MBA Pre-Process Primer

Disclaimer: The information shared is purely to help the candidates prepare for their Interview/WAT round and
Management Canvas shall not be held responsible for the misuse of any information provided.

Management Canvas
The Quarterly Business Magazine of IIM Indore - A Student Publication
www.managementcanvas.iimindore.in
In association with
Media Committee, IIM Indore
Current Affairs
WAT Topics
Economics
Finance
Marketing
Operations

Disclaimer: The list of questions/topics given below is not meant to be comprehensive. It is meant to
provide guidelines/pointers on certain focus areas. Wherever possible, the participants are expected to
have their view on the topics rather than knowing the facts as they are. Keeping abreast with the
current affairs both in the national and international circles in the areas of polity, economy, business,
sports, etc. are of paramount importance.
1. Euro crisis: apart from knowing the latest on the crisis engulfing European countries, have an
opinion on the impact it might have on economy (world and India in particular)
2. Recipients of Padma Bhushan, Padma Shri, awards
3. UP assembly polls (which party do you think should win the polls and why)
4. Important takeaways from the Union budget and Rail Budget
5. Your opinion about Indian cricket teams recent dismal performance
6. What is repo rate, reverse repo rate (current repo rate and reverse repo rate)? What is GDP and
what is GNP? What is Indias GDP and where does it stand?
7. Measures taken by RBI to control weakening of INR (against USD). Current exchange rate
8. Supreme Courts judgment on cancelling 2G licenses issued to certain players
9. Happenings in the worlds latest country: South Sudan
10. Current state of Indian airline industry (Air India, Kingfisher etc.)
11. Your opinion on FDI in retail sector
12. Anna Hazares anti-corruption movement (do such events derail the democratic process?)
13. Lokpal bill Will it have the effect that was originally intended
14. Facebook IPO
15. Devas-ISRO deal and who is to be held responsible
16. UIDAI project (Aadhar card)
17. Food Security Bill
18. General understanding of the stock markets, mutual funds. Some interviewers ask the
approximate value of Sensex on the day of the interview and the stock price of the company you
have worked for (or your favorite company)
19. Apple after Steve Jobs
20. Latest corporate results (Q3,Q4 and FY 2011-12) of the company you worked for
21. Degrading of US AAA rating
22. Googles decision to buy Motorola
23. Is Nano a successful project?
24. Cloud computing (mainly if you are from IT background)
25. Recent important business events such as joint venture, M&A (end of Hero Honda partnership,
TATA Starbucks JV)
26. Infosys after Murthys exit. Who is presently heading it?
27. Smart phone market (in India and abroad)
28. Current state of mid African countries (Libya, Egypt, Syria which had political leadership crisis)
29. Japanese economy post tsunami
30. Issue of Chinese currency being undervalued
31. Emergence of China in the global arena
CURRENT AFFAIRS
32. Role played by institutions such as IMF, ECB etc. in bailing out Greece (and European countries
in general)
Note:
Participants are expected to have an idea of what is happening around the world in the areas of
economics, business affairs, politics, and sports. It is advisable to follow a newspaper or a good
magazine (The Hindu, Business Line or Economic Times, or Financial Express, India Today, Forbes,
Economist).

CURRENT AFFAIRS

Guidelines for WAT phase of selection

WAT, as you all know is Written Ability Test. It has 2 sections/parts in it
1) Summary part
2) Article part

Summary part: Anything can be asked to summarize in this section. Word limit must be adhered to.
Skills that are tested are the identification of critical parts in the passage, forming suitable paragraphs,
good vocabulary, and contraction of detailed ideas as per space and word limit and the concise and clear
description of the central theme of the passage.
*Caution: No extra sheets are provided for this, hence it is advised that you dont clutter the space
provided and try to avoid scratch work]

Article Part : Articles to be written usually are those which are currently trending, hence it is advised
that you start reading newspapers from now on and also brush up the news items from last 3 months
newspapers. Magazines like Forbes, Entrepreneur, and Economist will aid you in this process. We have
identified a set of topics, which you are advised to go through once:
a) FDI in Indian Retail Sector
b) Democracy: The most ideal form of government
c) LokPal Bill and the anti-corruption movement by Anna Hazare
d) SOPA, PIPA and information censorship on the internet
e) Reservations in colleges: Good or Bad?
f) India, a superpower in 2020?
g) Eurozone Debt crisis and USA bond rating degradation (S&P)
h) RBI policies with respect to growth and inflation
i) Should Government bailout Kingfisher: Crisis in airline industry

