Business Studies Mock Test - 1

The correct answer is ​When the growth prospects of the business are high

Key Points

• Working capital is a financial metric which represents operating liquidity available to a business, organisation, or other entity, including governmental entities. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital.
• If the raw materials and other required materials are available freely and continuously, lower stock levels may suffice.
• If, however, raw materials do not have a record of un-interrupted availability, higher stock levels maybe required.
• The Working Capital Requirement (WCR) is a financial metric showing the amount of financial resources needed to cover the costs of the production cycle, upcoming operational expenses and the repayments of debts.
• The working capital requirement will not be high when the procurement of raw material is difficult or not readily available.
• When the rate of inflation is low, the working capital requirement will likely not be high.

The correct answer is Capital structure decision

Key Points

• Capital Structure, means arranging capital from various sources in order to meet the need for long-term funds for the business.
• It combines equities, preference share capital, long-term loans, debentures, retained earnings, and various other long-term sources of funds.
• Capital structure refers to the proportion of each of these sources of funds in the capital, which the company should raise or arrange to carry out its business effectively.
• Thus, capital structure is extremely important. 
• Capital structure decisions or practices have a significant role to play in corporate financial management.

The correct answer is Financial planning

Key Point

• Financial planning is the process of taking a comprehensive look at your financial situation and building a specific financial plan to reach your goals.
• Financial planning often delves into multiple areas of finance, including investing, taxes, savings, retirement, your estate, insurance and more.
• Financial planning is the practice of putting together a plan for your future, specifically around how you will manage your finances and prepare for all of the potential costs and issues that may arise.
• The process involves evaluating your current financial situation, identifying your goals and then developing and implementing relevant recommendations.
• Financial planning is holistic and broad, and it can encompass a variety of services,
• Rather than focusing on a single aspect of your finances, it views clients as real people with a variety of goals and responsibilities.
• It then addresses a number of financial realities to figure out how to best enable people to make the most of their lives.
• Financial planning is not the same as asset management. Asset management generally refers to managing investments for a client.
• This includes choosing the stocks, bonds, mutual funds and other investments in which a client should invest their money.

The correct answer is Dividend decision

Key Points

• Dividend decision relates to how much of the company's net profit is to be distributed to the shareholders and how much of it should be retained in the business for meeting the investment requirements.
• This decision should be taken keeping in mind the overall objective of maximising shareholders' wealth.
• The dividend decision is concerned with the quantum of profits to be distributed among shareholders.
• A decision has to be taken whether all the profits are to be distributed, to retain all the profits in business or to keep a part of profits in the business and distribute others among shareholders.
• It is the decision about how much of earnings to pay out as dividends versus retaining and reinvesting earnings in the firm.

The correct answer is Planning and controlling are separable twins of management

Key PointsThe relationship between planning and control.

Planning originates Control

• Planning is the most basic function of a firm. It decides what is to be done, who will do it when it will be done etc.
• The aim of planning is to bridge the gap between where the firm is and where it wishes to be.
• Control on the other hand only starts after planning.
• It is basically controlling that all activities are going according to the plan. So without planning there is no need for control.

Controlling sustains Planning

• The relationship between planning and control is that it is a two-way street.
• While planning originates in control, control will help sustain the planning function.
• It directs the course of planning and points out the areas where further planning is necessary.

They are Interdependent and Interlinked

• Planning and control are actually part of one integral function. So they always co-exist as one larger function.
• Controlling actually involves comparing actual performance with the plans, and without any plans, it will be unable to do so. Without a yardstick for comparison, there is no point in the control function.
• Similarly, planning is also dependent on the control function. Planning is only done on paper, it has to be translated into actions.
• And it is controlling by managers that ensure that these plans are implemented correctly and produce the desired results.
• Hence the relationship between planning and control is that of interdependence.
• For example, the workers made 800 units in one day. Is this a good statistic? The only way we can compare is if a plan and standards are in place. Say if the standard is 900 units, then the managers step in to correct this deviation from the standard. This is the control function.

Both are Forward-Looking Functions

• Both planning and control are concerned with the future activities of the firm. Planning is always done for the future. And control too is a forward-looking activity.
• The past cannot be changed or controlled, we can only focus on controlling the future. It is the objective of both these functions to combine and achieve the business objectives and goals of the firm.

The correct answer is Lead to better career of the individual.

Key Points

• Training
• It is the systematic development of knowledge, skills and attitudes required by an individual to perform adequately a given task or job.
• Development
• It denotes the process by which the employees acquire skills and competence to do their present job and increase their capabilities for handling higher jobs in the future.

The benefits of training and development to an organization are as follows: 

1. Training is a systematic learning. It is always better than hit and trial methods which lead to wastage of efforts and money. 
2. Training enhances employee productivity both in terms of quantity and quality, leading to higher profits. 
3. Training equips the future manager who can take over in case of an emergency. 
4. Training increases employee morale and reduces absenteeism and employee turnover. 
5. It helps in obtaining effective response to fast changing environment – technological and economic.
    

Additional InformationThe benefits of training and development activity to the employees are as follows: 

1. Improved skills and knowledge due to training lead to better career of the individual. 
2. Increased performance by the individual helps him to earn more. 
3. Training makes the employee more efficient to handle machines. Thus,less prone to accidents. 
4. Training increases the satisfaction and morale of the employees

The correct answer is All of the Above

Key Points

• Recruitment is a process of finding and attracting the potential resources for filling up the vacant positions in an organization.
• It sources the candidates with the abilities and attitude, which are required for achieving the objectives of an organization.
• Recruitment process is a process of identifying the jobs vacancy, analyzing the job requirements, reviewing applications, screening, shortlisting and selecting the right candidate.
• Recruitment process is the first step in creating a powerful resource base.
• The process undergoes a systematic procedure starting from sourcing the resources to arranging and conducting interviews and finally selecting the right candidates.

