National Institute of Business Management

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Assignments of Two year MBA

Semester - I

Total Marks :100

1. Students are requested to go through the instructions carefully.

2. The Assignment is a part of the internal assessment.

3. Marks will be awarded for each Assignment, which will be added to the total
marks. Assignments carry equal marks.

4. Assignments should submit in your 'portal' on/before the 'completion date'

mentioned.

1. Principles and Practices of Management

Explain the different activity levels of Management.

Ans: The management of an industry can be sub-divided into the following different
level:

1. Top Management

It consists of the Board of Directors and the principal officers such as the Chief
Executive, Managing Director, and others concerned with the general operation as
distinct from some functional specialization. They are the ultimate level of authority
in the operation of the enterprise. They set the objectives, define the goals, establish
the policies, see that the policies are put into effect and judge the results. Livingston
has described the top management’s actual operation by listing it as follows:

A. Decision-making

(i) Origination versus confirmation or veto

(ii) Planning

1. Setting of goals

What, how much, at what price, when and where.

2. Mechanism

a) Process

b) Structural organization and co-ordination

c) Appointment of key personnel.

(iii) Policy

1. Definition

General versus specific

2. Integration.

(iv) Implementation

1. Release of authority

2. Integration.

(v) Financial

1. Selection of types of funds to be secured

2. Distribution of profit.

B. Judicial
(i) Comparison

Of accomplishment with goal.

(ii) Evaluation

1. Of accomplishment with the cost.

2. Of alternative possibilities.

(iii) Counsel

In place of decision or command.

There are certain behavioural characteristics of top-level executives given below:

i) Drive - Pure physical energy is an absolute necessity.

ii) A strong desire to become the top man.

iii) A willingness to work for long hours.

iv) Projecting an image of success

v) Management’s effectiveness.

2. Upper Middle Management

It consists of the head of the Personnel Administration Department, Production or

Works Manager, Sales Manager or others responsible for research, finance,
accounting and the like. Thus, Upper Middle management consists of the executives
responsible for leading functions within the enterprise such as Personnel
Administration, Production, Sales, Research, etc.

3. Middle Management

‘Middle Management acts with and under Top Management to accomplish these
broad objectives of administration:

1. To run the details of the organization, leaving the top officers as free as possible of
their other responsibilities.

2. To co-operate in making a smoothly functioning organization.

3. To understand the interlocking of departments in major policies.

4. To achieve the co-ordination between the different parts of the organization.

5. To build up a contented and efficient staff where regard is given according to

capacity and merit and not according to change or length of service.

6. To develop leaders for the future by broad training and experience.

7. To build up a company spirit where all are working to provide a product or service
wanted by others.”

4. Foreman

They are men who have direct supervision over the working force in office, factory,
sales field or other areas of activity of the concern. The function of the foreman
include the supervision of the workmen, procurement of needed material and tools
for his crew from the stockrooms, the planning, scheduling and assignment of work
of each man, the training of workers, the issuing of orders, the maintenance of
quality, the care of machines and equipments, the getting out of the required
production, improving working condition,

developing morale and team spirit, maintaining discipline, controlling absenteeism,

adjusting grievances, improving methods of production and representing the
management to the workmen and the workmen to the

management.

5. Rank and File

The responsibilities of the persons belonging to this group are even more restricted
and more specific than those of the foreman.

2. Human Resources Management

Explain the functions of Human Resources Management covering the major
areas like Personnel Administration, Employee Welfare and Functional Areas.

Ans: Functions may broadly be divided into the following eleven groups:
I. Recruitment and Selection

(i) Recruitment and Selection procedures

a) Recruitment of personnel

b) Knowledge of sources of employee supply

c) Physical tests, Trade tests and Aptitude tests

d) Investigation of references

e) Selection interviews.

(ii) Job analysis, Job description and Job specification.

II. Induction

a) Introduction to supervisor

b) Introduction to job and workplace

c) Introduction to colleagues

d) Introduction to welfare activities and other facilities

e) Authorities and procedures

f) Service conditions

g) Sponsor system.

III. Compensation

a) Wage scales, Increments and Efficiency Bar

b) Salary and Wage standardisation

c) Incentives, Payments and Allowances

d) Working hours and Overtime

e) Profit sharing, Bonus

f) Holidays, Leave

g) Executive compensation plans.

IV. Discipline

a) Instances of indiscipline and Misconduct

b) Causes of indiscipline

c) How to deal with indiscipline; Domestic enquiry

d) Handicaps of management in the maintenance of discipline and enforcement of

certain rules.

V. Transfer and Promotion

a) The procedure to be adopted

b) Causes of transfer and promotion

c) Personnel for transfer and promotion

d) Records of transfer and promotion.

VI. Merit rating and evaluation of employees

a) Assessment techniques

b) Counselling

VII. Administration in relation to

a) Absenteeism

b) Late coming

c) Loitering

d) Employee turnover, its causes, incidence, effects, remedies, and statistical analysis.

VIII. Personnel training and Development Training for:

a) Apprentices

b) Workers

c) Foremen and supervisors (TWI i.e., Training Within Industry)

d) Junior executives and

e) Management staff.

IX. Personnel records and Statistics

a) Accident Records

b) Employee turnover studies

c) Absenteeism and indebtedness

d) Wage levels and cost of living

e) Research into Industrial Relations and Personnel Management problems.

X. Retirement

a) Provident fund and pension plans

b) Gratuity provisions

c) Exit interviews

d) Long service awards

e) Retirement plans, housing, medical aid etc.

XI. Statutory compliance of:

a) Apprentice Act

b) Employment Exchange (Compulsory Notification of Vacancies Act)

c) Payment of Wages Act and Payment of Bonus Act

d) Shops and Establishment Act

e) Employee’s Provident Fund Act.

It should be noted that the listing made by different authors is by no means

comprehensive or necessarily representative of the work of personnel
administration; it is only indicative of the nature of activities which are usually
included in the functional areas of a modern company of large dimensions.
B. Employee Welfare comes under two distinct areas as given below:

I. Conditions of Work Environment

(i) Working Condition

a) Temperature

b) Ventilation

c) Lighting

d) Dust, smoke, fumes and gases

e) Noise

f) Humidity

g) Hazard and safety devices.