These are just some of the topics, which you may have encountered in newspapers and magazines over
the last few months. Skills which are tested include knowledge about the topic, facts preferably
supported by numbers, ability to present and the clarity of your thought process.
[In both the write-ups, neat and tidy presentation is suitably rewarded]


Basics of Economics
The story of Modern Economics as taught at the Institutes of higher learning begins from a certain book,
An enquiry in to the Nature and Causes of the Wealth of Nations, written by the Father of Modern
Economics, Adam Smith. This Social Science deals with the decisions made by individuals and nations
given that they have only scarce resources at their disposal. These resources can be money, skill, time
(for an individual) and natural resources, labour and capital for a nation.
Opportunity cost is a key concept in economics, and is described as "the basic relationship between
scarcity and choice". Opportunity cost is the cost of any activity measured in terms of the value of the
next best alternative foregone (that is not chosen).
Microeconomics
The Economist's Dictionary of Economics defines Microeconomics as "The study of economics at the
level of individual consumers, groups of consumers, or firms. It involves the determination of price
through the optimizing behaviour of economic agents, with consumers maximizing utility and firms
maximizing profit."
Thus, Microeconomics seeks to answer questions like, how does the change of a price of good influence
a family's purchasing decisions? If my wages rise, will I be inclined to work more hours or less hours? Etc,
which brings us to the 2 basic laws of Economics:
A. The Law of Demand
If all other factors remain equal, the higher the price of a good, the less people will demand that
good. The amount of a good that buyers purchase at a higher price is less because as the price of
a good goes up, so does the opportunity cost of buying that good. As a result, people will
naturally avoid buying a product that will force them to forgo the consumption of something
else they value more.

B. The Law of Supply
The higher the price, the higher the quantity supplied. Producers supply more at a higher price
because selling a higher quantity at higher price
increases revenue.