Recruitment Planning

• Recruitment planning is the first step of the recruitment process, where the vacant positions are analyzed and described. It includes job specifications and its nature, experience, qualifications and skills required for the job, etc.
• A structured recruitment plan is mandatory to attract potential candidates from a pool of candidates. The potential candidates should be qualified, experienced with a capability to take the responsibilities required to achieve the objectives of the organization

Identifying Vacancy

• The first and foremost process of recruitment plan is identifying the vacancy. This process begins with receiving the requisition for recruitments from different department of the organization to the HR Department, 

Job Analysis

• Job analysis is a process of identifying, analyzing, and determining the duties, responsibilities, skills, abilities, and work environment of a specific job. These factors help in identifying what a job demands and what an employee must possess in performing a job productively.

Job Description

• Job description is an important document, which is descriptive in nature and contains the final statement of the job analysis. This description is very important for a successful recruitment process.

Job Specification

• Job specification focuses on the specifications of the candidate, whom the HR team is going to hire.
• The first step in job specification is preparing the list of all jobs in the organization and its locations.
• The second step is to generate the information of each job.

Job Evaluation

• Job evaluation is a comparative process of analyzing, assessing, and determining the relative value/worth of a job in relation to the other jobs in an organization.
• The main objective of job evaluation is to analyze and determine which job commands how much pay. There are several methods such as job grading, job classifications, job ranking, etc., which are involved in job evaluation. Job evaluation forms the basis for salary and wage negotiations.

Recruitment Strategy

• Recruitment strategy is the second step of the recruitment process, where a strategy is prepared for hiring the resources. After completing the preparation of job descriptions and job specifications, the next step is to decide which strategy to adopt for recruiting the potential candidates for the organization.

Searching the Right Candidates

• Searching is the process of recruitment where the resources are sourced depending upon the requirement of the job. After the recruitment strategy is done, the searching of candidates will be initialized. This process consists of two steps −

1. Source activation − Once the line manager verifies and permits the existence of the vacancy, the search for candidates starts.
2. Selling − Here, the organization selects the media through which the communication of vacancies reaches the prospective candidates.

The correct answer is Estimating the Manpower Requirements, Recruitment, Selection, Placement and Orientation

Key Points

• Staffing is the function of management which takes care of the manpower requirement of an organisation.
• In the complex business environment where rapid continuous changes take place in technology,
• Market preferences and size of organization, it becomes essentially critical to find appropriate and suitable personnel for the job.
• Thus, proper staffing is important for an organization

Staffing Process:

Manpower requirements

• The very first step in staffing is to plan the manpower inventory required by a concern in order to match them with the job requirements and demands. Therefore, it involves forecasting and determining the future manpower needs of the concern.

Recruitment

• Once the requirements are notified, the concern invites and solicits applications according to the invitations made to the desirable candidates.

Selection 

• This is the screening step of staffing in which the solicited applications are screened out and suitable candidates are appointed as per the requirements.

Orientation and Placement-

• Once screening takes place, the appointed candidates are made familiar to the work units and work environment through the orientation programs. placement takes place by putting the right man on the right job.

Training and Development-

• Training is a part of incentives given to the workers in order to develop and grow them within the concern.
• Training is generally given according to the nature of activities and scope of expansion in it. Along with it, the workers are developed by providing them extra benefits of in-depth knowledge of their functional areas.
• Development also includes giving them key and important jobs as a test or examination in order to analyze their performances.

Remuneration-

• It is a kind of compensation provided monetarily to the employees for their work performances.
• This is given according to the nature of the job- skilled or unskilled, physical or mental, etc. Remuneration forms an important monetary incentive for the employees.

Performance Evaluation-

• In order to keep a track or record of the behavior, attitudes as well as opinions of the workers towards their jobs.
• For this regular assessment is done to evaluate and supervise different work units in a concern.
• It is basically concerning to know the development cycle and growth patterns of the employees in a concern.

Promotion and transfer 

• Promotion is said to be a non-monetary incentive in which the worker is shifted from a higher job demanding bigger responsibilities as well as shifting the workers and transferring them to different work units and branches of the same organization.

The correct answer is Promotion

Key Points

• Marketing is an essential business function that helps in making the customers aware of the products or services that are offered by a business.
• The definition of marketing as defined by the American Marketing Association is as follows.
• “Marketing is the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.”
• Functions of marketing are those aspects that define the practice of marketing and are being discussed in detail in this article.

The following are the functions of marketing:

Identify needs of the consumer:

• The first steps in marketing function is to identify the needs and wants of the consumer that are present in the market. Companies or businesses must therefore gather information on the customer and perform analysis on the collected information.
• By doing this they can present the product or service that matches closely with the customer needs and wants.

Planning:

• The next step in marketing function is planning. It is considered very important for a business to have a plan.
• The management should be very clear about the company objectives and what it wishes to achieve from the created plan.
• The company should then chalk out a timeline that is essential for achieving the objectives.

Product Development:

• After the details are received from the consumer research, the product is developed for use by the consumers. There are many factors that are essential for a product to be accepted by the customer, a few factors among the many are product design, durability and cost.

Standardisation and Grading:

• Standardisation refers to the process of ensuring uniformity in the product which means that a product developed by a business shall be standard for every consumer with the same quality and design and this is one of the key aspects that needs to be maintained by the business.
• Grading is referred to as the process of classifying products that are similar in quality and characteristics. Grading helps in making the customer know about the quality of the product offered. It helps in making customers understand that the products conform to highest quality standards.

