. (v) Poor Communication and lack of coordination between the top, middle and operational level of management leading to poor goal definitions and unawareness of the departments role in achieving the goal. (vi) Pre-occupation of the operational level managers with the achievement of their short-term targets and lack of awareness of the contribution of their own efforts towards achievement of the overall objectives. (vii) Inability to integrate and coordinate the various functions of research and development, HR management, procurement, production, marketing and finance with the result that these activities are working independently and at cross purposes. (viii) Absence of a proper system to measure actual performance from time-to-time and compare the results with the targets to take timely corrective measures in the event of any new development or unfavorable variances. (111) Question Background: Winter 2009, Q # 8. Syllabus Topic: In your opinion, what types of complexities are generally encountered by parent companies in the planning and control of operations of their foreign subsidiaries? (06 Marks)
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Suggested Answer:The types of complexities generally encountered by parent companies in the planning and control of operations of their foreign subsidiaries are: Physical and Cultural Distances: The geographical and cultural distances separating the parent company increases the duration, expenses and barriers in communications between the headquarters and their foreign subsidiary companies and creates difficulties in the planning and control process. Diverse Economic Conditions: The parent company has to adjust operations to the situations prevailing in the countries in which the subsidiary companies are located. Differences in size of the market, nature of competition, type of the products, labor costs and currency implications render the tasks of setting standards and evaluating performance of foreign subsidiaries extremely complicated. Uncontrollable Factors: Planning and control is effective only in situations when timely corrective actions can be taken in the event of deviations in performances. Corrective action may not produce positive results because many foreign subsidiaries operate in conditions which are very different from those of the parent company. (112) Question Background: Winter 2009, Q # 9. Syllabus Topic: Excel Chemicals Limited (ECL) owns and operates facilities for the manufacture of industrial chemicals, including various types of highly corrosive acids. The Companys operations involve processes of procurement, production, packaging, storage and transportation of chemicals which can result in serious fire, physical injuries and other environmental and health hazards in the event of any lapses in the safety procedures. Identify and explain briefly six safety steps which should be adopted and implemented by the management of ECL as a responsible employer. (06 Marks) Suggested Answer:The management of ECL should take the following Safety Policy measures to minimize the risks of accidents in the plant for the manufacture of industrial chemicals: (i) Involvement and active supervision by the top management and participation of the employees in introducing effective safety policies in the entire premises. (ii) Creation of a Safety Committee to review the safety measures and monitor the implementation of the safety rules and procedures periodically to create a safe and secure working environment. (iii) Preparation of Safety Rules and Instruction Manuals for strict compliance by employees at all levels. (iv) Education and training of the workers on a continuous basis and dissemination of information by posting of safety charts, posters and installation of safety equipment at all sensitive areas in the premises. (v) Creation of an environment where the equipment and machines which are properly maintained and the workers are provided protective uniforms. (vi) Installation of proper warning/alarm systems and conduct of regular safety drills and exercises. (vii) Adoption of a policy which ensures that the workers are not required to work for very long hours which may adversely affect their concentration and result in performance lapses. (113) Question Background: Winter 2009, Q # 10. Syllabus Topic: The pursuit of goals of achieving cost economies and operating with lean and more flat organizational structures has resulted in creation of an environment in which the staff at the managerial levels are required to perform with greater business competencies and responsibilities. Consequently, managers at various levels have to acquire all-round competencies of external business environment awareness as well as deep understanding of the concepts of internal business management to be able to fulfill their responsibilities and perform in an
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intensely challenging and rapidly changing business environment. You are required to identify four different types of competencies each of external business environment and internal business management which in your opinion are most important for the present-day managers to enable them to perform successfully in the prevailing corporate environment. (08 Marks) Suggested Answer:The different types of external business environment and internal business management competencies requirements of managers to perform in the prevailing corporate environment are: External Business Environment Competencies: (i) Capable of evaluating external environment and be able to see the whole picture. (ii) Capable of quick thinking and be able to make timely decisions regarding changes in the external environment. (iii) Being proactive in anticipating the changing environment. (iv) Being sensitive to the interests and concerns of the different stakeholders in the organization in which new complex business relationships such as partnerships, alliances, joint ventures are prevalent. (v) Ability to take and manage external business threats. Internal Business Management Competencies: (i) Awareness of the overall organizational objectives, rather than being limited to the day-to-day operations of the organization. (ii) Capable of handling increased workloads and pressures. (iii) Responsible for building effective work groups and developing teams. (iv) Flexible in handling human relations and in managing internal challenges of group work performance. (v) Initiative for self-development, learning and acquiring financial and information management and IT skills. (114) Question Background: Winter 2009, Q # 11. Syllabus Topic: Capital Bank Limited is a leading financial institution and is well-known for its strength in rendering highly efficient professional services to its customers and keeping ahead of the competitors. The Bank follows a policy of recruiting staff at the entry level after careful evaluation of the qualifications of the candidates, their potential for advancement, professional aptitude and career objectives. The staff is groomed and entrusted with increasing responsibilities after careful career-path planning for each employee. The Bank operates in a highly competitive environment where the skills, knowledge and commitment of its human resources are of critical importance for the success of its business. The competitors are always on the lookout to identify professional staff and hire them at more attractive compensation packages. Required: (a) What do you understand by the term Employee Compensation Package? (02 Marks) (b) List and explain the essential steps involved in the formulation and implementation of a wellconceived Employee Compensation Strategy which the Bank should incorporate in developing its overall HR strategy. (09 Marks) Suggested Answer:(a) Employee Compensation Package refers to all forms of pay and rewards received by the employees for the performance of their jobs, including cash, bonuses, benefits, facilities and perquisites.