(ii) Factory Sanitation and Cleanliness

a) Provision of urinals in factories

b) Provision of spittoons

c) Provision for disposal of waste and rubbish

d) Provision for water disposal

e) Provision for proper bathing and washing facilities

f) Cleanliness, white-washing and repair of building and workshops

g) Care and maintenance of open spaces, gardens and roads.

(iii) Welfare Amenities

a) Provision and care of drinking water

b) Canteen services

c) Lunch

d) Rest room
e) Creches

f) Cloak rooms

g) Other amenities.

II. Employee’s Health Services

(i) Factory Health Services

a) Medical examination of employees

b) Factory dispensary and clinic treatment

c) First aid and ambulance room

d) Treatment of accidents

e) Health education and research.

(ii) Recreation

a) Play grounds for physical recreation

b) Social and cultural recreation.

(iii) Workers Education

a) Education to improve skills and earning capacity

b) Literacy

c) Library, pictorial education, lecture programmes

d) Worker’s education scheme and its working.

(iv) Economic Services

a) Employee’s Co-operative societies

b) Grain shops and fair price shops

c) Housing co-operatives.
(v) Housing for Employees and Community Services

(vi) Study of the working of the Welfare Acts

a) Factories Act

b) Employee’s State Insurance Act

c) Minimum Wages Act.

(vii) Social work in Industrial setting

a) Family planning

b) Employee counselling

C. Functional Areas of Human Resource Management

The functional areas of human resource management may be set forth as follows:-

1. Organisational planning, and Development

2. Staffing and employment

3. Training and Development

4. Wage and salary administration

5. Motivation and incentives

6. Employee services and benefits

7. Employee records

8. Labour or Industrial Relations and

9. Personnel Research and Personnel Audit.

(i) A determination of the needs of an organisation in terms of a company’s short and

long term objectives, utilisation of technology of production, deciding about nature
of the product to be manufactured, keeping in view the external environment and
public policy.

(ii) The planning, development and designing of an organisational structure through

the fixing of the responsibility and authority of the employees.

(iii) Developing an inter-personal relationship through a division of positions, job and

task, the creation of a healthy and fruitful inter-personal relationships; and the
formation of a homogeneous, cohesive and effectively interacting informal group.

2. Staffing and Employment

The staffing process is a flow of events which results in a continuous manning of

organisational positions at all levels from the top management to the operative level.
This process includes:-

(i) Manpower planning is a process of analysing the present and future vacancies that
may occur as a result of retirements, discharges, transfers, promotions or other
reasons and an analysis of present and future expansion or curtailment in the various
departments.

(ii) Recruitment is concerned with the process of attracting qualified and competent
personnel for different jobs.

(iii) Selection process is concerned with the development of selection policies and
procedures and the evaluation of potential employees in terms of job description
and job specification.

(iv) Placement is concerned with the task of placing an employee in a job for which
he is best fitted.

(v) Induction programme is concerned with the introduction of an employee to the

organisation and the job.
(vi) Transfer process is concerned with the placement of an employee in a position in
which his ability can be best utilised.

(vii) Promotion is concerned with rewarding capable employees by putting them in

higher positions with more responsibility and higher pay.

(viii) Separation process is concerned with severing of employment relationships on

account of misconduct, dismissal, discharge, superannuation, death, disablement etc.

3. Training and Development

It is a complete process and is concerned with increasing the capabilities of

individuals and groups so that they may contribute effectively to the attainment of
organisational goals. This includes:

(i) The determination of training needs of personnel at all levels, skill training,
employee development.

(ii) Self-initiated learning activities.

4. Wage and Salary Administration

It is concerned with the administering compensation policies and programmes

directed towards employee’s services and motivating them to attain desired levels of
performance. The components of this process are:

(i) Job Evaluation through which the relative worth of a job is determined.

(ii) Wage and Salary programme which consists of developing and operating a
suitable wage and salary programme, taking into consideration certain facts such as
ability of the organisation to pay, the cost of living, the supply and the demand
conditions in labour market and the wage and salary levels in other firms etc. It also
consists of conducting systematic and periodic wage and salary surveys and
determining the implementation possibilities of the same and its regular follow up.

(iii) The performance appraisal is concerned with evaluating employee performance

at work in terms of pre-determined norms and standards with a view to develop a
sound system of rewards and punishments and identifying employees eligible for
promotion. For this purpose, performance appraisal plans, techniques and
programmes are chalked out, their implementation evaluated and reports submitted
to the concerned authorities.

5. Motivation and incentives

(i) Motivation is concerned with motivating employees by creating conditions in

which they may get social and psychological satisfaction. For this purpose a plan for
non-financial incentives is formulated; a communication system is developed, morale
and attitude surveys are undertaken, the health of human organisation is diagnosed
and efforts are made to improve human relations in the organisations. The line
management has to be advised on the implementation of the plan and on the need,
areas and ways and means of improving the morale of employees.

(ii) The incentive plan includes both monetary and non-monetary incentives which
have to be developed, administered and reviewed from time to time with a view to
encouraging the efficiency of the employee.

6. Employee Services and Benefits

These are concerned with the process of sustaining and maintaining the work force
in an organisation. They include:

(i) Safety provisions within the company:- For this purpose policies, techniques, and
procedures for the safety and health of the employees are developed; the line
management is advised on the implementation and operation of safety programmes;
training has to be given to first line supervisors and workers in safety practices; the
causes of accidents have to be investigated and data collected on accidents; and the
effectiveness of the safety programmes evaluated periodically.
(ii) Employee counselling is the process in which employees are given courses in
solving their work problems and their personal problems.

(iii) Medical services include the provision of curative and preventive medical and
health improvement facilities for employees. A periodical medical check- up of
employees, training in hygienic and preventive measures are undertaken.

(iv) The recreational and other welfare facilities include entertainment services like
film shows, sports and games, housing, educational, transport and canteen facilities,
free or at subsidised rates.

(v) Fringe benefits and supplementary items are made available to the employees.
Fringe benefits are classified broadly into two.

(1) Statutory and

(2) Non-Statutory fringe benefits.