Packing and Labelling:

• The first impressions of a product are its packaging and the label attached to it.
• Therefore, packaging and labelling should be looked after very well.
• It is a well known fact that a great packaging and labelling goes a long way in ensuring product success.

Branding:

• Branding is referred to as the process of identifying the name of the producer with the product.
• Certain brands are there in the market which have a lot of goodwill and any product coming from the same brand will be accepted more warmly by the consumers. Although, having a separate identity for the product can be helpful.

Customer Service:

• A company has to set-up various kinds of customer service based on their product. It can be pre-sales, technical support, customer support, maintenance services, etc.

Pricing:

• It can be regarded as one of the most important parts of marketing function.
• It is the price of a product that determines whether it will be successful or a failure.
• Some other factors are market demand, competition, price of competitors.
• The company or business should understand clearly that bringing about frequent changes in the price of a product can lead to confusion in the minds of consumers.

Promotion:

• Promotion is the process of making the customers aware of the product by presenting it to customers across various channels of promotion and entice them to buy the product.
• The major channels of promotion are: advertising, media, personal selling and promotion (publicity).
• An ideal promotion mix will be a combination of all or some methods.

Distribution:

• Distribution refers to the movement of consumer goods to the point of consumption.
• A company must ensure that the correct channel of distribution is selected for the product.
• The mode of distribution is dependent on the factors such as shelf life, market concentration and capital requirements.
• Proper management of inventory is also essential.

Transportation:

• Transportation is defined as the physical movement of goods from one place to another.
• In other words, it is the movement of goods from the place of production to the place of consumption.
• Also, the correct mode of transportation can be selected based on the geographical boundaries of the market.

Warehousing:

• Warehousing of products creates time utility. It is often seen that there is a gap between the time a product is produced and the time when it is consumed.
• Companies like to maintain the smooth flow of goods even when the products are of seasonal nature.
• Warehousing and storing provides the opportunity to provide goods during off season also.

The correct answer is Physical distribution

Key Points

• Marketing is an essential business function that helps in making the customers aware of the products or services that are offered by a business.
• The definition of marketing as defined by the American Marketing Association is as follows.
• “Marketing is the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.”
• Functions of marketing are those aspects that define the practice of marketing and are being discussed in detail in this article.

The following are the functions of marketing:

Identify needs of the consumer:

• The first steps in marketing function is to identify the needs and wants of the consumer that are present in the market. Companies or businesses must therefore gather information on the customer and perform analysis on the collected information.
• By doing this they can present the product or service that matches closely with the customer needs and wants.

Planning:

• The next step in marketing function is planning. It is considered very important for a business to have a plan.
• The management should be very clear about the company objectives and what it wishes to achieve from the created plan.
• The company should then chalk out a timeline that is essential for achieving the objectives.

Product Development:

• After the details are received from the consumer research, the product is developed for use by the consumers. There are many factors that are essential for a product to be accepted by the customer, a few factors among the many are product design, durability and cost.

Standardisation and Grading:

• Standardisation refers to the process of ensuring uniformity in the product which means that a product developed by a business shall be standard for every consumer with the same quality and design and this is one of the key aspects that needs to be maintained by the business.
• Grading is referred to as the process of classifying products that are similar in quality and characteristics. Grading helps in making the customer know about the quality of the product offered. It helps in making customers understand that the products conform to highest quality standards.

Packing and Labelling:

• The first impressions of a product are its packaging and the label attached to it.
• Therefore, packaging and labelling should be looked after very well.
• It is a well known fact that a great packaging and labelling goes a long way in ensuring product success.

Branding:

• Branding is referred to as the process of identifying the name of the producer with the product.
• Certain brands are there in the market which have a lot of goodwill and any product coming from the same brand will be accepted more warmly by the consumers. Although, having a separate identity for the product can be helpful.

Customer Service:

• A company has to set-up various kinds of customer service based on their product. It can be pre-sales, technical support, customer support, maintenance services, etc.

Pricing:

• It can be regarded as one of the most important parts of marketing function.
• It is the price of a product that determines whether it will be successful or a failure.
• Some other factors are market demand, competition, price of competitors.
• The company or business should understand clearly that bringing about frequent changes in the price of a product can lead to confusion in the minds of consumers.

Promotion:

• Promotion is the process of making the customers aware of the product by presenting it to customers across various channels of promotion and entice them to buy the product.
• The major channels of promotion are: advertising, media, personal selling and promotion (publicity).
• An ideal promotion mix will be a combination of all or some methods.

Distribution:

• Distribution refers to the movement of consumer goods to the point of consumption.
• A company must ensure that the correct channel of distribution is selected for the product.
• The mode of distribution is dependent on the factors such as shelf life, market concentration and capital requirements.
• Proper management of inventory is also essential.

Transportation:

• Transportation is defined as the physical movement of goods from one place to another.
• In other words, it is the movement of goods from the place of production to the place of consumption.
• Also, the correct mode of transportation can be selected based on the geographical boundaries of the market.

Warehousing:

• Warehousing of products creates time utility. It is often seen that there is a gap between the time a product is produced and the time when it is consumed.
• Companies like to maintain the smooth flow of goods even when the products are of seasonal nature.
• Warehousing and storing provides the opportunity to provide goods during off season also.

The correct answer is When the product is unique in terms of packaging, product difference and product differentiation

Key Points

• Price is the cost consumers pay for a product.
• Pricing is a key element of the marketing mix.
• All the other elements – Product, Packaging, and Promotion are cost generators, i.e. they cost the company money. But pricing is an income generator.