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(b) The steps which should have been followed in the formulation and implementation of a well-conceived Employee Compensation Strategy are: (i) Identification of the Objectives of the Employee Compensation Strategy: Compensation objectives should have been identified and articulated as part of the Banks overall planning process. The objectives should be in line with the organization's overall corporate strategy and lead to the creation of a work force that is capable of implementing its plans. (ii) Review of Compensation Plan: Examination of the strengths and weaknesses of the existing compensation policies should have been carried on a regular basis to enable the management to formulate new or improved compensation package. (iii) Identification of the Positions and Prepare their Job Descriptions: Identification of the positions at various levels and precisely defined job descriptions are essential for the development of a meaningful compensation program. Job descriptions should be reviewed periodically to ensure that they are in conformity with the employee skill requirements, assignments and responsibilities. (iv) Evaluation of the relative importance of the Positions and their significance for achieving the objectives of the Bank: Evaluation and comparison of the positions is necessary to establish their relative importance and the relationship between the compensation for different positions. The standards must be well-defined and applied specifically to the positions rather to the individuals in these positions. (v) Comparison of the Compensation Packages with the packages offered by the competitors: Development of a rational compensation program in accordance with the competitive environment by collecting relevant data of compensation packages offered by the competitors. The Bank should identify the competitors and offer competitive compensation packages to attract and retain skilled and motivated employees. (vi) Administration of the Compensation Program: Administration of a comprehensive compensation program to be applied uniformly for all employees. By adopting formal procedures and standards, arbitrary or unfair personnel decisions can be avoided. (vii) Communication of the Compensation Package: Communication of all aspects of the compensation package to the concerned parties including the employees, supervisors, administrators and management who must have a thorough knowledge of the program to avoid any misunderstandings. (115) Question Background: Winter 2009, Q # 12 (a). Syllabus Topic: List the following steps involved in the operation of a typical Letter of Credit in their logical order of sequence. (06 Marks) (i) The exporters bank endorses the documents (bill of lading/airway bill) and delivers them to the importers bank. (ii) The importers bank pays the proceeds to the exporters bank. (iii) The importer obtains the banks promise to pay the specified amount on behalf of the importer. (iv) The exporter ships the goods and obtains the Bill of Lading/Airway Bill. (v) The exporter delivers the documents to his banker. (vi) The importers banker promises the exporter to pay the specified amount on behalf of the importer. Suggested Answer:The steps involved in the operation of a letter of credit in their logical sequence are: (i) The importer obtains the banks promise to pay the specified amount on behalf of the importer. (ii) The importers banker promises the exporter to pay the specified amount on behalf of the importer.
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(iii) The exporter ships the goods and obtains the Bill of Lading / Airway Bill. (iv) The exporter delivers the documents to his banker. (v) The importers bank pays the proceeds to the exporters bank. (vi) The exporters bank endorses the documents (bill of lading/airway bill) and delivers them to the importers bank. (116) Question Background: Winter 2009, Q # 12 (b). Syllabus Topic: Identify five advantages which a multinational corporation expects to achieve by establishing manufacturing facilities in foreign countries. (05 Marks) Suggested Answer:The major advantages of establishing manufacturing facilities in foreign countries are: (i) To utilize cheap raw materials, energy and human resources. (ii) To achieve economies of large-large production opportunities available in certain countries. (iii) To eliminate or achieve economies in costs of transportation of raw materials and finished goods. (iv) To overcome high tariff rates and various non-tariff barriers. (v) To obtain available tax concessions and tax holidays. (vi) To achieve advantages of lower financial costs in certain countries (117) Question Background: Summer 2009, Q # 1. Syllabus Topic: Pan Pacific Steel Mills Limited was established in 1960 to manufacture steel products such as iron bars, wire rods, girders and steel sheets. In 2006, a team of professional management assumed charge of the Companys operations. The new management team made ambitious plans to increase the rated capacity, diversify the product-mix and upgrade the quality of the products to bring the Companys operations at par with the leadin g players in the countrys steel industry. In spite of formulation of Corporate and Business Strategy on sound lines by the multi-disciplinary management team, the Company is experiencing serious problems in achieving its objectives due to lack of cohesion between the formulation of strategic plans and their actual implementation. (a) Explain the relationship between Strategy Formulation and Strategy Implementation. (b) What essential elements should the management of Pan Pacific Steel Mills Limited consider for creating an environment of good relationship between Strategy Formulation and Strategy Implementation? (10 Marks) Suggested Answer:(a) Strategy formulation policies can be successful only if the strategic plans are implemented effectively by converting the plans into well-conceived actions designed to achieve the objectives of the organization. Strategic plans and strategy implementation have to be synchronized to perform in close interaction to achieve optimum results. (b) The essential elements which should be considered by the management of PPSML for creating good relationship between formulation of strategic plans and strategy implementation are: (i) Organizational Structure: Organizational structure creates the formal pattern of interactions and coordination amongst the management, supervisors and workers to link the tasks and efforts of the individuals and groups to implement and achieve the strategic plans. The management should ensure that the Organization Structure is suitably integrated for achieving harmony among the various functions and greater co-ordination at all levels. (ii) Human Resources: Human resources with necessary skills should be deployed in appropriate positions, for effective strategy implementation. (iii) Technology: Technology comprises the knowledge, equipment and work techniques necessary to deliver the products or services. Technology is an important factor in strategy implementation. The management should
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ensure that appropriate and adequate technological inputs are available to support the performance necessary to achieve the objectives of the strategic plans. (iv) Decision Process: Decision processes are required for the resolution of problems encountered in the operations of the business and achievement of the objectives of the strategic plan. Decisions relating to allocation of resources are particularly important for strategy implementation because timely availability of resources are crucial for the success of strategic plans. Sound policies and processes should be developed to ensure that all significant decisions are taken on a timely basis and in a co-ordinated manner. (v) Monitoring and Control Systems: Appropriate system should be established to ensure that progress is monitored against the established standards on a continuous basis and deviations if any, are identified for taking timely corrective actions. (vi) Reward System: A well-conceived reward system comprising salaries, benefits, promotions and recognition should be developed to provide necessary motivation to the workforce for successful implementation of the strategic plans. (118) Question Background: Summer 2009, Q # 2. Syllabus Topic: Euro Motors Limited is engaged in the business of manufacturing and marketing of an extended line of motor cars catering to the varied needs of a wide segment of the automobile market. The Company operates in a dynamic market environment dominated by four well-entrenched and strong companies competing aggressively to achieve leadership status and expand their respective share of the market. List six performance indicators, which in your opinion, would help to measure the success of marketing strategy of Euro Motors Limited. (06 Marks) Suggested Answer:The performance indicators to measure the success of marketing strategy of Euro Motors Limited which is engaged in the business of manufacturing and marketing of automobiles in a dynamic and highly competitive business environment may be as follows: (a) Growth in sales revenue (b) Increase in market share. (c) Percentage increase in sales achieved through customer retention/brand loyal customers. (d) Product development speed time i.e. time to develop, manufacture and market a new product. (e) Number of customer complaints lodged. Percent increase/decrease in number of customer complaints. (f) Number of new distributorships appointed in the year. (g) Sales of new products / models lodged in the year as a proportion of the Companys annual turnover. (119) Question Background: Summer 2009, Q # 3. Syllabus Topic: Apollo Mining Company Limited owns and operates integrated facilities of mining of coal and iron ore along with power generation and distribution facilities. Although these facilities have been developed at a substantial investment cost, the management has been indifferent to the conditions of its workforce of 1500 employees. A major accident in the coal mines, which occurred recently, resulting in the death of 120 workers, has triggered wide-spread resentment and agitation among the workers due to the poor safety conditions and they have demanded strict compliance with the Mine Safety Rules and Regulations. Due to the aggressive attitude of the striking workers and to safeguard its assets, the Company has deployed private armed guards at a considerable cost. After 28 days of complete closure of all mining and other business activities due to stand-off and strikes, the management and the Workers Union have agreed to enter into negotiations through a process of collective bargaining. (a) State four factors which, in your opinion, are responsible for the indifferent attitude of the management of Apollo Mining Company Limited towards its workers. (b) Briefly describe five different measures that the management should take to satisfy the demands of the workers and help to achieve a conducive working environment. (09 Marks)