Equilibrium:
When supply and demand are equal (i.e. when
the supply function and demand function
intersect) the economy is said to be at
equilibrium. At the given price, suppliers are
selling all the goods that they have produced and
consumers are getting all the goods that they are
demanding. As you can see on the chart,
ECONOMICS
equilibrium occurs at the intersection of the demand and supply curve. At this point, the price of the
goods will be P* and the quantity will be Q*. These figures are referred to as equilibrium price and
quantity.
However, in the real market place equilibrium can only ever be reached in theory, so the prices of goods
and services are constantly changing in relation to fluctuations in demand and supply.
Macroeconomics
The Economist's Dictionary of Economics defines Macroeconomics as "The study of whole economic
systems aggregating over the functioning of individual economic units. More specifically, it is a study of
national economies and the determination of national income."
A variety of measures of national income and output are used in economics to estimate total economic
activity in a country or region:
Gross Domestic Product (GDP):
It is defined as "the value of all final goods and services produced in a country in 1 year". Thus,
GDP = consumption + investment + (government spending) + (exports imports)
Gross National Product (GNP)
It is defined as "the market value of all goods and services produced in one year by labour and property
supplied by the residents of a country."
GNP = GDP + NR (Net income from assets abroad (Net Income Receipts))
GDP per capita (per person) is often used as a measure of a person's welfare. Countries with
higher GDP may be more likely to also score highly on other measures of welfare, such as life
expectancy. In addition, other measures of welfare such as the Human Development Index (HDI), Index
of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), gross national happiness
(GNH), and sustainable national income (SNI) are also used.
Purchasing Power Parity (PPP) asks how much money would be needed to purchase the same goods
and services in two different countries, and uses that to calculate an implicit foreign exchange rate.
Using that PPP rate, an amount of money thus has the same purchasing power in different countries.
One of the most common uses of PPP is in lessening the misleading effects of shifts in a national
currency. This is particularly an issue when calculating a nation's Gross Domestic Product (GDP)
The Big Mac Index (first published in The Economist) is an informal way of measuring the purchasing
power parity (PPP) between two currencies. The Big Mac was chosen because it is available to a
common specification in many countries around the world thus enabling a comparison between many
countries' currencies.
ECONOMICS
The Big Mac PPP exchange rate between two countries is obtained by dividing the price of a Big Mac in
one country (in its currency) by the price of a Big Mac in another country (in its currency). This value is
then compared with the actual exchange rate; if it is lower, then the first currency is under-valued
(according to PPP theory) compared with the second, and conversely, if it is higher, then the first
currency is over-valued. Similarly, we also have the Starbucks Tall Latte Index.
Exchange-rate regime
The exchange-rate regime is the way a country manages its currency in relation to other currencies and
the foreign exchange market. To understand this, we must look at the various policy actions of the
Central Bank (RBI for India, The Federal Bank for the US)
Fiscal policy is the use of government expenditure and revenue collection (taxation) to influence the
economic activity. Monetary policy on the other hand, attempts to stabilize the economy by controlling
interest rates and spending. The two main instruments of fiscal policy are government expenditure and
taxation. Changes in the level and composition of taxation and government spending can impact the
following variables in the economy:
Aggregate demand and the level of economic activity;
The pattern of resource allocation;
The distribution of income
The mechanisms to control liquidity: Interest Rates
What is Bank rate?
Bank Rate is the rate at which central bank of the country allows finance to commercial banks. Bank
Rate is a tool, which central bank uses for short-term purposes. Any upward revision in Bank Rate by
central bank is an indication that banks should also increase deposit rates as well as Base Rate /
Benchmark Prime Lending Rate. Thus any revision in the Bank rate indicates that it is likely that interest
rates on your deposits are likely to either go up or go down, and it can also indicate an increase or
decrease in your EMI.
Bank Rate increased to 9.50% from 6.00% as a part of the technical adjustment w.e.f. from the close of
business day of 13/02/2012.
What is Cash Reserve Ratio (CRR)?
Banks in India are required to hold a certain proportion of their deposits in the form of cash. However,
actually Banks dont hold these as cash with themselves, but deposit such case with Reserve Bank of
India (RBI) / currency chests, which is considered as equivalent to holding cash with RBI. This minimum