Pricing

• A price is a value in monetary terms that one party pays to another in a transaction in exchange for some goods or services.
• So the definition of price is the amount of money the buyer will pay as consideration to the seller in exchange for goods or services
• Pricing isn’t always as easy as setting a price the seller hopes to obtain.
• It involves aspects such as demand and supply, cost of the product, its perception and value for the customer and many such factors.
• So while pricing a product, the company has to take immense care and consideration.
• If the price is too high or even too low the product will fail in the market.
• This is also the reason why the determination of price is not a one-time event.
• A company changes the prices according to the market conditions and other circumstances.
   

Additional Information Factors Affecting Price Determination
A company has to keep in mind various factors while determining the price of a product. Some such important factors are given here.

Cost of the Product

• The most important factor affecting the price of a product is the product cost.
• The product cost will be inclusive of the cost of production, the distribution costs and the selling and promotion costs.
• This cost will act as a benchmark for setting the price.In the long run, the company will obviously try to cover the entire cost of the product.
• And in addition, it will set for itself a profit margin over and above such cost. But perhaps in the short run, the company may set a price lower than the cost of the product.
• This is a marketing strategy to boost sales and capture a share in the market.
• But in the long run, no company can survive unless the prices of the products/services do not even cover their costs.

The three types of costs of a company

• Fixed Cost: These costs are fixed. They have no relation to the level of activity or production of the company. Even if there is no production of goods these costs will occur. For example, the rent of the factory is a fixed cost.
• Variable Cost: These are the costs that vary in direct proportion to the production levels of an entity. Higher the production, higher the cost and vice versa. The raw material is a classic example of a variable cost
• Semi-Variable Costs: These costs also vary with the production levels. But they are not directly proportional. Say for example the salary of a manager is 10,000/- a month fixed and then 10% of his sales. This is a semi-variable cost.

The Demand for the Product

• The cost of the product will only give you a benchmark to determine the price. The upper limit of the price range will depend on the utility the product has and hence its demand in the market. So the cost of the product is the seller’s concern.
• The buyer’s concern is the utility of the product. The demand for the product will depend on its utility and its price. The law of demands states that lower the price higher the demand.
• Another factor to consider when determining the price is the elasticity of demand. This means the corresponding change in demand to the change in the price of a product. If the demand is inelastic then the company can charge a higher price for their products.

Price of Competitors

• One factor that affects price termination is the price the competition charges for their product. Not only their price but their products, its features and other factors like distribution channel, promotions etc. should also be studied.
• In a market, with free competition, the prices have to be very competitive. You cannot risk pricing yourself out of the market. But on the other hand, if your products have special r additional features this must be reflected in the price.

Government Regulation

• The government has a duty to protect its citizens from unfair practices and pricing. So it may impose certain laws and regulations with regards to the pricing of a product. It can even regulate the prices of goods that it considers essential goods.
• This generally happens in the pharmaceutical industries. Manufacturers charge exuberant prices for life-saving drugs and the buyers have no choice but to pay. In such cases, the government may step in and regulate the prices of these essential medicines.

The correct answer is Product concept

Key PointsFive orientations (philosophical concepts to the marketplace have guided and continue to guide organizational activities:

1. The Production Concept
2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Societal Marketing Concept

The Production Concept.

• This concept is the oldest of the concepts in business.
• It holds that consumers will prefer products that are widely available and inexpensive.
• Managers focusing on this concept concentrate on achieving high production efficiency, low costs, and mass distribution.
• They assume that consumers are primarily interested in product availability and low prices.
• This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than in its features.

The Product Concept.

• This orientation holds that consumers will favor those products that offer the most quality, performance, or innovative features.
• Managers focusing on this concept concentrate on making superior products and improving them over time.
• They assume that buyers admire well-made products and can appraise quality and performance. 
• However, these managers are sometimes caught up in a love affair with their product and do not realize what the market needs.
• Management might commit the “better-mousetrap” fallacy, believing that a better mousetrap will lead people to beat a path to its door. 

The Selling Concept.

• This is another common business orientation. It holds that consumers and businesses, if left alone, will ordinarily not buy enough of the selling company’s products.
• The organization must, therefore, undertake an aggressive selling and promotion effort.
• This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying.
• It also assumes that the company has a whole battery of effective selling and promotional tools to stimulate more buying.
• Most firms practice the selling concept when they have overcapacity. 
• Their aim is to sell what they make rather than make what the market wants.

The Marketing Concept. 

• This is a business philosophy that challenges the above three business orientations. 
• Its central tenets crystallized in the 1950s.  It holds that the key to achieving its organizational goals (goals of the selling company) consists of the company being more effective than competitors in creating, delivering, and communicating customer value to its selected target customers.
• The marketing concept rests on four pillars: 

1. Target market,
2. Customer needs,
3. Integrated marketing
4. Profitability.

The correct answer is All of the Above

Key Points

• Organizing involves assigning responsibilities, grouping them into offices, delegating power, and distributing assets throughout the organization.
• During the organizational operations, administrators organize employees, assets, processes, and regulations to work with the plan's goals.

The following steps are to be undertaken in the organizing process.

(i) Identification and Division of Work:

• The first step in the process of organizing involves identifying and dividing the work that has to be done in accordance with previously determined plans.
• Work is divided into manageable tasks so that duplication can be avoided and workload can be shared among employees.

(ii) Departmentalisation:

• Once, work has been divided into small and manageable activities,
• Then those activities which are similar in nature, are grouped together.
• This process is called departmentalization.
• Departments can be created on the basis of products, functions and territory.

(iii) Assignment of Duties:

• Once the departments are created, each department is placed under the charge of an individual, called the departmental head.
• Then, each job is allocated to an individual, according to his knowledge and skill.
• There should be a proper match between the nature of jobs and the ability of an individual.