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Suggested Answer:(a) The indifferent attitude of management of Apollo Mining Company Limited towards the workers may be attributed to: (i) Abundance of workers seeking jobs and comparatively few opportunities for employment in the area. (ii) Unsatisfactory enforcement of Mining Rules and Regulations by the concerned regulatory authority. (iii) The Management does not believe in ethics, justice and fair play in its dealings with the workers. (iv) The Workers and their Union is not fully aware of the rights of the workers and their bargaining strength. (b) The management of Apollo Mining Company Limited should take the following measures to satisfy the demands of the striking workers: (i) Compensation for the Affected Workers: Management should pay compensation to the dependents of the workers who have lost their lives in the accident. Proper arrangements should be made for treatment, including hospitalization, of workers who have been injured in the accident. (ii) Safety Equipment: Management should install proper safety equipment in the mines and protective personal gear for ensuring safe working conditions in the mines. (iii) Formal Safety Training of the Workers: Management should introduce Safety Training Programs and educate the workers of the positive results achieved through the introduction and implementation of these programs. (iv) Provide Medical Facilities to the Workers: Management should provide adequate medical facilities, including hospitalization for the workers and their families. (v) Group Life Insurance: Management should provide Group Life Insurance coverage for the workers. (vi) Social Needs of the Workers: Management should sponsor recreational and social activities for the workers and their families. (120) Question Background: Summer 2009, Q # 4. Syllabus Topic: Companies which seek expansion of business can achieve their objectives either through organic/internal expansion or by pursuing acquisition strategies. (a) Explain the key differences between strategies of expansion by organic/internal growth and by acquisition. (06 Marks) (b) Give any four reasons why organizations generally prefer to achieve expansion through internal growth and not through policies of acquisition. (06 Marks) Suggested Answer:(a) Organic/internal growth is a strategy to achieve growth by expansion in the companys own line of products and market portfolio. It relates to increasing the market share in the existing market or entering new markets by bringing high value products. Acquisition strategies involve expansion by way of purchase of controlling interest in other existing companies. The key differences between the two strategies are as follows: (i) In internal growth strategy, expansion is achieved in a steady and planned manner extending over a phasewise schedule, whereas in an acquisition strategy, rapid expansion is achieved through acquisition of existing assets of another company. (ii) In expansion by internal growth, the success of the strategy is dependent, to a considerable extent, on the managements ability to formulate and implement sound plans, whereas in growth by acquisition, the success of the strategy is also linked with achievement of corporate, business and operational level synergies. (iii) In a strategy of internal growth, the level of competition can become more intense, particularly if there are relatively few strong players, but in expansion by acquisition the level of competition may be reduced by acquiring a rival competitor. (b) A company may pursue a policy of growth by organic/internal expansion and not through acquisition for the following reasons:
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(i) Expansion of its physical infrastructure and facilities can be planned more efficiently to fulfill the organizational requirements. In case of acquisition, the company would have to utilize the existing sites and facilities which may not be the most suitable option for its requirements. (ii) The cost of acquisition of an existing company may be much higher than the cost of expansion of assets through internal growth. (iii) Often, acquisitions require substantial investment outlays and the acquiring companies resort to heavy borrowings which may extend financial leverage beyond prudent limits. (iv) In acquisitions, a company acquires functions of other companies which may result in duplication of facilities or redundancies which ultimately results in lowering of employees morale. (v) Human Resources can be utilized more effectively and with a greater degree of cohesion of corporate culture by adopting strategies of organic growth. Also, in the case of organic growth, better career development opportunities are provided to the employees. In case of expansion by acquisition of other businesses, the company usually has to acquire and assimilate the staff of those businesses. (121) Question Background: Summer 2009, Q # 5 (a). Syllabus Topic: Rapidly changing economic, technology and social environment along with the pressures to produce more value-added products and services at lower costs compel organizations to adopt measures to utilize their resources in the most efficient manner. Although Human Resources are not reflected as assets in the Financial Statements, they play a critical role in the achievement of the Companys business strategies. Explain how sound Human Resource Management and Planning policies can play an important role to enable a Company to successfully achieve its business objectives. (08 Marks) Suggested Answer:The Human Resource Management and Planning policies can play an important role in the achievement of business objectives by: (i) Determining Requirements of Human Resources: an essential element of HR Management and Planning function is to ascertain accurately HR requirements to avoid problems of manpower shortages, wastages, and mismatch of work skills with the job requirements and redundancies due to over staffing. (ii) Ascertaining Training Needs: an important HR planning function pertains to preparation and conduct of training programs to ensure that a cadre of skilled workforce is available to meet the requirements of the organization. (iii) Career Path Planning for Managers: Career path planning of trained and experienced officers/managers is essential in order to retain them and keep them motivated to meet the present and future requirements of personnel in all management positions. (iv) Fair Compensation: Fair compensation plans, including fringe benefits are essential for inducting and retaining a motivated and performanceoriented team and work force at all levels. (v) Industrial Relations: Properly conceived industrial relations strategies are essential for maintaining a skilled and motivated work force and ensure continuity of smooth operations. (123) Question Background: Summer 2009, Q # 5 (b). Syllabus Topic: Although managers at various levels are frequently involved in the Performance Appraisal of their subordinates, there are certain weaknesses in this process. Knowledgeable Human Resource Managers are aware of these weaknesses and take measures to minimize their adverse impact. In your opinion what kind of limitations should be kept in perspective by Human Resource Manger while reviewing Performance Appraisal Reports? (06 Marks) Suggested Answer:The limitations of Performance Appraisal are:
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(i) Performance Appraisals often focus on employees efforts for short-term rewards rather than on issues that are important to the long-term success of the organization. (ii) Supervisors involved in Performance Appraisal often consider them in the context of reward-punishment exercises and not on the overall skills and potential of the employee. (iii) Performance Appraisal is often considered as a routine paperwork exercise rather than conducting an objective critique of the individuals performance. (iv) Individuals being appraised consider the exercise as being biased or unfair. (v) Subordinates react negatively when evaluators offer unfavorable comments. (vi) Personal biases and inconsistencies of the individual conducting the Performance Appraisal may undermine the efficacy of the entire exercise. (124) Question Background: Summer 2009, Q # 6. Syllabus Topic: You have been entrusted with the task of hiring an individual for the position of General Manager Marketing for Good Health Dairies Limited. The company has been established recently and is in the process of establishing marketing network for distribution of its products throughout the country. Identify and explain briefly, what kinds of managerial competencies would you examine and seek in the prospective candidates for the position. (09 Marks) Suggested Answer:In order to recruit a suitable candidate for the position of General Manager, Marketing, I will examine and seek the following managerial competencies: (i) Communication Competency: The ability to effectively transfer and exchange information with senior management and subordinates as well as other stakeholders. (ii) Planning and Administrative Competency: The ability to plan and organize activities and make decisions especially related to resource allocation, costs, etc. (iii) Teamwork Competency: The ability to complete the tasks through individuals who have to work collectively in a team environment. (iv) Strategic Action Competency: The ability to understand the overall mission and strategies of the organization and be able to achieve the objectives of the company. (v) Global Awareness Competency: Ability to explore and seize business opportunities. The Marketing Manager should have knowledge of different cultures and a receptive and open mind. (vi) Self-management Competency: The General Manager should have a sense of integrity and good ethics and be willing to accept responsibilities. (125) Question Background: Summer 2009, Q # 7. Syllabus Topic: Companies which pursue market-driven business strategies consider that sponsorship of high profile and attractive events are communication techniques to create awareness and affiliation of their companies and brands with the target market. These companies enter into agreements and provide financial and non-financial support for social, cultural, literary and sports events to a group, organization or an individual celebrity in anticipation of creation of a lasting awareness of the companys name or its brand among the audience. Sponsorship by leading companies, as a promotional alternative, has gained world-wide prominence in recent years. Briefly describe six main objectives which are envisaged to be achieved through sponsorship of such high profile and attractive events? (09 Marks) Suggested Answer:Companies which pursue market-driven business strategies consider sponsorship of attractive and high profile events to achieve the following objectives: (a) Increased Visibility: The wide exposure such events receive in both the electronic and print media provides sponsors with vast publicity opportunities.
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(b) Business-to-business Promotion: Competition for prominent positioning of products in the shelf-spaces of popular retail outlets is a big challenge for companies. Various types of sponsorships e.g. paid overseas holidays or complimentary tickets/passes for popular events can be used to attract retailers, dealers and other intermediaries in the distribution channel to promote the companys products. (c) Differentiate Product from Competitors: Sponsorship provides companies a competitive selling advantage because it offers opportunities for category exclusiveness which can be used as product differentiation strategy for creating greater acceptability amongst the customers. Sponsorships help companies to create exclusive attributes for their products in the minds of the customers to fulfill their needs and objectives. (d) Active Display of Product Attributes: Sponsorship allows companies to draw special attention of the audience to the advantages and unique attributes of their product by promoting special events e.g. tyre manufacturers may sponsor car-racing events to demonstrate their products in action. (e) Cost Effectiveness: Sponsorships are usually more cost effective especially when a specific category of audience is to be targeted. (f) Targeted Sponsorship: Properly planned sponsorship programs integrated with predetermined objectives and focused on specific audience targets can create lasting impact. (g) Captive Viewership: Advertisements on TV are often avoided by the viewers, for example by changing the channels. In case of popular programs/shows, it is possible to retain the attention of the captive viewership. (126) Question Background: Summer 2009, Q # 8. Syllabus Topic: In the preceding five decades, a significant number of companies have pursued well conceived strategies of Globalization in order to seize the immense business opportunities by operating on a worldwide basis. These companies have achieved notable success in the expansion of their business globally and have manufacturing facilities and marketing networks spread in several countries. State and briefly explain six significant objectives of multinational companies in pursuing policies of Globalization. (09 Marks) Suggested Answer:The significant objectives of multinational companies in pursuing strategies of globalization are: (i) To achieve significant economies of scale in management and other functional operations of the global companies. (ii) To recover extremely high Research and Development expenditures required in the manufacturing of knowledge-based products from widely dispersed target markets located in different countries. (iii) To gain access to wide global markets without incurring substantial expenditures on product development in different markets. (iv) To seize the advantages offered by growing economies, such as dismantling of trade restrictions, growth of free trade zones and relaxation of regulations regarding direct foreign investments. (v) To enter into widely diversified markets and achieve maximum profits through transfer pricing and tax concessions. (vi) To derive maximum advantages of access to cheap sources of labour, raw materials and energy. (127) Question Background: Summer 2009, Q # 9. Syllabus Topic: Competition for attracting direct foreign investments among countries has always been intense. Countries such as Singapore, Malaysia and Cyprus have been able to satisfactorily fulfill the requirements of the foreign investors and achieve significant growth through these investments. However, a large number of third world countries have not been so successful in attracting direct foreign investments mainly due to the high level of Political Risks perceived by the prospective investors. (a) Explain what is meant by the term Political Risk in the above context. (b) What are the different types of Political Risks which have to be considered by a prospective investor while evaluating opportunities of direct foreign investment in a third world country? (07 Marks)
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Suggested Answer:(a) Political risk is the probability that political decisions or events would negatively affect the long-term security and profitability of an investment in a foreign country. (b) The different types of Political Risks which would adversely affect the security and long-term profitability of direct foreign investment in a third world country are: (i) Domestic Instability Domestic instability relates to the risks of subversion, revolution, internal conflict and government crisis. (ii) Foreign Conflict Foreign conflict pertains to the extent of hostility and disputes that a country has with other country (ies). (iii) Political Climate Political climate can be affected by radical shifts in government policies and can be influenced by the number of political parties, their level of maturity, political and economic agenda and approaches towards free or restrictive foreign investment policies. (iv) Economic Culture Economic culture refers to the risks of significant shifts in policies concerning government involvement and control of economic activities as well as financial markets, including currency fluctuations, inflation, repatriation of capital and dividends, regulation of prices of essential inputs and development and maintenance of infrastructure. (v) Level of Corruption Level of corruption refers to the degree to which the various institutions, including the government, are perceived to be untrustworthy, open to bribes and involved in various types of fraudulent and unethical practices. (128) Question Background: Summer 2009, Q # 10. Syllabus Topic: According to Maslows Theory of Hierarchy of Human Needs, all human beings have different kinds of needs. Competent marketing managers must have insight in the Hierarchy of Needs to be able to create appropriate promotional strategies for successful marketing of their products. In the context of Maslows Theory of Human Needs, which type of human needs would be satisfied by the following: (i) Health insurance (ii) Cosmetics (iii) Flowers for a sick friend (iv) Tandoori Nan (v) Burglar alarm system in a bungalow (vi) Rare and expensive work of art (vii) Membership of an exclusive golf club (viii) Wages received by a daily worker (ix) Sponsoring of a charitable hospital (x) a luxury car (05 Marks) Suggested Answer:The products / services would satisfy the following types of Human Needs: Product/ Service Type of Need (i) health insurance Security (ii) cosmetics Social//friendship/love (iii) flowers for a sick friend Social/friendship/love (iv) tandoori nan Physiological (v) burglar alarm system in a bungalow Security (vi) rare and expensive work of art Self-actualization (vii) membership of an exclusive golf club Esteem (viii) wages of a daily worker Physiological (ix) sponsoring of a charitable hospital Self-actualization (x) a luxury car Esteem (129) Question Background: Summer 2009, Q # 10. Syllabus Topic: Briefly explain the following concepts: Business Ethics Pull Strategy of Promotion
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Licensing