Under statutory fringe benefits the following are covered in general:

(i) Contribution to provident fund

(ii) Administration of ESI schemes

(iii) Payment of gratuity

(iv) Payment of bonus

(v) Provision for industrial canteen

(vi) Provision of creche for the kids of female employees etc.

Non-statutory benefits include the following:

(i) Operation of conveyance facility

(ii) Company sponsored recreation schemes

(iii) Interest free loan

(iv) Functioning of co-operative societies

(v) Scholarship allowance to employee’s children etc.

These benefits are usually given to employees in order to tempt them to remain in
the organisation, to provide them social security and to reduce absenteeism and
labour turnover. Policies and programmes for implementing these have to be
properly developed.

7. Employee Records

Complete and up-to-date information is maintained about employees, so that these

may be utilised if need be, at the time of making transfers/promotions, giving merit
pay or sanctioning leave. Such records include information relating to personal
qualifications, special interests, aptitudes,

results of tests and interviews, job performance, leave, rewards and punishments.

8. Labour Relations

By labour relations is meant the maintenance of healthy and peaceful labour-

management relations so that production/work may go on undisturbed.

(i) Grievance handling policy and procedure are developed, after finding out the
nature and causes of grievances and locating the most delicate areas of
dissatisfaction.

(ii) Rules and Regulations are framed for the maintenance of discipline in the
organisation and proper system of reward and punishment is developed.

(iii) Efforts are made to acquire knowledge of and to observe and comply with the
labour laws of the country and acquaint the line management with the provisions
which are directly concerned with organisation. Collective bargaining has to be
developed so that all the disputes may be settled

by mutual discussions without recourse to the law court. Such bargaining,

negotiating and administering agreements relate to wages, leave, working conditions
and employee-employer relationship.

9. Personnel Research and Personnel Audit

This area is concerned with:-

(i) A systematic inquiry into any aspect of the broad question of how to make more
effective an organisation’s personnel programmes - recruitment, selection,
development and accommodation to human resources.

(ii) Procedures, policies and findings submitted to the top executive.

(iii) Data relating to quality, wages, productivity, grievances, absenteeism, labour

turnover, strikes, lockout, accidents etc., which are collected and supplied to the top
management so that it may review, alter or improve existing personnel policies,
programmes and procedures.

(iv) Morale and attitude surveys.

3. Financial Management

Explain the interface between finance and other functions.

Finance is the study of money management, the acquiring of funds (cash) and the
directing of these funds to meet particular objectives. Good financial
management helps businesses to maximize returns while simultaneously minimizing
risks.

Financial management is an integral part of overall management and not merely a

staff function. It is not only confined to fund raising operations but extends beyond it
to cover utilisation of funds and monitoring its uses. These functions influence the
operations of other crucial functional areas of the firm such as production, marketing
and human resources. Hence, decisions in regard to financial matters must be taken
after giving thoughtful consideration to interests of various business activities.
Finance manager has to see things as a part of a whole and make financial decisions
within the framework of overall corporate objectives and policies.

Let us discuss in greater detail the reasons why knowledge of the financial
implications of their decisions is important for the non-finance managers. One
common factor among all managers is that they use resources and since resources
are obtained in exchange for money, they are in effect making the investment
 decision and in the process of ensuring that the investment is effectively utilized they
are also performing the control function.

Marketing-Finance Interface

There are many decisions, which the Marketing Manager takes which have a significant
location, etc. In all these matters assessment of financial implications is inescapable impact
on the profitability of the firm. For example, he should have a clear understanding of the
impact the credit extended to the customers is going to have on the profits of the company.
Otherwise in his eagerness to meet the sales targets he is liable to extend liberal terms of
credit, which is likely to put the profit plans out of gear. Similarly, he should weigh the
benefits of keeping a large inventory of finished goods in anticipation of sales against the
costs of maintaining that inventory. Other key decisions of the Marketing Manager, which
have financial implications, are:

Pricing

 Product promotion and advertisement

 Choice of product mix

 Distribution policy.

Production-Finance Interface

As we all know in any manufacturing firm, the Production Manager controls a major
part of the investment in the form of equipment, materials and men. He should so
organize his department that the equipments under his control are used most
productively, the inventory of work-in-process or unfinished goods and stores and
spares is optimized and the idle time and work stoppages are minimized. If the
production manager can achieve this, he would be holding the cost of the output
under control and thereby help in maximizing profits. He has to appreciate the fact
that whereas the price at which the output can be sold is largely determined by
factors external to the firm like competition, government regulations, etc. the cost of
production is more amenable to his control. Similarly, he would have to make
decisions regarding make or buy, buy or lease etc. for which he has to evaluate the
financial implications before arriving at a decision.

Top Management-Finance Interface

The top management, which is interested in ensuring that the firm’s long-term goals
are met, finds it convenient to use the financial statements as a means for keeping
itself informed of the overall effectiveness of the organization. We have so far briefly
reviewed the interface of finance with the non-finance functional disciplines like
production, marketing etc. Besides these, the finance function also has a strong
linkage with the functions of the top management. Strategic
planning and management control are two important functions of the top
management. Finance function provides the basic inputs needed for undertaking
these activities.

Economics – Finance Interface

The field of finance is closely related to economics. Financial managers must

understand the economic framework and be alert to the consequences of varying
levels of economic activity and changes in economic policy. They must also be able to
use economic theories as guidelines for efficient business operation. The primary
economic principle used in managerial finance is marginal analysis, the principle that
financial decisions should be made and actions taken only when the added benefits
exceed the added costs. Nearly all-financial decisions ultimately come down to an
assessment of their marginal benefits and marginal costs.

Accounting – Finance Interface

The firm’s finance (treasurer) and accounting (controller) activities are typically
within the control of the financial vice president (CFO). These functions are closely
related and generally overlap; indeed, managerial finance and accounting are often
not easily distinguishable. In small firms the controller often carries out the finance
function, and in large firms many accountants are closely involved in various finance
activities. However, there are two basic differences between finance and accounting;
one relates to the emphasis on cash flows and the other to decision making.

4. Marketing Management

Explain the different Marketing Environments and the role of culture and sub
culture.