(iv) Establishing Reporting Relationships:

• In the organization, each employee has some authority as well as responsibility.
• It is necessary that every individual must know whom he has to take orders from and to whom he is answerable.
• This creates superior-subordinate and helps in coordinating various activities in the organization.
   

Additional Information The organizing process involves:

1. Identification of Objectives and Activity Division
2. Identifying and categorizing job tasks
3. Activity grouping.
4. Gathering Human as well as Material Resources
5. Establishing Power and Responsibility
6. Creating a Relationship Structure
7. Establishing the Control Span and Decentralization
8. Teamwork.
9. Offering Physical Facilities as well as an Appropriate Environment
10. Formation of a Structural Connection for Overall Control
11. Examining and Reorganizing

The correct answer is Planning is a mental exercise

Key Points

• Planning is basically an intellectual activity of rational thinking
• Planning is firmly correlated with discovery and creativity. However, the manager would first have to set goals.
• Planning is an essential step what managers at all levels take.
• It needs holding on to the decisions since it includes selecting a choice from alternative ways of performance.
• The planning function of management has some special features.
• These features cast enlightenment on its scope and nature.:

Planning focuses on achieving objectives:

• Companies are set up with a common goal in view. Explicit purposes are placed out in the projects along with the ventures to be initiated to accomplish the goals. Therefore, planning is helpful.

Planning is a primary function of management:

• Planning puts down the foundation for other operations of management.
• All other managerial duties are conducted within the structure of the ideas outlined. Consequently, planning leads to other operations.
• This is also mentioned as the supremacy of planning.

Planning is continuous:

• Plans are outlined for a particular period of time, perhaps for a period, a quarter or a year.
• At the completion of that period, there is a requirement for a new policy to be formed on the support of new conditions and future circumstances.

Planning is futuristic:

• Planning typically includes looking forward and outlining for the future.
• The idea of planning is to coincide future results efficiently to the valid advantage of an association.
• It means glancing into the future, investigating it and foretelling it.
• Planning is, therefore, perceived as a forward-looking capacity based on predicting

Decision Making

• Decision making means choosing the best alternative among the alternatives available.
• Planning cannot be imagined in the absence of alternatives.
• If there is no alternative available then there is no need for planning.
• A thorough analysis of all the alternatives helps us choose the best one and hence the need for planning arises.

Planning is Mental Exercise

• Planning is the outcome of a mental process rather than wishful thinking and guesswork.
• Planning is a thinking process and it is separate from organisational activities.
• It is based on logical reasoning, facts, foresight, vision, intelligent imagination, and sound judgment.
• Example: All the great CEOs like Tim Cook of Apple, Mark Zuckerberg of Facebook have an immense capability to imagine. Then these people make sound judgments and help their companies attain phenomenal success.

The correct answer is None of the Above

Key Points

• All of the above elements are a part of business environment of an enterprise
• Elements of the business environment are described here:

Customer:

• The prime task for any business is to attract and retain customers. This is to ensure its own long-term profitability and existence in the market.
• It therefore follows that the need and the desire of the customer should be monitored minutely to ensure customer delight, which will lead to the firm having an increasing number of loyal customers.
• Changing tastes and preferences of the customer should not only be observed as they happen, but forecasted before, and necessary corrections should be made in the product/service profile by the company.
• Customers are the backbone of a company and the very reason for the company’s existence.

Products:

• Product factors such as the demand, image, features, utility, function, design, life cycle, price, promotion, distribution, differentiation and availability of substitutes of products or services also form an intimate part of the business environment.
• The product/service features are the key to attract/retain customers.

Marketing Intermediary:

• This includes all those who facilitate the distribution of goods from the centres of production to the various centres of consumption.
• These are the middlemen who form part of the distribution channel and those who help reach the product/service to the ultimate consumer.
• They can be few or many in number, depending on the length of the distribution chain and type of distribution system that the company adopts.
• If this chain is hassle free and functions without many hurdles, it eventually helps the organisation.

Competitors:

• The world has become a global market. There exists tremendous competition in each and every area.
• There are other business entities that manufacture similar products and compete with a company for market share and turnover.
• These have to be managed well and market intelligence is required to find out about their future plans.
• These can play a major role in making or marring the fortunes of any company.

Suppliers:

• An important factor in the microenvironment is the supplier, i.e., those who supply raw materials and components and machines to the company.
• The suppliers should be reliable and act as business partners, working in coordination to fulfil the ultimate consumer expectations.
• If the suppliers are reliable, there is no need to keep heavy inventory stocks that increases the risk of obsolescence and damage and also blocks to working capital of the company.

The correct answer is Functional foremanship

Key Points

• F.W. Taylor or Fredrick Winslow Taylor, also known as the ‘Father of scientific management’ proved with his practical theories that a scientific method can be implemented to management.
• Taylor gave much concentration on the supervisory level of management and performance of managers and workers at an operational level.

Confusion Points

• The term, functional foremanship means separation of planning from execution.
• Each worker is supervised by various specialists.
• But it is not the principles of management given by Taylor. 
• The five principles of management by F.W Taylor.

Science, not the Rule of Thumb

• This rule focuses on increasing the efficiency of an organisation through scientific analysis of work and not with the ‘Rule of Thumb’ method.
• Taylor believed that even a small activity like loading paper sheets into boxcars can be planned scientifically.
• This will save time and also human energy.
• This decision should be based on scientific analysis and cause and effect relationships rather than ‘Rule of Thumb’ where the decision is taken according to the manager’s personal judgement.