Benchmarking

(10 Marks)

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Suggested Answer:Business Ethics is a code of moral principles that the employees follow with respect to what is right or wrong from the viewpoint of the organizations dealings and interactions with its stakeholders. The organizational culture and internal policies and systems have far-reaching ethical implications and reinforce the set of values to be upheld by the employees in all their business dealings. The standards of ethical conduct may be embodied in the Companys Formal Code of Ethics. Pull Strategy of Promotion is a promotional strategy based on aggressive advertising of brands to build-up consumer demand. In a successful Pull Strategy, the customers ask for the brand by name, inducing retailers or distributors to acquire stocks of the companys goods. Licensing is a technique of entering a specific market in which the licensor enters into an agreement with a licensee, by offering the licensee the right to use the manufacturing process, trade mark, patent, trade secret or any other item of value for a fee or royalty. Benchmarking is the process of comparing the companys products and processes with those of the competitors or leading firms in other industries or any other accepted standards against which the performance of the company is measured. (130) Question Background: Winter 2008, Q # 1. Syllabus Topic: Orient Cement Limited (OCL) aspires to be included in the category of a select group of progressive companies in the country and is considering a proposal for introducing significant changes in its labour welfare policies which would offer tangible benefits to the workers. This would include construction of a housing colony, provision of medical benefits, subsidized canteen facilities, besides payment of partial fees for dependent children of the employees. In your opinion what important benefits would accrue to OCL by introducing welfare oriented labour policies? (06 Marks) Suggested Answer:The introduction of welfare-oriented labour policies would offer significant benefits to OCL by way of: (i) Improvement in goodwill, image and reputation of the Company. (ii) Increase in efficiency and productivity of the workers. (iii) More congenial working relationship and better harmony with the workers union. (iv) Ability to attract and retain competent and more committed work force. (131) Question Background: Winter 2008, Q # 2. Syllabus Topic: It is widely realized that companies pass through various stages of growth during the different periods of their existence. State four dominant characteristics which would be apparent in a company which is in: (a) The start-up or initial stage of its business; (b) The rapid and dynamic growth stage of its existing business. (06 Marks) Suggested Answer:(a) The dominant characteristics of a company which is in the start-up stage of its business are: (i) High financial costs. (ii) Limited cohesiveness in the senior management team. (iii) Organizations systems and procedures are not in place. (iv) Extremely high workload for key personnel with conflicting and multiple priorities. (v) Resources are not sufficient to meet multiple demands. (vi) Relationships with suppliers, customers and other stakeholders are in the developing stage.
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(b) The dominant characteristics of a company which is witnessing rapid and dynamic growth of its existing business are: (i) New markets, products and technology are being introduced. (ii) Multiple and conflicting demands for allocation of management, technical and financial resources. (iii) Rapidly expanding organizational structure. (iv) Unequal growth in various sectors within the organization. (v) Shift in power structures as the organization witnesses expansion in business. (vi) Constant dilemma between doing current work and building support systems for the future. (132) Question Background: Winter 2008, Q # 3. Syllabus Topic: Shakeel Ahmed, a competent and hard working young officer, is at the initial stage of his professional career in a leading insurance company. He has an ambitious goal to reach senior management position within a period of seven years. He intends to plan his career path well in advance and pursue a Personal Development Plan (PDP) with a high degree of zeal and commitment. (a) What do you understand by Personal Development Plan? (03 Marks) (b) What are the principal advantages of adopting and pursuing a well-formulated Personal Development Plan? (04 Marks) Suggested Answer:(a) Personal Development Plan is a plan which outlines the process of improving and upgrading ones work skills, knowledge and capabilities in order to enhance its effectiveness and adaptability. Personal Development Planning is a continuous process to improve and utilize ones full potential at each stage of the chosen career path. (b) The principal advantages of adopting and pursuing a well-formulated Personal Development Plan are: (i) Continuous appraisal of the individuals career path and upgrading of skills. (ii) Acquisition and accumulation of new skills thus minimizing the chances of the existing skills becoming obsolete or redundant. (iii) Continuous monitoring of progress in ones career to ensure that it is on the right path and taking timely corrective measures, if considered necessary. (iv) Creating a sense of achievement and commitment to reach the set targets within specified time-limits. (133) Question Background: Winter 2008, Q # 4. Syllabus Topic: New Age Automobile Company Limited intends to diversify its operations by establishing a separate division for manufacture of a less-expensive brand of tractors. The tractors would be used primarily by agriculturists having small farm-holdings. The Management is contemplating whether to promote personnel from the automobile division for certain middle-level technical positions in the tractor division and induct new entry level personnel in the automobile division, or alternatively recruit foremen level personnel from external sources for the tractor division by advertising for the positions in the news media. Narrate and explain briefly the advantages and disadvantages of internal promotion and transfer of foremen level personnel for the tractor division from the automobile division. (10 Marks) Suggested Answer:The advantages of promotion from internal sources, for the tractor division are: (i) Improvement of Morale The internal transfers and promotions would provide an impetus to the morale of the workers. They would feel assured that the company has a policy to provide opportunities to the existing employees rather than to outsiders. (ii) Proper Evaluation of Employees - The management is in a better position to evaluate the performance of existing employees before considering them for higher positions. The past performance of existing employees is a better guide to their skills, competency levels and commitment as compared to interviews with outsiders.
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(iii) More effective team work - Since the existing employees know the middle and senior level managers, they would be motivated to put in their maximum efforts leading to more effective team work. (iv) Cost-effective - Internal transfer from within the organization is less costly than recruitment from external sources. The disadvantages of transfer and promotion from the automobile division are: (i) Absence of Fresh Ideas - Transfer from internal sources prevents introduction of fresh blood and new ideas which are essential for innovations. (ii) Biases and Personal Preferences of Managers- The managers may not necessarily promote deserving employees strictly on merit because of their personal likes and dislikes for certain individuals. (iii) Limitations on the number of employees to be transferred Since the transfer has to be made from within the organization, the number of individuals who are eligible to apply would be restricted. The individuals outside the organization who are more talented would not be given an opportunity to serve the organization. (iv) Rather than being motivated to work hard, employees may become complacent because of their assured promotion and seniority. (134) Question Background: Winter 2008, Q # 5 (a). Syllabus Topic: What are the distinctive ingredients of Vision and Mission Statements? Suggested Answer:Vision and Mission Statements are manifestations of the unique identities of an organization. They are enduring statements containing: Business philosophy Unique purpose Goals of business The above are inter-twined with the competitive advantages which distinguishes it and sets it apart from others. (135) Question Background: Winter 2008, Q # 5 (b). Syllabus Topic: It has been observed that certain companies adopt, with minor modifications and changes in emphasis, the basic ingredients of Vision and Mission Statements of the more successful rival companies in an attempt to achieve similar results. Describe the drawbacks of adopting such an approach in formulation of Vision and Mission Statements. (04 Marks) Suggested Answer:The drawbacks of adopting Vision and Mission Statements of more successful rival companies, with certain changes and modifications, are as follows: (i) Vision and Mission Statement of a firm is inextricably inter-linked with its management philosophy, purpose of business and distinctive capabilities which cannot be replicated in their entirety by other firms. (ii) The imitated version of a Vision and Mission Statement cannot be an enduring or permanent feature and frequent lapses or deviations in actual performance are bound to create resentment and suspicion among the internal and external stakeholders. (136) Question Background: Winter 2008, Q # 6. Syllabus Topic: Corporate and Business Strategies of marketing-focused organizations operating in different product lines pursue entirely different approaches depending on customer, competitor and inter-functional orientations. The features of each of the different types of orientations are: Customer Orientation: Entire focus on customer e.g. Jeweler boutique selling expensive designer jewelry to a select niche market. Competitor Orientation: Emphasis on plans and actions of competitors as only few competitors dominate the market e.g. branded edible oil. Inter-functional Coordination: Marketing is considered to be an all-encompassing company-wide responsibility and all the departments are geared to contribute towards the marketing efforts e.g. a shipyard manufacturing ocean-going vessels for major foreign buyers.
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(03 Marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