THE MACRO-ENVIRONMENT

The only real certain thing in this world is change. Sometimes change occurs so
slowly that it is virtually imperceptible. We are often unaware that change is
occurring until it is too late to do anything about it. At other times change is so rapid
that, even though it is obvious, we find it difficult to react quickly enough.

Although none of us possess the power to foresee the future, we can be sure that it
will be different from today, and that change is a fact of life. We have little power to
stop it, and the sensible course of action is to welcome change and attempt to adapt
to it. In order for a firm to be able to adapt successfully to changing circumstances,
management needs to have an understanding and appreciation of the factors and
forces influencing such changes, ideally, a firm should be in a position to adapt to
changes as they are occurring, or even in advance. Firms should attempt to capitalize
upon change rather than merely reacting to it. By identifying environmental trends
soon enough, management should be able, at least in part, to anticipate where such
trends are leading and what future conditions are likely to result from such changes.
Unless firms are able to identify and react to changes quickly enough, they are likely
to be dictated to by circumstances beyond their control. Instead of being part of the
changes occurring, and leading the market, they will, of necessity, be forced into
being market followers. Instead of adapting to change and even going some way
towards influencing events, events will instead influence them, perhaps in an
unfavourable way.

In terms of its speed of response, and its ability to react to changing conditions, we
can generally classify three types of firm:

1. Firms that identify and understand the forces and conditions bringing about
changes. Such firms adapt and move in line with such changes. To a certain extent,
such a firm may itself play a part in influencing events.

2. Firms that fail to adapt to changes early enough to become part of that change.
Such firms have little opportunity to influence events, but are usually forced to react
to changes eventually, out of the necessity to survive.

3. Firms that fail to realize change has occurred, or refuse to adapt to changing
circumstances. Such firms are unlikely to survive in the long term or, if they do, are
unlikely to prosper.

The competitive environment

There are very few firms that are fortunate enough to have no competitors. Except in
the case of the centrally planned economies, of which, of course, there are fewer and
fewer as they increasingly turn towards free-market mechanisms. On the other hand,
there are very few markets which possess all the characteristics of what the
economist calls a ‘perfectly competitive’ market structure where no company

has any differential advantage and where all products are homogenous and
companies therefore must accept the market price. Rather, most markets fall
somewhere in between these two extremes but are characterized by intense
competition. In some markets the market structure is dominated by three or four
very large companies with a number of medium and smaller sized companies all
vying for position. In such competitive market structures, in an attempt to reduce
price competition and to secure a competitive advantage, companies

will seek to make their products and services stand out in some way from their
competitors. This attempt to ‘differentiate’ product/services from those of
competitors is a key feature therefore of modern marketing.
Differentiation can be achieved in many ways, but essentially the extent to which
differentiation is successful or otherwise is the responsibility of the marketing
function. So, for example, the marketer will seek to gain a competitive edge through,
say, branding, or perhaps packaging. Innovative distribution, or excellent customer
service can also be used to differentiate the company’s offering from those of
competitors. Clearly, marketing decision therefore must reflect and indeed be based
upon an analysis of the competitive environment.

In fact, the competitive element of a company’s environment is probably one of the

most important elements in the development of marketing strategies and plans, and
therefore in affecting the extent of a company’s success, or otherwise, in the market
place. Traditionally, economists have distinguished between market structures with
different degrees of competition. As already mentioned, at one extreme we have the

monopolistic market structure where there is only one supplier and hence little or no
competition. We have also suggested that this type of market structure is
increasingly rare apart from the centrally planned economies or where for some
other reason an industry is state run or protected. Also, as already mentioned, as the
other extreme is the perfectly competitive market structure where products are
undifferentiated between competitors. In the ‘real world’ though the economists
‘oligopolistic’ (a market structure with a few relatively large companies) or
‘monopolistic competition’ (a market structure with many competitors and hence
where product differentiation of some kind is crucial) are more realistic.

Supplier environment

Suppliers are other business firms and individuals who provide the resources needed
by the marketing firm to produce goods and/or services. Nearly every firm, whether
engaged in manufacturing, wholesaling or retailing, is likely to have suppliers. Large
firms such as Marks and Spencer or the Ford Motor Company are likely to have
numerous suppliers. For example, Ford must obtain glass windscreens, headlamp
units, brake pads, tyres, steel sheet, fabric for interior upholstery and a number of
other materials in order to produce cars. While some of these product constituents
will come from major manufacturers such as British Steel, Pilkington’s Glass, Lucas
and Dunlop, other components, ranging from industrial fasteners to engine gaskets,
will often be supplied by a large number of smaller, less well known companies.

As you will appreciate, Ford depends on possibly hundreds of suppliers for its
manufacturing capability and commercial prosperity. In the same way, hundreds of
firms depend on Ford for orders. The firms that supply Ford with finished
components are also likely to be supplied with raw materials or semi processed
goods by a host of other suppliers. Purchasing is regarded as a very important
management function in many organizations. The reason for this is that firms must
be able to purchase product and services at an acceptable price and quality. The

firm must also ensure that its suppliers are capable of offering an acceptable level of
service on such matters as delivery, reliability, stock availability, servicing
arrangements and credit facilities. The buyer-supplier relationship is one of economic
interdependence. Both parties rely on each other for their commercial well being.
Changes in the terms of the relationship are usually based on negotiation rather than
on ad hoc unilateral decisions. Such relationships are usually long term, with each
party realizing its dependence on the other. Both parties are seeking security and
long-term stability from their commercial relationship. This is not to say that factors
in the supplier environment do not change. Suppliers may be forced to raise their
prices and may also be affected by industrial disputes which, in turn, will affect
delivery of materials to the buying firm. Some suppliers may find themselves in
financial difficulty and be forced into liquidation. In an attempt to limit the effect of
such factors, many buying firms use a ‘multiple sourcing’ purchasing policy. This
avoids over-dependency on any one supplier and reduce the vulnerability of the
buying firms.

The distributive environment

Many firms, particularly in industrial markets where products are often buyer-
specified market and deliver their products direct to the final customer. Other firms
use some form of intermediate distribution system. The distribution system is then
made up of one or more ‘middlemen’ who can be individuals or other organizations.
They range from agents, distributors, factors and whole salers to retailers.