Harmony, Not Discord

• Taylor indicated and believed that the relationship between the workers and management should be cordial and completely harmonious.
• Difference between the two will never be beneficial to either side.
• Management and workers should acknowledge and understand each other’s importance.
• Taylor also suggested the mental revolution for both management and workers to achieve total harmony.

Mental Revolution

• This technique involves a shift of attitude of management and workers towards each other.
• Both should understand the value of each other and work with full participation and cooperation.
• The aim of both should be to improve and boost the profits of the organisation.
• Mental Revolution demands a complete change in the outlook of both the workers and management; both should have a sense of togetherness.

Cooperation, not Individualism

• It is similar to ‘Harmony, not discord’ and believes in mutual collaboration between workers and the management.
• Managers and workers should have mutual cooperation and confidence and a sense of goodwill.
• The main purpose is to substitute internal competition with cooperation.

Development of Every Person to his Greatest Efficiency

• The effectiveness of a company also relies on the abilities and skills of its employees.
• Thus, implementing training, learning best practices and technology, is the scientific approach to brush up the employee skill.
• To assure that the training is given to the right employee, the right steps should be taken at the time of selection and recruiting candidates based on a scientific selection.

The correct answer is Unity of command​.

Key Points

• Henry Fayol, also known as the ‘father of modern management theory’ gave a new perception of the concept of management.
• He introduced a general theory that can be applied to all levels of management and every department.
• The Fayol theory is practised by the managers to organize and regulate the internal activities of an organization.
• He concentrated on accomplishing managerial efficiency.

The fourteen principles of management created by Henri Fayol are explained below.

Discipline

• Without discipline, nothing can be accomplished.
• It is the core value for any project or any management. Good performance and sensible interrelation make the management job easy and comprehensive.
• Employees good behaviour also helps them smoothly build and progress in their professional careers.

Division of Work

• Henri believed that segregating work in the workforce amongst the worker will enhance the quality of the product. Similarly,
• he also concluded that the division of work improves the productivity, efficiency, accuracy and speed of the workers.
• This principle is appropriate for both the managerial as well as a technical work level.

Authority and Responsibility

• These are the two key aspects of management. Authority facilitates the management to work efficiently, and responsibility makes them responsible for the work done under their guidance or leadership.

Unity of Command

• This means an employee should have only one boss and follow his command.
• If an employee has to follow more than one boss, there begins a conflict of interest and can create confusion.

Unity of Direction-

• Whoever is engaged in the same activity should have a unified goal.
• This means all the person working in a company should have one goal and motive which will make the work easier and achieve the set goal easily.

Subordination of Individual Interest

• This indicates a company should work unitedly towards the interest of a company rather than personal interest.
• Be subordinate to the purposes of an organization.
• This refers to the whole chain of command in a company.

Remuneration

• This plays an important role in motivating the workers of a company.
• Remuneration can be monetary or non-monetary.
• However, it should be according to an individual’s efforts they have made.

Centralization

• In any company, the management or any authority responsible for the decision-making process should be neutral.
• However, this depends on the size of an organization.
• Henri Fayol stressed on the point that there should be a balance between the hierarchy and division of power.

Scalar Chain

• Fayol on this principle highlights that the hierarchy steps should be from the top to the lowest.
• This is necessary so that every employee knows their immediate senior also they should be able to contact any, if needed.

Order

• A company should maintain a well-defined work order to have a favourable work culture.
• The positive atmosphere in the workplace will boost more positive productivity.

Equity

• All employees should be treated equally and respectfully.
• It’s the responsibility of a manager that no employees face discrimination.

Stability

• An employee delivers the best if they feel secure in their job.
• It is the duty of the management to offer job security to their employees.

Initiative

• The management should support and encourage the employees to take initiatives in an organization.
• It will help them to increase their interest and make then worth.

Esprit de Corps

• It is the responsibility of the management to motivate their employees and be supportive of each other regularly.
• Developing trust and mutual understanding will lead to a positive outcome and work environment.

The correct answer is A dynamic function

Key Points

• In order to be successful, it is important that a business adapts itself to the changes in the taste and preferences of the consumers.
• Management has been described as a social process involving responsibility for economical and effective planning & regulation of theoperation of an enterprise in the fulfillment of given purposes.
• It is a dynamic process consisting of various elements and activities.
• These activities are different from operative functions like marketing, finance, purchase etc. Rather, these activities are common to each and every manger irrespective of his level or status.

​Management is a dynamic function:

• Management has to make changes in goals, objectives and other activities according to changes taking place in the environment. 
• The external environment such as the social, economic, technical, and political environment has great influence over the management.
• Management is a dynamic process because it keeps on changing with the changes that takes place in the environment.
• It is continous process because it is the act of coordinating the efforts of people to accomplish desired goals and objectives using available resources efficiently and effectively. It continues till the goals are achieved by organization.
   

Additional InformationManagement is goal oriented process:

• Management always aims at achieving the organisational objectives.
• The functions and activities of manager lead to the achievement of organisational objectives

Management is a universal phenomenon.

• The use of management is not restricted to business firms only.
• It is applicable in profit-making, non-profit-making, business or non-business organizations; even a hospital, school, club, and house has to be managed properly.

Management is Multidimensional:

• Management does not mean one single activity but it includes three main activities:
• Management of work
• Management of people
• Management of operations

​Management is a continuous process:

• Management is a continuous or never-ending function.
• All the functions of management are performed continuously.
• For example planning, organizing, staffing, directing, and controlling are performed by all the managers all the time.

Management is a group activity:

• Management always refers to a group of people involved in managerial activities.
• The management functions cannot be performed in isolation.
• Each individual performs his/her role at his/her status and department, and then only management function can be executed.