ratio (that is the part of the total deposits to be held as cash) is stipulated by the RBI and is known as the
CRR or Cash Reserve Ratio. Thus, when a banks deposits increase by Rs100, and if the cash reserve ratio
is 6%, the banks will have to hold additional Rs 6 with RBI and Bank will be able to use only Rs 94 for
investments and lending / credit purpose. Therefore, higher the ratio (i.e. CRR), the lower is the amount
that banks will be able to use for lending and investment. This makes it an instrument in the hands of a
ECONOMICS
central bank through which it can control the amount that banks lend. Thus, it is a tool used by RBI to
control liquidity (money supply) in the banking system.
RBI has announced reduction in CRR from 6.00% to 5.50% wef 28/01/2012 (announced on 24/01/2012 in
the review of the third quarter monetary policy of 2011-12
What is Statutory Liquidity Ratio (SLR)?
SLR indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or
other approved securities. Thus, we can say that it is ratio of cash and some other approved securities to
liabilities (deposits). It regulates the credit growth in India.
What are Repo and Reverse Repo rates?
Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks against
securities. If banks are short of funds they can borrow rupees from the Reserve Bank of India (RBI) at the
repo rate, the interest rate with a 1 day maturity. When the repo rate increases borrowing from RBI
becomes more expensive.
Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI. The
banks use this tool when they feel that they are stuck with excess funds and are not able to invest
anywhere for reasonable returns. This reverse repo rate is always lower (by a 100 basis points or 1 per
cent) than the repo rate.
Thus, we can conclude that Repo Rate signifies the rate at which liquidity is injected in the banking
system by RBI, whereas Reverse repo rate signifies the rate at which the central bank absorbs liquidity
from the banks
Currently, the repo rate is 8.5%
Now that we are clear about these, lets come back to the exchange rates.
The basic types are, a floating exchange rate, where the market dictates movements in the exchange
rate; a pegged float, where a central bank keeps the rate from deviating too far from a target band or
value, via the policy actions we have discussed above; and a fixed exchange rate, which ties the
currency to another currency, mostly more widespread currencies such as the U.S. dollar or the euro or
a basket of currencies. Before the 1970s fixed exchange rate systems were followed. Today, the market
determined floating exchange rates are the norm
[1]
.
Inflation and Related terms:
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a
period of time. When the general price level rises, each unit of currency buys fewer goods and services.
Consequently, inflation reflects erosion in the purchasing power of money.
[1] Read up on The Bretton Woods Conference for more information about this
change.
ECONOMICS
Deflation generally refers to falling prices and is often caused by a reduction in money supply or credit.
Deflation could also be caused by reductions in government, personal, or investment spending and
often has the side effect of increasing unemployment in an economy.
Stagflation is a sluggish economy coupled with a high rate of inflation and unemployment. Stagflation
occurs when an economy isnt growing but prices are, which is not a good situation for a country to be
in. The word was coined during the inflationary period of the 1970s in the US. India also has recently
experienced it a couple of years ago.
Hyperinflation is basically a very high level of inflation that eventually spirals out of control until the
value of the currency becomes practically worthless. A recent example is Zimbabwe. Also, Germany
experienced it in the post second world war period.
Measurement of scale of inflation
Inflation can be measured in the following 2 ways:
Inflation based on changes in consumer prices for specific baskets of goods, also known as
consumer price index (CPI)
Inflation based on changes in average prices of goods traded in wholesale market, called as
wholesale price index (WPI)
India is amongst few countries of the world, which uses WPI to measure the inflation in the economy.
WPI is calculated on weekly basis unlike CPI that is calculated on a monthly basis. WPI in India includes a
total of 435 commodities classified as below:
Primary articles (food articles non-food articles and minerals)
Fuel, power, light, lubricants and manufactured products like food products, beverages,
tobacco, textiles, leather and leather products)
WPI is calculated on base year and WPI base year is assumed to be 100. Though WPI is not an accurate
indicator of inflation, India has still not moved to the CPI measure of inflation. This is because, in India,
there are four different types of CPI indices (CPI Industrial Workers; CPI Urban Non-Manual Employees;
CPI Agricultural labourers; and CPI Rural labour), and that makes switching over to the Index from WPI
fairly risky and unwieldy.
For more information:
http://www.investopedia.com/
http://www.rbi.org.in/
http://www.economist.com/economics-a-to-z
http://www.bloomberg.com/news/economy/