Because of the seeming permanence of the distributive environment at any point in

time, many firms make the mistake of thinking it is static. In fact, distribution
channels change and evolve just like any other facet of business life. As Davidson
explains: Distribution channels resemble the hour hand of a watch. They are always
moving, but each individual movement is so small as to be invisible in isolation. The
cumulative movement over a number of years can, however, be massive.

Because distribution channels change relatively slow, it is easy for manufacturers to

respond too slowly to their evolution. Existing channels may be declining in their
popularity of efficiency, while new potential channels of distribution may be
developing, unnoticed by the marketing firm.

The role of culture

A society’s culture is completely learned way of life which is handed down from
generation to generation. Cultural influences give each society its own peculiar
attributes. Although the norms and values within a society are the result of many
years of cultural conditioning, they are not static. It is cultural changes,

and the resulting revised norms and values within a society, that is of particular
interest to the marketing firm. Nowhere is the aspect more poignant than when the
company is marketing internationally. The English anthropologist, E.B. Taylor, 10
defined culture as: that complex whole which includes knowledge, belief, art, morals,
law, custom, and any other capabilities and habits acquired by man as a member of
society. Taylor’s definition is an accepted classic in defining some of the major facets
of culture, and in emphasizing that culture is very much a learned phenomenon.
British culture has historically been largely materialistic, derived as it is from the
Protestant work ethic of self-help, hard work, thrift and the accumulation

of wealth. Arguably, other Western cultures such as the United States, Germany and
Japan are even more materialistically oriented. This factor is often thought to be one
of the reasons for these countries’ superior economic performance. Cultural values
do, however, change over time, and a number of Western core values are currently
undergoing major changes. Some of the changing cultural values are particularly
prevalent among the young include:

- A questioning of materialism and its values.

- A decline in respect for authority and the law.

- A belief in the rightness of militancy and conformation.

- A desire for innovation and change.

- A shift towards informality

Sub-cultural influences

Within each culture are numerous sub-groups with their own distinguishing modes
of behaviour. In the United States black Americans represent the largest racial/ethnic
sub-culture. In the UK it is the Asian community. American marketing firms realize
that it is impossible to treat such a large group of consumers

as a homogeneous mass, a number studies though indicate that their consumption

habits are significantly different from those of the remainder of Americans. As a
result, American firms are now designing products and advertising campaigns aimed
specifically at this large minority markets. This has now also happened in the UK.
Indeed, although the UK is more culturally homogeneous than the USA, firms can no
longer ignore the cultural differences of the ethnic population. Ethnic heterogeneity
is slowly being recognized by more enlightened firms as potential

source of marketing opportunities. Cannon highlights a number if interesting

examples of marketing opportunities and problems related to sub-cultures.

- Products may need to meet special religious needs (e.g. kosher foods).

- Marketing intermediaries may be different (e.g. the importance of small, Asian-run,

shops)

- Consumer tastes may differ (e.g. Cadbury Typhoo’s pound Yam, aimed mainly at
consumers of Caribbean origin)

- Language can be a problem in marketing communications (e.g. in the UK, 77 per

cent of Pakistani origin women and 43 percent of Pakistani-origin men cannot speak
working English).

The culturally aware marketing firm will recognize that sub-cultures represent
distinct market segments and will seek to increase their awareness of the needs,
attitudes and motivations of sub-groups

5. Organizational Behavior

Explain Organizational Behavior and its different major aspects.

Organizational Behaviour has included two terms in it. Therefore, these two terms
should be detailed first before diving into the title in question.

→ Organization: It is a group of people who are collected to work for a common goal
with collective efforts. Organization works through two concepts i.e. coordination
and delegation among its group members. Delegation is necessary to allocate group
members with equal work according to their capability, and coordination is required
to achieve organizational goal with precision.

→ Behaviour: It is a verbal or physical response shown by a person as a consequence

of the impact of his/her surroundings. Individual Behaviour varies in accordance with
their mental reactivity to particular circumstances because of their deeply imbibed
morals and value system.
→ Organizational Behavior: Organizational Behaviour is the observation of individual
and/or group Behavior in response to the other individuals or group as a whole. It
studies Behavior of people or group to know their attitude towards particular
circumstances.

∗ Fundamental Aspects of Organizational Behavior: There are various aspects of

Organizational Behaviour which it has to deal with, to know the soul of particular

Organization. Below mentioned are some of the fundamental aspects of

Organizational Behaviour-

1) People: This element is the soul of the Organization because people work to
achieve the target of Organization and Organization works to fulfill the needs of
individual or group of individuals. The word ‘people’ can be anyone who is working
inside the Organization, like employees or any external person like supplier,
customer, auditor, or any government official.

2) Structure: It is the body of the Organization which is to be taken care of to bring

coordination between different levels of Organization, because Organization does not work
aloof and is dependent on people which again work on the concept of division of labor. So,
there is always a hierarchy in Organization which if not properly dealt with can mess the
system because of nil scrutiny and flow of control.

3) Technology: Organizations work on technologies to help people in efficiently doing

their work. Same technology does not apply to each Organization but different
Organizations demand different technologies for their different line of businesses e.g
bank needs mediating technology which connects customers and bankers,
Manufacturing companies need long linked technology because of their assembly
line process, and hospitals work on intensive technology because of their
responsibility to provide specialized services in terms of doctors and medical
equipments.

4) Environment: Organizations are influenced by the environment in which they

work, at a substantial level. Environment is important to Organizations because of
the following factors:

Supply and demand comes from this environment.

Human resource, competitors, government agencies, unions, and political parties

comes from environment in which Organization is surviving.

The Organizations have to follow rules and regulations fostered by this environment.

6. Principles of Economics
 How economics work and discuss the relations between the main economic
players and institutions.