List four characteristics which, in your opinion, would determine the direction of marketing policies and efforts in each of the above three types of business orientations. (09 Marks) Suggested Answer:The determinants of competitive policies and efforts in the different categories of business are: Customer orientation Customer commitment. Creation of customer value. Measure customer satisfaction After-sales service. Understanding of customer needs and objectives. Competitor orientation Sales force shares competitors information among themselves. Individual organizations respond rapidly to competitors actions. Senior managers frequently discuss competitors strategies and tactics. Keen to seize opportunities for competitive advantage. Constant struggle to achieve market leader status. Inter-functional coordination Inter-functional calls on customers. Technical, procurement, customer and market information is shared closely among different functions/departments. Close integration among different functions and departments in implementation of strategy. Functions are geared towards creation and satisfaction of individual customer needs. Resources are shared frequently among the various business units. (137) Question Background: Winter 2008, Q # 7 (a). Syllabus Topic: Currently, a large number of progressive companies are in the various stages of adopting policies of Corporate Social Responsibility. Explain what you understand by the term Corporate Social Responsibility. (03 Marks) Suggested Answer:Corporate Social Responsibility involves an organizations obligation to provide benefits to society in ways that protect and improve the welfare of the society, along with pursuance of the organizations own business interests. (138) Question Background: Winter 2008, Q # 7 (b). Syllabus Topic: In your opinion what are the major concerns which prevent organizations from adopting and implementing comprehensive policies of Corporate Social Responsibility? (05 Marks) Suggested Answer:The major concerns which prevent organizations from adopting and implementing comprehensive policies of CSR are: (i) Concerns that they may adopt a comprehensive CSR policy while their competitors may not do so with the result that they may incur costs which may place them at a competitive disadvantage. (ii) Organizations may not feel a sense of commitment and urgency to address to the various issues which are of a societal nature. (iii) There are no accepted standards on CSR issues. (iv) At times it may be difficult to identify the stakeholders and the audience for the CSR reports which may be ambiguous and could undermine the quality of the reports. (v) Belief that efforts of the traditional philanthropists are sufficient to take care of the social needs of the society. (vi) Reporting on the entire scope of a companys impact upon the society and the environment is a complex exercise which is beyond an individual organizations capabilities and scope of activities.
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(139) Question Background: Winter 2008, Q # 8 (a). Syllabus Topic: Governments in developing countries are often concerned that global companies with substantial financial and technical resources are in a position to exploit the opportunities in a manner which are detrimental to the interests of the host countries. It is also feared that the domestic industries which are in the infant stages of their development may face grave problems due to the highly aggressive policies of the global companies. Identify and briefly explain six types of policy decisions which governments in the developing countries may take to meet the threats from the global companies. (09 Marks) Suggested Answer:The Governments in developing countries may take the following policy decisions to protect their interests in the face of threats from global companies: (i) Impose quotas which would prescribe limits on the quantities and values of raw materials that the global company may import from its affiliated/parent companies. (ii) An import tariff structure may be imposed which may make the imported goods expensive and enable the domestic manufacturers to compete in the local market. (iii) The government may place restrictions on the ability of global companies to acquire domestic companies, especially those which are engaged in business of a sensitive nature such as defense, utilities, etc. (iv) The government may impose restrictions on the maximum per cent of shares that a global company can hold in a domestic business entity. (v) Legal standards of safety and quality of imported goods may be imposed to prevent global companies from importing goods which are considered to be of a substandard or inferior quality. (vi) Impose stringent conditions of deletion programs. (vii) Stipulate that a certain proportion of the local personnel should be hired by the global company. (140) Question Background: Winter 2008, Q # 8 (b). Syllabus Topic: Multinational Enterprises are classified as Ethnocentric, Polycentric and Geocentric companies depending on the strategies and policies pursued by their top management. List the distinguishing characteristics of each of the above types of international companies. (06 Marks) Suggested Answer:Ethnocentric oriented companies follow policies that are primarily home-grown and the management assumes that the practices which work in the headquarters or in the home country are most suitable and should be adopted and pursued in all their international operations. Polycentric oriented companies follow the philosophy that the organization located in the host country should be staffed by local individuals to the maximum extent as they are expected to understand more closely their culture, work ethics and markets. Consequently, subsidiaries in various countries operate under the directions of locals and are controlled by the parent company through well-conceived financial reporting systems. Geocentric orientation is an approach in which the management considers that a worldwide focus, both at the headquarters and also in the host countries, offers optimal advantages. The best people, regardless of their home or host country origin, should be used to solve company problems. Major issues of headquarters and subsidiaries, such as rising of funds, building of plants, research and development are viewed in the entire global perspective. (141) Question Background: Winter 2008, Q # 9. Syllabus Topic: Paragon Polyester Company Limited (PPCL), a Korean company, is considering a proposal for a substantial investment to establish a polyester plant in a foreign country. PPCL has considerable technology and expertise in its particular line of business which is available in only a few countries. PPCL is examining the pros and cons
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

of setting the project as a wholly-owned subsidiary company or entering into a joint venture with one of the local entrepreneurs. In your opinion, what are the distinctive advantages and disadvantages of undertaking overseas manufacturing operations through a wholly-owned subsidiary company? (08 Marks) Suggested Answer:The advantages and disadvantages of undertaking overseas manufacturing operations through a wholly-owned subsidiary company are: Advantages (i) The Korean company would not have to share its profits with any other entity. (ii) The Korean company would not have to share its technology and know-how with any foreign entity. (iii) The Korean company would not have communication problems which are frequently experienced in joint venture operations. (iv) The overseas manufacturing operations of the Korean company would be fully integrated and aligned with its overall international operations. Disadvantages (i) The substantial amount of investment may prevent or discourage the Korean company from undertaking wholly-owned overseas manufacturing operations. (ii) The risks of nationalization and losses are much greater in the event the host government introduces major changes in its policies towards foreign investments. (iii) It may be difficult to recruit suitable high-level technical and management personnel in the host country in the absence of benefits of equity ownership. (iv) The wholly-owned subsidiary may not be able to avail the benefits of the overseas partners valuable knowledge and expertise of the domestic conditions, local markets and distribution channels etc. (142) Question Background: Winter 2008, Q # 10. Syllabus Topic: Strategists involved in the marketing of Fast Moving Consumer Goods (FMCG) keep a close watch on the various stages of the Life Cycle of their products and adjust their strategies accordingly. List the type of marketing-mix strategies of Products, Pricing, Distribution and Sales Promotion which should be pursued to meet the requirements of the products which are in the introduction, growth, maturity and decline stages of their product life cycle. (12 Marks) Suggested Answer:The marketing-mix strategies in different stages of Product Life Cycle should be pursued on the following lines: Growth Maturity Product extension, after sales Diversification service and warranties of products Price Unit cost, plus Price to penetrate market Price to meet Competition Distribution Build selected Build intensive distribution Strengthen distribution channels channels distribution network Sales Promotion Heavy sales Reduce effort due to increase Increase efforts Promotion in consumer demand to promote brand Product Marketing-mix Stages Introduction Basic Product Decline Phasing out of weak products Reduce price Eliminate unprofitable outlets Reduce cost to minimum level

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(143) Question Background: Winter 2008, Q # 11. Syllabus Topic: Briefly explain the following: (a) Business Ethics (c) Environment Management Suggested Answer:(a) Business Ethics refers to the code of moral principles and values which are applied by individuals and organizations in their dealings in the commercial world. Business ethics provide guidelines for acceptable behaviour by organizations in their strategy formulation and day-to-day operations. (b) Core Competence is the key ability or strength that an organization has acquired which differentiates it from others, gives it competitive advantage and contributes to its long term success. Core competence accrues due to its favourable location, access to superior quality raw materials, unique capabilities of equipment, acumen of management, skills and competence of workers and marketing insight. Core competence is valuable, rare and difficult for competitors to imitate. (c) Environment Management is a systematic approach to minimize the damage caused by an organization to the environment in which it operates. Environment management has assumed considerable importance because all the stakeholders expect organizations to be responsible for the preservation of the environment and management are increasingly being held responsible and liable for their organizations environmental performance. Environment management involves reducing pollution/waste and consumption of natural resources in judicious manner. (d) Job Description is a structured and factual statement of a jobs functions and objectives. It defines the boundaries of the job-holders authority and responsibility and includes the job title, department, job site, and reporting channels. (144) Question Background: Summer 2008, Q # 1. Syllabus Topic: The sponsors of Seaside Resorts Limited (SRL) are considering to set up a major project on the sea coast at a distance of 85 kilometers east of Karachi. The project would have facilities of guest houses, swimming pools, golf courses, tennis and squash courts and scuba diving. It would also have modern facilities of conference rooms and auditoriums for holding business meetings, training courses, conferences and symposia. This first-ofits-kind project in Pakistan would involve substantial capital investment and also require well-planned physical facilities and selection of state-of-the-art specialized equipment. A cadre of highly trained and dedicated work force having diversified skills would be crucial for the successful operations of the project. The sponsors who were seized with these overwhelming problems were considering acquiring the services of an expatriate executive to implement this project and operate it in the initial years. However, the uncertainties associated with the hiring of an individual on contract basis and entrusting him with such far-reaching authorities and responsibilities was a source of grave apprehension for the sponsors. In the meantime, Oriental Resorts Inc, a Thailand-based company with experience of managing of similar high profile luxury resort projects in several far-eastern countries has approached SRL and offered to provide guidance and expertise for implementation and operation of the proposed project under a franchise arrangement. Explain what is a Franchise Arrangement? Also identify four advantages that would accrue to SRL by entering into a Franchise Arrangement with Oriental Resorts Inc. (09 Marks) Suggested Answer:In a Franchise Arrangement, one business entity who is the franchisor grants a license to another business entity called the franchisee to use the name and brand/trademark of the franchisor and conduct the business according to the tested processes, methods, administration and marketing techniques developed by the franchisor. SRL
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(b) Core Competence (d) Job Description