ECONOMICS

Finance: An Introduction
A managers actions in a firm should always be towards maximizing shareholders wealth. In a nutshell, a
financial manager has to ensure the generation of cash flows now and in the future.
The financial system basically handles interactions between fund surplus units and fund deficit units. It
comprises of financial markets (Capital & Money markets), financial instruments (Bond, stock etc.) and a
variety of intermediaries (financial institutions).
Financial Markets
Capital Market
It is the market where long term debt instruments (e.g. bonds) and equity securities (e.g. shares) are
issued and traded. The primary market is for issuance of new securities; for example a company coming
up with an IPO (Initial public offer) while secondary market is for trading (buying and selling) of already
issued securities; for example stock exchanges.
Capital Market Securities
Common stock: represents a fractional ownership in the company that issued it. The holders receive
dividends as declared by the board of directors, entitled to voting rights on the selection of board
members and other matters related to company, and stand at the very end of the line in terms of
distributions of assets in case of liquidation (closure) of company.
Preferred Stock: is similar to common stock but with few exceptions. The holders are paid a specified
dividend, carry limited or no voting rights and stand in the line ahead of common shareholders with
respect to any payment of dividends and any distribution of assets in case of liquidation.
Bond: is a capital market debt security. A bond has a face value at which it is issued, a maturity date on
which it will be repurchased by the company and an annual fixed interest rate at which a fixed amount
will be paid to the holder periodically.
A few notable variations of bonds:
Zero-coupon bond: No stated interest rate and makes no periodic payments. Instead, it is issued at
discount to face value, which is paid at maturity.
Convertible bond: is generally issued at an interest rate lower than the market rate. It contains a
provision whereby the holder can convert the bond into a specified number of common shares at a
specified price.
Money Market
Money market refers to the market where large corporations and government raise short term money
by selling various debt instruments. Similar to capital market, money market also has a primary as well
FINANCE
as secondary market. The main purpose of money market is to enable corporations to raise money for
their short term needs to get through seasonal business cycles or for other purposes. Money market is
treated as a safe place because of high liquid nature of securities and their short maturities. Unlike
capital market, individual players dont invest in money market as the value of investments is large.
Money Market Instruments
Treasury Bills (T-Bills): T-Bills are short term borrowing instruments of the central government of the
country issued through the central bank (RBI in India). They are virtually zero risk instruments, and
hence returns are not so attractive. Another use of these instruments is to absorb liquidity from the
market by contracting money supply.
Commercial Paper: Commercial paper is a short term unsecured promissory note issued by corporate
and financial institutions at a discount to its face value. They yield higher returns as compared to T-Bills
as they are relatively less secure. Only firms with high credit ratings will find buyers without offering any
substantial discounts. Commercial papers are actively traded in secondary market.
Certificate of Deposit (COD): COD is a promissory note issued by a bank in form of a certificate entitling
the bearer to receive interest. The returns are higher than T-Bills because it assumes higher level of risk.
Derivatives
A derivative is a financial instrument which doesnt have a value of its own, but derives its value from
some other asset, which is called as an underlying asset. Derivatives are tools to reduce a firms risk
exposure, the process is known as hedging. Forwards and Futures are simple derivatives while Options
and Swaps are more complicated ones.
Forwards: A forward contract is an agreement between two parties to buy/sell the underlying asset at a
predetermined future date for a price that is specified today. It is susceptible to counter party risk.
Futures: A future contract is a forward contract formally traded on organized exchanges. It is traded in
large values in regulated environment and almost free of counter party risk. Like forward contracts,
future contracts are obligations for buyer and seller. Most common financial futures are stock futures
and index futures.
Options: An option is a right to the holder but not an obligation to buy or sell the underlying asset at a
specified exercise price at a specified date in future. There are three parties to an option: writer (seller),
holder (buyer) and the exchange. There are two types of options: Call option is an option to buy and Put
option is an option to sell.
Swaps: A swap is an agreement between two parties to exchange cash flows over a period of time. Two
most popular swaps are currency swaps and interest rate swaps. Currency swap involves an exchange of
cash payments in one currency for cash payments in another currency. Interest rate swap allows a
company to borrow capital at fixed (or floating) and exchange its interest payments with interest
payments at floating rate (or fixed rate).
FINANCE
Some other financial terms
Venture capital (VC): It is a means of equity financing for rapidly growing private companies. It comes
under private equity market. VC provides the finances for the start-up, supporting research &
development, expansion of a growing private company. The venture capitalist is the general partner and
makes all the investment decisions for the firm. He receives a profit share (usually 25%) and a
management fee (usually 2% of the fund).
Initial Public Offering (IPO) and Follow on Public Offering (FPO): The basic difference between Initial
Public Offer (IPO) and Follow on Public Offer (FPO) is as the names suggest IPO is for the companies
which have not listed on an exchange and FPO is for the companies which have already listed on
exchange but want to raise funds by issuing some more equity shares. IPO is the first stock sale of the
company to the public. Usually, companies come up with an FPO to restructure their business (Debt and
Equity) or to raise funds for new businesses.
Rights Issue: An issue of common stock to the existing shareholders of the company is known as rights
issue. This privilege extended to existing shareholders is known as preemptive right. Rights can be
exercised within a stipulated time, after which they expire.
Frequently Asked Questions
What are the typical roles of a financial manager?
A financial manager is responsible for providing financial advice and support to colleagues and clients so
as to enable them to make sound business decisions. The role of financial manager is more than simple
accounting; it is multifunctional. Typical roles and titles: Controller, Treasurer, Risk Manager, Credit
Manager, Cash Manager etc. For more details, please visit http://www.qfinance.com/balance-sheets-
checklists/defining-the-financial-managers-role
Is CFA needed before starting MBA?
CFA is not at all a prerequisite for doing MBA. Not having a CFA certification is not a disadvantage for
any candidate applying for MBA.
Is work life balance always compromised for a finance manager?
There are some profiles like investment banking which demand high amount of employees time over
work, but most of other profiles like corporate finance allow you to have a work life balance as any
other manager in marketing or operations profile would have.
Is finance a glorified version of mathematics or does it demand some subjective analysis too?
It is a normal misconception that a finance manager would always be working with numbers. A finance
manager must understand all the aspects of business so that they can adequately advise the senior
management in strategic decision making.
FINANCE