The issue of institutional development, or ‘governance reform’, has come to

prominence during the last several years. During this period, the academic literature
on institutions and development has exploded. And today even the World Bank and
the IMF, which used to dismiss institutions as mere ‘details’ that do not affect the
wisdom of the orthodox economic theory, have come around to emphasising the role
of institutions in economic development. For example, the International Monetary
Fund (IMF) put great emphasis on reforming corporate governance institutions and
bankruptcy laws during the 1997 Asian crisis, while a recent World Bank annual
report (Building Institutions for Markets, 2002) focused on institutional development,
although from a rather narrow point of view, as indicated by its title. Of course, the
new attention paid to institutions in the orthodox literature should not be seen as
the result of an innocent scholastic awakening. Rather, it is better seen as an attempt
to cope with the continued failures of orthodox policies in the real world. Despite the
miserable failures of radical policy experiments through various structural
adjustment programmes (SAPs) in developing countries and the big-bang ‘transition’
programmes in the former communist countries, the orthodox economists have
refused to draw the most obvious conclusion, namely, that the orthodox policies, and
the theories underlying them, are flawed. At first, they tried to argue that the policy
reforms need to be more extensive in order to succeed. When that happened and
the good results still did not materialise, they started saying that policy reforms need
time to work. However, after 15, 20 years of reform, even this line of defence has
become difficult to maintain. So, now the orthodox economists use institutions to
explain why ‘good’ economic policies based on ‘correct’ economic theories have so
consistently failed. By talking about deficient institutions, they can argue that their
policies and theories were never wrong, and did not work only because the countries
that implemented them did not have the right institutions for the ‘right’ policies to
work. In other words, the institutional argument is being mobilised as a means to
protect the core tenets of orthodox economics in the face of its inability to explain
what is happening in the real world. In this paper, we discuss how the theory on the
role of institutions in development can be improved, by critically examining the
current orthodox discourse on institutions and highlighting some of its key
theoretical issues. After a discussion of some definitional problems (section 2), I will
discuss some problems arising from the widespread failure to distinguish between
the forms and the functions of institution (section 3). Then I will critically examine
the excessive emphasis on property rights in the orthodox literature on institutions
and development (section 4) and discuss a number of problems that arise from the
simplistic view on institutional change that underlies the orthodox view on
institutional persistence (section 5). 2 2 Some definitional problems One
fundamental difficulty involved in the study of the relationship between institutions
and economic development is that there is no widely accepted definition of
institutions.1 If we cannot agree on what we mean by institutions, it is difficult to
imagine that we would have a consensus on what they are supposed to do, such as
promoting economic development. When we have differences over the very
definition of the term ‘institutions’, it is not surprising that we do not have an
agreement on the relationship between institutions and economic development. At
the very general level, we may say that there are certain functions that institutions
have to serve if they are to promote economic development, and that there are
certain forms of institutions that serve these functions the best. However, the
difficulty is that we cannot come up with an agreed list of the ‘essential’ functions
nor an obvious match between these functions and particular forms of institutions.
The problem is that there are many different ways and different levels of abstraction
in which the conceptual ‘pie’ may be cut. For example, in one of my earlier articles, I
had identified three key functions of institutions in promoting economic
development: (i) coordination and administration; (ii) learning and innovation; and
(iii) income redistribution and social cohesion (Chang, 1998b). However, why just
these three functions? Why not add encouragement of investment or, following
Amartya Sen’s approach, the function of developing human capabilities? Also, the
conceptual ‘pie’ could be cut at many different levels of abstraction. For example,
why not define the functions at less abstract levels, such as the lender of last resort
or the smoothing of income fluctuation, and so on? In the end, there is no one right
way in which the functions necessary for economic development are defined.
Moreover, even if we can agree on the list of functions that are essential for
economic development, this does not mean that we can agree on the exact kinds
and forms of institutions that we need in order to fulfil those functions. First, one
institution could be serving more than one function. For example, budgetary
institutions typically serve multiple functions, such as investment in productive assets
(e.g., physical infrastructure, R&D facilities), social protection (the welfare state), and
macroeconomic stability (e.g., through the ‘automatic stabiliser’ function). For
another example, political institutions could also perform a number of functions such
as distillation of different opinions into a decision, conflict resolution, provision of
social cohesion, and nation-building. No institution performs only one function.
Second, there are many institutions that serve the same function, although they
would all serve other functions as well, which may or may not overlap. So, for
example, macroeconomic stability is achieved not simply by an independent central
bank solely focused on inflation (as the current orthodoxy goes) but also by a host of
other 1 For a very informative early discussion of the definitional problem, see van
Arcadia (1990). Van Arcadia points out that institutions are used to mean both the
‘rules of the game’ and the ‘organizations’. While the former sense of the term has
become more prevalent since the time when van Arcadia wrote the article, we still
use terms like the Breton Woods Institutions, which uses the word institution in the
latter sense. 3 institutions, including the budgetary institutions, institutions of
financial regulation, and wage- and price-setting institutions. For another example,
investment is encouraged not just by strong protection of property rights (as the
current orthodoxy goes) but also by financial institutions (which will determine the
availability of ‘patient’ capital), labor institutions (which have implications on
productivity of the investment), and the welfare state (which provides ‘insurances’
against failure of investment). Third, the same function could be served by different
institutions in different societies (or in the same society at different times). For
example, social welfare is typically achieved by the welfare state in most European
countries. The same is provided by a combination of a (weaker) welfare state,
company welfare schemes, family provision, and other means in East Asia. If we
looked at the welfare state only, we may misleadingly believe that the level of social
welfare provision in East Asia is much lower than what it is. For another example,
discipline of lax corporate management is provided by the stock market in the Anglo-
American economies, whereas it is provided by the main lending banks in countries
like Germany and Japan. For all of these reasons, it is impossible to come up with a
single list of functions and forms of institutions that are desirable, not to speak of
essential, for economic development. This, in turn, makes the exploration of the
relationship between institutions and economic development extremely
complicated. Any theorization of the role of institutions and economic development
will have to accept this limitation. 3 Forms vs. functions another big problem that
dogs the current orthodox literature on institutions and development is its inability