(12 Marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

would be able to gain the following advantages of entering into a franchise arrangement with Oriental Resorts Inc.: (i) The franchisee is able to make investment in a proven business format and can eliminate the risks and difficulties of establishing a completely a new business. (ii) The franchisee can use a well-known brand name which is promoted aggressively and has wide customer acceptance. (iii) The franchisee receives guidance and advice on selection of a suitable project design and equipment according to the pre-tested specifications of the franchisor. (iv) The franchisee can concentrate wholly on the day-to-day operations of the business as the responsibilities of purchasing stocks, staff training, marketing and advertising are handled by the franchisor. (v) The franchisee can seek managerial advice and guidance to overcome any problems which he may encounter in the business. (145) Question Background: Summer 2008, Q # 2. Syllabus Topic: East-West Centre of Diabetes (EWCD), a non-profit organization has recently received substantial donations from a group of overseas Pakistani philanthropists. EWCD has ambitious plans to develop the institution into an absolutely world-class research and teaching university-cum-hospital in the country. The Hospital would provide infrastructure facilities and medical care by a team of highly reputable consultants. It is envisaged to provide treatment for diabetes which is growing at an alarming rate and adversely affecting the health of a large segment of the population in all age groups. The University would also help to produce qualified doctors who would specialize in the treatment of patients suffering from this highly debilitating disease. You are required to prepare a Mission Statement for EWCD stating its purpose and identifying its core values. The Mission Statement should be brief, simple and clearly highlight the important purpose, intent and aspirations of EWCD. (06 Marks) Suggested Answer:Mission Statement: EWCD is committed to the development of human capabilities through the sharing of knowledge and application through service. It seeks to prepare individuals who would be exemplary doctors and nurses, through excellence in research and education, all dedicated to provide meaningful contribution to society in the treatment of diabetes. (146) Question Background: Summer 2008, Q # 3. Syllabus Topic: What do you understand by Code of Ethics in the context of a business organization? State four advantages which in your opinion are important for adopting a Code of Ethics? (07 Marks) Suggested Answer:Code of Ethics provides a guideline to the moral principles or values by which an organization conducts its business with respect to what is right or wrong. The Code of Ethics applies both to the organization as well as its employees in all their business dealings. The advantages of adopting a formal code of ethics are: Provides an explicit guidance to employees so that they know what is expected from them in terms of ethical behavior. Enhances the organisations reputation and inspires public confidence. Creates an awareness of the organisations expectations of proper conduct among all the stakeholders, including the management. Promotes a culture of excellence by demonstrating the organisations commitment to ethical behavior. (147) Question Background: Summer 2008, Q # 4. Syllabus Topic: As a Senior Manager in the Human Resources Department of Apex Bank Limited, you have been entrusted with the task of conducting a Disciplinary Enquiry against Mr. Hameed Khan, an Assistant Manager in the Bank
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

Square Branch. The Branch Manager, who is a highly respected senior officer with considerable experience, has leveled charges of aggressive attitude and gross misbehavior against the Assistant Manager in dealings with his colleagues. What steps would you take to ensure that the Disciplinary Enquiry is conducted in a fair and impartial manner and the final outcome is based on principles of equity? (12 Marks) Suggested Answer:In order to conduct the Disciplinary Enquiry in a fair and impartial manner, I would adopt the following steps: (i) Obtain complete written evidence from the Branch Manager stating the specific nature of the Assistant Managers misconduct, their dates and timings and the names of colleagues with whom the Assistant Manager was involved in the offensive conduct. (ii) Make efforts to obtain specific information from the complaints as well as other colleagues regarding any special circumstances inside the office or outside which may help to explain the source of the problem. (iii) Investigate into the Assistant Managers personal record to ascertain if there is any evidence of indiscipline, aggressive behaviour or misconduct in the past. (iv) Study the Banks disciplinary rules bearing in mind the Assistant Managers past record and the nature and intensity of the offence. (v) Direct the Assistant Manager to give a written reply to the various allegations of aggressive conduct and misbehaviour offering his explanations to the charges made by the Branch Manager. (vi) A meeting would be held with the Assistant Manager in which he would be provided an opportunity to explain his viewpoint and circumstances leading to the Branch Managers complaint. Structure the enquiry and make noting of the important points to be covered in the enquiry. The Assistant Manager would be informed of the date, time and place of the enquiry and the reason why he has to appear for the enquiry. (vii) Examine similar cases in the past and the nature of punishment meted to the defaulters. (viii) After hearing of the Assistant Managers explanation in an objective, fair and consistent manner, I would draw my conclusions regarding the nature of the allegations and the intensity of the misconduct. (ix) Prepare a comprehensive report on the allegations leveled by the Branch Manager, written and verbal replies of the Assistant Manager and my findings along with the course of proposed line of action and rationale for my recommendations. (148) Question Background: Summer 2008, Q # 5. Syllabus Topic: All leading global business organizations possess certain distinctive marketing capabilities and competitive advantages which set them apart from those companies whose operations are confined within their limited geographical areas. Describe five core capabilities which are observed in leading global organizations regardless of special lines of business. (10 Marks) Suggested Answer:The core capabilities which are commonly observed in leading global business organizations are: (i) In-depth knowledge of the organisations products, their strengths and special customer service skills. (ii) Highly developed marketing skills by way of insight of consumer behaviour, market segments, share of the market and distributions channels. (iii) Capacity for continuous innovation and research which is a prerequisite for maintaining and consolidating of their global leadership status in a highly competitive business environment. (iv) Creation and retention of a pool of talented and motivated management team and work force aligned with the strategic objectives of the organization. (v) Financial resourcefulness with the capability to utilize the funds effectively with sound planning and control structures. (vi) Assessment of the strengths and weaknesses of the competitors in the different territories in terms of their market share, competitive advantages and anticipated business strategies.
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(149) Question Background: Summer 2008, Q # 6. Syllabus Topic: In the current economic scenario, business organizations are under continuous stress to achieve economies in their production and operating costs. The pressures for cost reduction emanate from the management as well as the competitors and customers. Identify eight operational and strategic areas which must be scanned continuously by an industry leader to achieve cost economies and maintain its competitive advantage. (08 Marks) Suggested Answer:The economies in production and operating costs can be achieved by focusing in the following areas: (i) Exploring alternate sources of cheaper raw materials and components. (ii) Negotiating with existing suppliers of raw materials and components for more favourable terms. (iii) Relocating facilities to areas which have lower costs. (iv) Improving capacity utilization to achieve economies in costs. (v) Introducing modifications in production designs to reduce costs. (vi) Improving machine and worker efficiencies. (vii) Re-engineering processes to eliminate activities and bring cost reductions. (viii) Hiring contract workers with the objective to reduce labour costs. (ix) Outsourcing processes/ manufacturing of components to low cost suppliers if quality control measures can be implemented. (x) Adopting efficient inventory management practices such as just-in-time inventory management techniques. (150) Question Background: Summer 2008, Q # 7 (a). Syllabus Topic: Lazzat Foods Limited is engaged in the business of manufacture of packaged masalas, jellies and jams. The Companys sales have been stagnant since the past two years due to intense competition and aggressive promotion by the competitors in the domestic market. The Management has proposed to explore new markets abroad and has suggested that the Company consider participation in a Trade Fair to be held in Colombo. Give four advantages which are expected to be achieved by the Companys participation in the Trade Fair (04 Marks) Suggested Answer:The expected advantages of participation in the Trade Fair are: The Trade Fair can serve as a vehicle for securing orders for the Companys products. The Trade Fair can create awareness of the products among the prospective customers. The participants in the Trade Fair from other countries may show interest in the products which may lead to sales and joint ventures in these countries. The Trade Fair may lead to contacts and opportunities for appointment of agents and distributors in Sri Lanka. (151) Question Background: Summer 2008, Q # 7 (b). Syllabus Topic: State six reasons why companies enter into international alliances and Give two examples of industries in which international alliances are most common and identify a logical reason for such an alliance (08 M) Suggested Answer:The reasons for entering into international alliances are: To gain access to foreign markets. To effectively utilize complementary technologies. To co-operate to reduce research costs. To minimize risk for any individual participant.
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