Marketing: Preprocess Primer
Financial success of an organization often depends on how it markets its products and, more
importantly, the organization itself. For a firm to make profit or, what they call, meet its bottom line
there must always be a top line. The American Marketing Association defines Marketing as the activity,
set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that
have value for customers, clients, partners, and society at large. In layman terms, marketing is the art of
identifying and anticipating consumer needs and satisfying them by delivering the goods and services
that they value eventually achieving the objectives of the firm and of the society. Marketing is
everything a company does to acquire and retain a customer.
What does the job of a typical marketer entail?
A marketers job is to study the market and determine the best way to reach the customers profitably. It
begins with working with the rest of the company to determine the prospective product needs of the
customer which involves research and planning. It is followed by the vital task of marketing the product
to the end consumer profitably. This involves delivering the products value to the customer through
advertising and selling. A career in marketing often starts from a sales profile as it is the only platform to
understand the customer and his needs, up close and personal.
Marketing concept:
A simple but important idea that firms follow, marketing concept implies that an organization aims all its
efforts at satisfying its customers profitably.
What is the difference between marketing and sales?
Marketing is not the art of selling products. In fact, the aim of marketing is to understand the customer
so well that the product fits him and sells itself, thus making selling superfluous. Selling then remains as
only the tip of the marketing iceberg!
Marketing Sales
Marketing is everything that a firm does to reach
its customers and to generate leads.
Selling is everything a firm does to influence a
customer to buy a product of service, or in other
words, close the sale.
Marketing is often a longer process of building a
brand for the product and the company. It involves
finding the right product for satisfying the
customers needs.
Selling is the short term process of matching the
right customer to the value offered.

What is the difference between advertising and marketing?
The institute of Practitioners in Advertising (IPA), the body which represents advertising agencies,
defines advertising as the means of providing the most persuasive possible selling message to the right
prospects at the lowest possible cost.
MARKETING
At the most fundamental level, marketing differs from advertising in that marketing is to create a
product that would satisfy prospective customer demands. The role of advertising, on the other hand, is
to create a demand for an existing product.
What is a brand?
In Principles of Marketing, by Philip Kotler and Gary Armstrong a brand is defined as a name, term, sign
symbol or a combination of these, that identifies the maker or seller of the product. A Brand is an
offering from a known source. All companies strive to build a strong, favorable and unique brand.
What is the difference between price, value and satisfaction?
Value reflects the sum of perceived tangible and intangible benefits and costs to customers. Value
increases with quality and decreases with price. However, other factors can also play a vital role in our
perceptions of value. Satisfaction reflects a persons judgments of products perceived performance in
relation to expectations.
What are the four Ps of marketing?
The four Ps, often synonymous with the marketing mix, entails price, promotion, product and
place. The four Ps have expanded to the seven Ps with the recent addition of process, physical
evidence and people. This tool is vital in determining a brands unique selling point.
Note: A candidate is not expected to know the exact definitions but is required to understand the
concept behind each of these terms. This note has been prepared with the aim of providing an
exhaustive coverage of the same. The candidate however should concentrate on having plausible
answers for a few (indicative but not exhaustive) questions substantiating his interest in marketing.
1. Why are you interested in Marketing and (or) sales?
2. How would you connect your graduation background with a prospective career in marketing?
3. Which brand/product/advertisement has left a lasting impression upon you?
4. Why do you think you would suit a marketing profile?

Reference:
1. Kotler, Keller, Koshy and Jha, Marketing Management, 13
th
Edition

MARKETING

About Operations Management
What is Operations Management?
Operations Management (OM) deals with management of the firms operations to produce/offer
goods/services. In simple terms, it is the study of how a manager can make the business operation more
efficient (in terms of resources used) and how he can make it more effective (in terms of creating value
to the customer).
The operations function is one of the 3 primary functions within a business, the other two being finance
and marketing.
What are the main topics covered in OM?
Some of the main topics covered in OM are - Product and Process Design, Capacity Planning, Demand
forecasting, Inventory management, Production Scheduling and Control, Quality Management, Project
Management, Services Management, Supply chain management and Strategy in operations.
What is the difference between goods and services?
The essential difference between services and goods is that a service is an intangible process, while a
good is the physical output of the process. For example, a shop floor that manufactures plastic bottles
provides goods while a bank that is issuing a loan to its customer is providing a service.
What is a production process?
A production system is defined as a user of resources to transform inputs into some desired outputs. For
a plant that manufactures tyres, raw material, labour and capital can be inputs while the finished rubber
tyre will be the output. The steps through which the raw material is converted into a finished good can
be referred to as the process.
A simple parameter to measure efficiency of a process is productivity. In a broad sense, productivity is
the ratio of goods/services produced to resources used (output to input).
Bottleneck
A bottleneck is defined as any resource whose capacity is less than the demand placed on it. A
bottleneck is a constraint within the system that limits the rate of flow of output. A bottleneck is often
created in a process when capacity is constrained.
The primary objective of a manager in the operations department is to eliminate the bottleneck that
exists in the process. By removing this inefficiency, the manager can increase profits by reducing time to
produce.