Intangible:

• Management function cannot be physically seen but its presence can be felt.
• The presence of management can be felt by seeing the orderliness and coordination in the working environment.
• It is easier to feel the presence of mismanagement as it leads to chaos and confusion in the organisation.

The correct answer is Management as an Art

Key PointsManagement as an Art:

• Art is the experienced and personal utilization of subsisting information to accomplish solicited outcomes. It can be procured via education, research and practice.
• As art is involved with the personal utilization of data some kind of inventiveness and creativity is needed to follow the fundamental systems acquired.
• The essential characteristics of art are as follows:
• The presence of theoretical knowledge:  Art assumes the presence of specific academic knowledge. Specialists in their particular fields have obtained specific elementary postulates which are appropriate to a specific sort of art. For instance, the literature on public speaking, acting or music, and dancing is publicly acknowledged.
• Personalized application:  The application of this primary information differs from person to person. Art, hence, is a highly personalized notion.
• Based on custom and creativity:  Art is practical. Art includes the creative practice of subsisting intellectual knowledge. We know that music is based on 7 notes. However, what makes the style of a musician different or distinctive is his performance of these notes in an artistic way that is uniquely his own solution
   

Additional InformationManagement as a Science:

• Science is an organized collection of knowledge that emphasizes definite universal truths or the action of comprehensive laws.
• The central characteristics of science are as follows:
• The organized body of knowledge: Science is a precise entity of knowledge. Its systems are based on a purpose and consequence association.
• Universal validity: Scientific conventions have global genuineness and application.
• Systems based on experimentation: Scientific conventions are originally formed via research and then tested via repeated trial and error in under-regulated situations.

Management as a Profession:

• The profession can be described as an occupation upheld by specific education and practice, in which entry is limited.
• A profession has the following features:
• The well-defined theory of knowledge: All services are based on a well-defined form of education that can be procured through education.
• Restricted entry: The entrance to a profession is defined through an examination or through obtaining an educational degree. 
• Professional community:  All professions are affiliated to a professional association that controls entry, presents a certificate of training and expresses and supports a system of government. To be qualified to study in India, lawyers have to become members of the Bar Council which monitors and regulates their actions.

The correct answer is Ecological objective

Key Points

• “Management is the process by which a co-operative group directs actions of others toward common goals.” Management is defined as the process of planning, organizing, and controlling an organization's operations in order to achieve the target efficiently and effectively.
   

Objectives can be categorized into organizational objectives, social objectives, and personal or individual objectives.

Organizational Objectives: 

• Management is accountable for establishing and attaining objectives for the company.
• It has to deliver a variety of objectives in all operations contemplating the interest of all shareholders including, stakeholders, consumers, the government, and employees.
• The principal objective of any company must be to use material and human resources to the maximum potential benefit, i.e., to meet the financial objectives of a firm. And, they are survival, profit, and growth
• Survival: The essential objective of any industry is survival. Management must attempt to assure the continuation of the business. In order to survive, an industry must gain enough funds to meet the costs that would be incurred.
• Profit: Poor survival is not sufficient for the industry. Management has to make sure that the company earns a profit. Profit contributes to a necessary catalyst for the sustained successful performance of the firm. Profit is crucial for meeting the costs and uncertainties of the business concern.
• Growth: A firm requires to add to its chances, in the long run, for this it is necessary for the concern to develop. To prevail in the business, management must utilise adequately the growth potential of the firm.

Social objectives:

• It includes the establishment of benefits for the community.
• As a part of the community, every business whether it is a trade or non-trading concern has a social responsibility to meet.
• This applies to consistently generating financial value for many components of society.
• This includes using environmentally beneficial technologies of production, providing job opportunities to the disadvantaged sections of the community, and furnishing primary facilities like crèches and schools to employees.

Personal Objectives:

• Establishments are made up of resources who possess different backgrounds, experiences, objectives, and personalities.
• They all become part of the establishment to meet their several demands.
• These differ from economic necessities such as ambitious perks and salaries, social obligations such as equal attention, and higher-level demands such as individual growth and progress.

The correct answer is All of the above

Key Points

• Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace.
• Consumer protection measures are often established by law.
• The Consumer Protection Act (CPA) seeks to protect and promote the consumers’ interest through speedy and inexpensive redressal of their grievances.
• The scope of the Act is very wide.
• It is applicable to all types of undertakings, big and small, 
• Whether in the private or public sector, or in the co-operative sector, 
• whether a manufacturer or a trader, and 
• whether supplying goods or providing services.
• The Act confers certain rights to consumers with a view to empowering them and to protect their interests

The correct answer is IRDA

Key Points

• IRDA or Insurance Regulatory and Development Authority of India is the apex body that supervises and regulates the insurance sector in India. 
• The primary purpose of IRDA is to safeguard the interest of the policyholders and ensure the growth of insurance in the country. 
• When it comes to regulating the insurance industry, IRDA not only looks over the life insurance, but also general insurance companies operating within the country.
• India began to witness the concept of insurance through a formal channel back in the 1800s and has seen a positive improvement ever since.

This was further supported by the regulatory body that streamlined various laws and brought about the necessary amendment in the interest of the policyholders. Below mentioned are the important roles of IRDA -

1. First and foremost is safeguarding the policyholder’s interest.
2. Improve the rate at which the insurance industry is growing in an organised manner to benefit the common man.
3. To ensure the dealing are carried on in a fair, integral manner along with financial soundness keeping in mind the competence of the insurance company.
4. To ensure faster and a hassle-free settlement of genuine insurance claims.
5. To address the grievances of the policyholder through a proper channel.
6. To avoid malpractices and prevent fraud.
7. To promote fairness, transparency and oversee the conduct of insurance companies in the financial markets.
8. To form a reliable management system with high standards of financial stability

The correct answer is Regulation of takeover bids by companies

Key PointsThe three Protective Functions of SEBI are:

1. Controlling insider trading and imposing penalties for such practices.
2. Undertaking steps for investor protection.
3. Promotion of fair practices and code of conduct in securities market.