To take advantages of firms with different skills and abilities. To avoid ownership of overseas operations. Examples of industries in which International Alliances are common: Pharmaceutical Industry --- to reduce research costs and use complementary skills. Manufacture of computers and electronics --- to utilize complementary manufacturing facilities and skills. Airline Industry ---to share passenger load and utilize available capacity. (152) Question Background: Summer 2008, Q # 8 (a). Syllabus Topic: Narrate important points that should be considered in the decision making process. Suggested Answer:The following important points should be considered when one is involved in the decision making process: (i) Have a clear perspective of the goals to be achieved. (ii) Develop the timeframe for reaching the final decision. (iii) Analyze the nature of the problem in sufficient detail according to the importance of the final outcome of the decision. (iv) Examine the various available options. (v) Weigh the possible consequences of selecting any one or combination of actions. (153) Question Background: Summer 2008, Q # 8 (b). Syllabus Topic: Union Group of Companies has diversified interests in fertilizer, sugar, cement and steel industries. Each entity operates as a strategic business unit and executives in the individual companies have powers to take all decisions at the operational level and only limited decisions at the tactical level. The Group Management Team which monitors and controls the performance of the different strategic business units has retained for itself the powers to make all strategic decisions. Describe the distinguishing features of decision making process at Operating, Tactical and Strategic levels. (09 Marks) Suggested Answer:Operational Level Decisions Decisions are concerned with day-to-day systems and procedures. Decisions are more structured and are of a routine nature. Outcomes of decisions are immediate and of short term nature. Decisions involve fewer risks. Tactical Level Decisions Decisions are concerned with short to medium term objectives. Decisions are often related with implementation and success of strategic decisions. Decisions are concerned with overseeing and handling of budgets, personnel, schedules and resources. Risks of failure of decisions are moderate. Strategic Level Decisions Decisions are concerned with long-term goals and future direction of business. Decisions are more conceptual and have elements of uncertainty. Decisions have far-reaching consequences and are therefore of considerable importance. Decisions are taken at the highest management and board levels. (154) Question Background: Summer 2008, Q # 9. Syllabus Topic: Tameer Construction Company, a UAE-based entity, has ambitious plans to develop major real estate projects in Pakistan through a subsidiary company. The parent companys principal office in Dubai is largely managed by expatriate executives who are committed to a policy of highly centralized control of the Companys financial resources and are reluctant to delegate financial powers to the overseas
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(03 Marks)

Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

subsidiary. As the Chief Executive Officer of the subsidiary, you are required to advise the parent company of the disadvantages of pursuing a highly centralized financial policy. Identify four disadvantages of pursuing such a centralized policy. (06 Marks) Suggested Answer:The major difficulties expected to be faced by the parent and subsidiary companies in pursuing a highly centralized financial policy are: (i) The staff at the parent company would not be fully conversant with the local rules and regulations in Pakistan. (ii) The operations of the subsidiary may suffer due to delays in the decisions by the parent company resulting in higher costs and inefficiencies. (iii) The executives at the parent company would be overburdened as they would have to take numerous decisions pertaining to the subsidiary. (iv) The morale and initiative of the local staff may be affected as they would have to obtain approvals for decisions which can be taken here readily by responsible officers. (v) The overall costs would increase considerably due to duplication of work and additional traveling and incidental costs. (155) Question Background: Summer 2008, Q # 10 (a). Syllabus Topic: The governments generally promulgate comprehensive laws for health, safety and security of the workers. State five objectives which are expected to be achieved through these laws (05 Marks) Suggested Answer:The objectives of promulgating comprehensive laws for the health, safety and security of the workers are: (i) To encourage employers and employees to reduce hazards in the work place and to strengthen the health, safety and security programs. (ii) To establish minimum safety and health standards, particularly in hazardous industries such as steel, mining and construction. (iii) To create an effective framework for enforcement of the regulations. (iv) To frame procedures for reporting of job related accidents, injuries, illnesses and deaths. (v) To prevent employment of child workers. (vi) To provide special facilities for female workers. (156) Question Background: Summer 2008, Q # 10 (b). Syllabus Topic: Safety Engineers are convinced that industrial accidents are attributable to inadequate Human, Environmental and Mechanical/Technical security factors. How can responsible management effectively reduce the risks of accidents in each of these categories? (09 Marks) Suggested Answer:Responsible Management can reduce the risks of industrial accidents by adopting the following measures: Human Factors: Strict compliance with safety rules Proper operation of equipment Avoid excessive overtime Environmental Factors: Good housekeeping Proper ventilation Adequate lighting Mechanical/Technical Factors: Safe storage and handling of inflammable materials Proper tools and equipment Adequate protective equipment or mechanical guards
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Question & Answers (Business Management) Compiled By: Faisal Zia __________________________________________________________________________________________________

(157) Question Background: Summer 2008, Q # 11. Syllabus Topic: What do you understand by transfer pricing in the context of multinational companies. List two advantages of adopting market-based transfer pricing policies. (04 Marks) Suggested Answer:International transfer pricing is the price at which products or services are transacted between units of the same company which are located in different countries. The advantages of market-based transfer pricing are: (i) The individual units would achieve high level of efficiency as they can negotiate most favourable marketbased prices as if they were independent units. (ii) The selling unit would make efforts to improve the quality of the products in accordance with the requirements of the purchasing unit. (iii) The performance of the individual units can be evaluated more objectively.

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