to clearly distinguish between the forms and the functions of institutions. For
example, if we look at the papers by Kaufmann et al. (1999; 2002; 2003) that compile
all major ‘governance’ indexes (or the indexes of institutional quality), we find that
these indexes often mix up variables that capture the differences in the forms of
institutions (e.g., democracy, independent judiciary, absence of state ownership) and
the functions that they perform (e.g., rule of law, respect for private property,
enforceability of contracts, maintenance of price stability, the restraint on
corruption). In response to this confusion, some have argued that the ‘function’
variables should therefore be preferred over the ‘form’ variables. For example, Aaron
(2000: 128) argues that, in studying the impact of institutions on 4 However, this
emphasis on functions over forms should not be taken too far. While a particular
form does not guarantee the fulfillment of a particular set of functions, a complete
neglect of forms makes it very difficult for us to make any concrete policy proposal. If
we did that, we will be like a dietician who talks about eating a ‘healthy, balanced
diet’ without telling people how much of what they should have. In other words, the
emphasis on ‘good’ institutions may become empty without some statements on the
forms to be adopted. Having made this caveat, it should be emphasized that
currently the orthodox literature errs on the other side – that is, there is simply too
much fixation with particular forms. Such over-emphasis on forms is most vividly
manifested in the so-called ‘global standard institutions’ (GSIs) argument (for a critic
of this argument, see Chang, 2005). The proponents of the GSI argument believe that
there are particular (mostly Anglo-American) forms of institutions that all countries
have to adopt if they are to survive in the ever-globalizing world: political democracy;
an independent judiciary; a professional bureaucracy, ideally with open and flexible
recruitments; a small public enterprise sector, supervised by a politically independent
regulator; a developed stock market with rules that facilitate hostile Mandan
(mergers and acquisitions); a regime of financial regulation that encourages
prudence and stability, through things like the politically-independent central bank
and the BIS (Bank for International Settlements) capital adequacy ratio; a
shareholder-oriented corporate governance system; labor market institutions that
guarantee flexibility. This form-fetish has led to a dangerous denial of institutional
diversity, a move whose folly is evident in light of the bio-diversity argument
seriously. This transformation of the orthodox discourse on institutions into another
‘one-size-fits-all’ discourse is really unfortunate. To the heterodox economists who
had initially drawn attention to the role of institution, the whole point of bringing
institutions into the analysis was to expose the limits of the ‘one-size-fits-all’
argument regarding economic policy that had been deployed by the orthodox
economists. Even more problematical is the way in which their preferred institutional
forms are propagated by the powerful. The GSIs are increasingly imposed upon
unwilling countries through what Kaptur and Weber (2000) call ‘governance-related
conditionality’s’ of the Breton Woods institutions and the donor governments. It may
be easy to criticize the one-size-fits-all approach of the GSI discourse and say that we
should not be constrained by the forms too much, but then we should be able to
present a menu from which policy-makers can choose (of course, always
acknowledging that there is a room for innovation). Providing such a menu requires
empirical knowledge of the diverse forms of institutions that perform similar
functions in different contexts. It may be equally easy to criticize the functionalist
approach for being too abstract. The form-fetishists at least have a concrete
suggestion to make, it may be said, even if it means exactly copying a particular form
of institution that another country has, whereas the functionalists have nothing
concrete to say. It may be easy to say that countries should have a rule of law or a
professional bureaucracy, but how do policy-makers put those suggestions into
practice? Once again, without some knowledge of real-life institutions, it is difficult to
say anything useful in this regard. 5 In the end, there needs to be some balance
between forms and functions in our thinking about the role of institutions in
economic development – while we don’t want to ignore the importance of
institutional forms, we should not recommend vague things like ‘good property rights
system’ either. 4 Which institutions? Property rights rules? In the orthodox literature
on institutions and development, property rights are accorded the most important
role. It is because many of the developing and the transition economies lack a
clearly-defined and secure private property rights system, it is argued, that the ‘good’
policies based on ‘correct’ theories recommended by orthodox economist have failed
to work. This is because, according to this argument, in the absence of an
appropriate guarantee for the fruits of their sacrifices, people would not make any
investment, whatever the policies regarding macroeconomic balances, trade, and
industrial regulations may be. The emphasis on property rights in the orthodox
literature is so strong that it has even attracted the criticism that it amounts to
‘property rights reductionism’ (Roderick, 2004). This over-emphasis on property
rights institutions is particularly problematic when the orthodox theory on the
relationship between property rights and economic development suffers from a
number of conceptual, theoretical, and empirical weaknesses. 4.1 The
‘measurement’ problem To begin with, unlike some other institutions, such as the
bureaucracy or the fiscal system, the property rights system is a complex of a vast set
of institutions – land law, urban planning law, tax law, inheritance law, contract law,
company law, bankruptcy law, intellectual property rights law, and customs regarding
common property, to name only the most important ones. And being made up of
such diverse elements, it is almost impossible to ‘aggregate’ these component
institutions into a single aggregate institution called the property rights system. Given
the impossibility of aggregating all elements of a property rights system into a single
measurable indicator, empirical studies tend to rely on subjective measures of the
overall ‘quality’ of the property rights system. Many rely on surveys among
(especially foreign) businessmen, ‘experts’ (e.g., academics, chief economists of main
banks and firms, etc.), or even the general public, asking them how they assess the
business environment in general, and the quality of property rights institutions in
particular. Some use even more narrowly-defined concept like ‘expropriation risk’
(Acemoglu et al., 2001) – a notion that may have had some justification in the 1960s
and the 1970s, when there were not infrequent seizures of private assets by
governments, but not so any more today, when very few countries even contemplate
expropriating private assets. As we can imagine, these kinds of measures are very
problematic, as the survey results they can be strongly influenced by the general
state of business, rather than the inherent quality of property rights system itself
(Roderick, 2004). For example, a lot of people who were quite happy to praise the
good business environment in East and Southeast Asia suddenly started criticizing
cronyism and other institutional deficiencies in these countries once the 1997
financial crisis broke out. 6 4.2 The ‘coverage’ problem The orthodox discourse on
property rights does not recognize all possible forms of property rights. It essentially
recognizes only three types of property rights – open access, pure private ownership,
and state ownership – while ignoring other important forms of property rights. For
example, the literature on common-pool resources in environmental economics and
that on ‘open’ software (or ‘shareware’) on the internet show that the absence of
private property does not necessarily mean an ‘open access’ situation, where there is
no property right for anyone. Unlike what is overlooked in the orthodox literature,