OPERATIONS
Inventory Management
An inventory is the stock of an item or a resource used by an organization. Many companies have wide
ranging inventories such as pencils, paper clips, machines, computers etc. Inventory is maintained to
prevent a risk of shortage or to increase flexibility in the operations process. Sometimes, companies
build inventory to reduce the cost incurred while ordering. By ordering a large amount of stock, the
company might get a discount from its vendor. This saves total input cost and hence creates profits. At
the same time, the operations manager has to ensure that the cost incurred for holding the inventory is
not too high. For example, a company which sells fruits cannot order in bulk and avail discounts as the
fruits might require an expensive storage facility to keep them fresh.
Planning and forecasting
As an operations manager, material requirement planning or demand estimation needs to be done on a
regular basis. This is to ensure that the company meets the customers requirements within time. The
plans may be short-range plans (less than 3 months) or long range plans (over 1 year). Efficient planning
will lead to reduction in costs due to sudden variations in demand. Planning and scheduling is a popular
exercise undertaken by companies that manufacture seasonal products.

FAQs
What are the typical roles of a manager in the Operations department?
Some of the important roles are production control, quality assurance, purchasing, inventory planning
and control, supply chain management and logistics.
Do Operations Managers always work in factories?
No. There are several service related companies which hire managers to handle their operations.
Operations Managers are hired in sectors such as banking, transportation, insurance, communication
and many others.
Is it true that profiles given in Operations are usually mundane and repetitive, and that the salaries
offered are very low?
Any role offered will be mundane if the candidate does not have an interest in pursuing it. The same
holds true for Operations. The salaries offered are not always low and are often comparable to those
offered in other functions.
How is the role of an Operations Manager different from that of a General Manager?
Here is a good link that will answer the above question -
http://www.operationsmanager.com/operations-manager-roles-in-the-company/difference-between-
operations-managers-and-general-managers/
OPERATIONS
What are the traits required to be successful as a manager in Operations?
Basically, one needs to have a good understanding of the process. A flair for number-crunching and data
analysis would be an added bonus. But most of all, an interest in the field is crucial.

Tip - Go through the subjects like Industrial Engineering if taught to you. If not, you only need to know
why you are interested in Operations Management, some related concepts to your work (if relevant)
and why you want to shift to a career in Operations.

References
1. Operations Management for Competitive Advantage by Chase, Jacobs and Aquilano
2. Reading on Zeroing in on Operations

OPERATIONS

Management Canvas, an IIM Indore student publication, is a
quarterly business magazine. It offers keen insights on
contemporary business issues encompassing all major disciplines
in the field of management. It aspires to bring forth the ideas
and models which hold the potential to change the business
landscape in future.
Leading academics and students of reputed management
institutes are its regular columnists. It also enjoys the privilege of
publishing articles and interviews of Industry stalwarts of the
likes of Dr. J.J. Irani, Mr. Anand Mahindra, Mr. Subroto
Bagchi, Mr. Gaston Legurburu, Mr. Girish Mehta, Dr. Shiv Kumar
and Mr. Subhasheesh Anand to name a few.
Started as iMag in 2005 by PGP participants, it served as a
platform to showcase the intellectual capital of IIM Indore.It was
the first of its kind and was circulated primarily among the top
management schools in India. In 2007, in collaboration with
Executive PGP participants, it widened its reach to the corporate
world and was renamed iCanvas.
It underwent another phase of rebranding in 2009 and
emerged bigger and better as IIM Indore Management
Canvas. It has recently been granted an International Standard
Serial Number (ISSN): 0975-5012, making it a well-recognised
magazine in business circles.

The editorial team can be contacted at:
editor_i@iimidr.ac.in
For more updates, like our
Facebook Page: https://www.facebook.com/ManagementCanvas
or Follow us on twitter: http://twitter.com/ManagmentCanvas

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