there could be genuinely communal property rights that allow no individual
ownership but are based on clear rules about access and utilization (e.g., communal
rules for gathering firewood in communally-owned forest, rules on how one may not
make money out of a software building on the free ‘shareware’). Moreover, post-
socialist developments in China have shown us that there even could be hybrid forms
of property rights – for example, the TVEs (township and village enterprises) are de
jure owned by local governments but in some cases operate under de facto
(although unclear) private property rights held by powerful local political figures. 4.3
Superiority of private property rights the orthodox literature on property rights is
based on a rather simplistic and biased theory of property rights that glorifies private
property rights. In this discourse, it is believed that all effective incentives have to be
private and predominantly materialistic and therefore that no form of property rights
other than private property rights can provide adequate incentive for good
performance. However, there are enough theories that question whether only
individualized materialistic incentives, and therefore private property rights, work
(Simon, 1983; Base, 1983; Etzioni, 1988; Frey, 1997; Eller man, 1999). Unlike what is
posited in the orthodox theory, human motivations are multi-faceted and there are
just too many no selfish human behaviors for us to explain without admitting a range
of non-selfish motivations and without assuming a complex interaction between
different types of motivations, both selfish and non-selfish. At the empirical level,
there are many examples that show the limits of the simplistic view on the
superiority of private property rights. Once again, the recent Chinese experience,
with a complex mixture of private, public, and hybrid ownership patterns, often with
relatively unclear property rights (to add insult to the injury to the orthodox theory,
so to speak), is an obvious counter-example. Countries like France, Austria, Finland,
Norway, and Taiwan have extensively used state-owned enterprises (SOEs) in
engineering their impressive economic developments after the Second World War.
For another example, the famous Korean steel producer, POSCO, was set up in the
early 1970s as an SOE in a country that does not even produce the raw materials
(iron ore or coking coal) at a time when such act was a clear defiance of comparative
advantage (the country’s main exports at the time were labor-intensive items like
textiles and wigs) but went on to become the most cost-efficient steel producer in
the world within a 7 decade of its establishment and is now the second largest (now-
privatized) steel producer in the world.2 4.4 Desirability of strong protection of
property rights In the orthodox literature, it is uncritically assumed that a stronger
protection of property rights is always better. However, this cannot be true as a
general proposition. The fact that some protection of property rights is good does
not mean that more of it is always better. While it is probably true that a very weak
protection of property rights is bad, too strong a protection may not be good either,
as it can protect obsolete technologies and outmoded organizational forms. If that is
the case, there may be an inverse-U-shaped relationship, where too weak a
protection is not good but neither is too strong one. Or alternatively it may be that,
as far as it is above a minimum threshold, the strength of property-rights protection
may not matter too much. Whatever the exact relationship is the relationship
between the strength of property-rights protection and economic development is
not likely to be linear, contrary to what is assumed in orthodox theories. Moreover,
and more importantly from the point of view of economic development, the growth-
impact of a particular property right may not be constant over time. A particular
property right may become good or bad for the society, depending on changes in the
underlying technology, population, political balance of power, or even ideologies.
Indeed, there are many examples in history where the preservation of certain
property rights proved harmful for economic development while the violation of
certain existing property rights (and the creation of new property rights) was actually
beneficial for economic development. The best known example is probably the
Enclosure in Britain, which violated existing communal property rights by confiscating
the commons but contributed to the development of woolen manufacturing industry
by promoting sheep farming on the land thus confiscated. De Soto (2000) documents
how the recognition of squatter rights in violation of the existing property owners
was crucial in developing the American West. Up ham (2000) cites the famous
Sanderson case in 1868, where the Pennsylvania Supreme Court over-rode the
existing right of landowners to claim access to clean water in favor of the coal
industry, which was a key industry of the state at the time. Land reform in Japan,
Korea, and Taiwan after the Second World War violated the existing property rights
of the landlords but contributed to the subsequent development of these countries.
Many people argue that nationalization of industrial enterprises in countries like
Austria and France after the Second World War contributed to their industrial
developments, by transferring certain industrial properties from a conservative and
no dynamic industrial capitalist class to the professional public sector managers with
a penchant for modern technology and aggressive investments. The examples could
go on, but the point is that, if there are groups who are able to utilize certain existing
properties better than their current owners can, it may be better 2 for further
discussions on the political economy of SOEs, see Chang and Singh (2003). 8 for the
society not to protect the existing property rights and to create new ones that
transfer the properties concerned to the former groups. And in this circumstance,
too strong a protection of certain (existing) property rights may become a hindrance
to economic development. This is, of course, a main insight from Marx’s theory of
social evolution.3 To summarise, the security of property rights cannot be regarded
as something good in itself. What is important for economic development is not the
protection of all existing property rights at all costs, but the ability to decide which
property rights to protect to what extent under which conditions. 5 Theories of
institutional change 5.1 Institutional persistence and human agency In the
mainstream theories, once institutions are in place, they are seen as perpetuating
certain patterns of human interaction. And as institutions are seen as being
determined by immutable (or at least very-difficult-to-change) things like climate,
resource endowment, and cultural tradition, these patterns become almost
impossible to change, which introduces a ‘fatalist’ bias in the argument. So, for
example, temperate climate in the USA is supposed to have made small-scale land
ownership the natural institution, which then led to greater demands for democracy
and education, whereas the tropical climate in many Latin American countries led to
latifundia-dominated agriculture, producing the opposite results (Engerman and
Sokoloff, 1997; 2002). For another example, Botswana’s consensus-oriented political
culture with strong grass-root influence is supposed to have made its post-colonial
leaders to create an inclusive property rights system, which promoted economic
development (Acemoglu et al., 2003). Now, at one level, persistence is what we
should expect from institutions. Institutions are meant to be stable – otherwise they
will have no use. And therefore some degree of self-reinforcing mechanism is
inevitable when we look at the relationship between institutions and the economy.
However, this view has a number of serious problems. The first problem with this
argument is that, a country’s institutional complex contains various elements, and
therefore can be described as pro-developmental, antidevelopmental, or whatever
we want, depending on which particular elements we choose to highlight. In this
sense, explanations that rely on culture and institutions (as the embodiments of
cultural values) can easily degenerate into ex post justifications.