Following are the protective functions of Securities and Exchange Board of India SEBI:  

• Check on unfair practices – SEBI prevents fraudulent and unfair trade practices in the interest of investors. Some of the usual unfair trade practices are making misleading advertisements, manipulations, price rigging etc. SEBI takes strong actions against the companies indulging in these unfair trade practices.  
• Control on insider trading – When a person having access to price sensitive information in respect of securities of a company uses the information to make his personal profit, it is called insider trading. SEBI keeps a strict check on insider trading and takes strict action.  
• Protection of investors – SEBI protects the rights and interests of investors particularly individual investors and to guide and educate them. SEBI has compelled the companies to give accurate information to the investors on regular basis.  
• Code of conduct – SEBI promotes fair trade practices by developing a code of conduct so that companies and financial intermediaries render better service to the investors.

The correct answer is All of the Above

Key Points

• A capital market is a monetary market wherein long-term equity or debt securities are purchased and sold. A capital market is where new issues are made that are bought and sold
• Capital market consists of primary market and secondary market.
• Primary market deals with trade of new issues of stocks and other securities whereas secondary market deals with the exchange of existing or previously-issued securities.
• Capital markets refer to the venues where funds are exchanged between suppliers of capital and those who demand capital for use.
• Primary capital markets are where new securities are issued and sold.
• The secondary market is where previously issued securities are traded between investors.
• The best-known capital markets include the stock market and the bond markets

Additional Information

•  A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of money for the general public, providing loans for investment, and other such activities.
• These banks are profit-making institutions and do business only to make a profit.
• The two primary characteristics of a commercial bank are lending and borrowing.
• The bank receives the deposits and gives money to various projects to earn interest (profit).
• The rate of interest that a bank offers to the depositors is known as the borrowing rate, while the rate at which a bank lends money is known as the lending rate
• Development bank, national or regional financial institution designed to provide medium- and long-term capital for productive investment, often accompanied by technical assistance, in poor countries.
• Development banks are specialized financial institutions.
• They provide medium and long-term finance to the industrial and agricultural sector.
• They do term lending, investment in securities and other activities.
• They even promote saving and investment habit in the public.

The correct answer is There is an inverse relationship between call rates and other short-term money market instruments

Key Points

• Call money is any type of short-term, interest-earning financial loan that the borrower has to pay back immediately whenever the lender demands it.
• Call money allows banks to earn interest, known as the call loan rate, on their surplus funds.
• Call money is typically used by brokerage firms for short-term funding needs
• Call money, also known as "money at call," is a short-term financial loan that is payable immediately, and in full, when the lender demands it.
• Unlike a term loan, which has a set maturity and payment schedule,
• Call money does not have to follow a fixed schedule, nor does the lender have to provide any advanced notice of repayment.
• Call money is a short-term, interest-paying loan from one to 14 days made by a financial institution to another financial institution.
• Due to the short term nature of the loan, it does not feature regular principal and interest payments, which longer-term loans might.
• The interest charged on a call loan between financial institutions is referred to as the call loan rate.

The correct answer is Capital Market

Key Points

• A capital market is a place where buyers and sellers indulge in trade (buying/selling) of financial securities like bonds, stocks, etc.
• The trading is undertaken by participants such as individuals and institutions.
• The capital market trades mostly in long-term securities.
• The magnitude of a nation’s capital markets is directly interconnected to the size of its economy which means that ripples in one corner can cause major waves somewhere else.

Types of Capital Market

• The capital market consists of two types i.e. Primary and Secondary.
• Primary Market: Primary market is the market for new shares or securities. A primary market is one in which a company issues new securities in exchange for cash from an investor (buyer). It deals with trade of new issues of stocks and other securities sold to the investors.
• Secondary Market: Secondary market deals with the exchange of prevailing or previously-issued securities among investors. Once new securities have been sold in the primary market, an efficient manner must exist for their resale. Secondary markets give investors the means to resell/ trade existing securities. Another important division in the capital market is made on the basis of the nature of security sold or bought, i.e. stock market and bond market.

The correct answer is Short-term borrowings

Key Points

• Short-term loans are defined as borrowings undertaken for a short period to meet immediate monetary requirements.
• For example, companies often borrow short-term loans using bank overdrafts to arrange money for working capital requirements. The loan tenure varies based on the debt type.
• A short-term loan is a credit facility extended to individuals and entities to finance a shortage of cash. Examples include credit card, bank overdraft, trade credit, payday loans, etc.
• The loan tenure varies based on the debt type. Many loans mature in 6-12 months while others come with a tenure of 1-2 years.
• The annual percentage rates (APRs) or the interest rates are normally set high. Short tenure restricts lenders from making adequate profits which is why they try to compensate it with higher interests.
• Most short-term loans are unsecured as there is no property that can be sold off for recovery if the debtor defaults. As such, loan applicants with a good credit score are preferred.
• Low credit score applicants often have to struggle quite a bit to secure a short-term loan. They are often extended loans at very high interest rates

The correct answer is Financial planning

Key Points

• Financial planning is the process of taking a comprehensive look at your financial situation and building a specific financial plan to reach your goals.
• Financial planning often delves into multiple areas of finance, including investing, taxes, savings, retirement, your estate, insurance and more.
• Financial planning is the practice of putting together a plan for your future, specifically around how you will manage your finances and prepare for all of the potential costs and issues that may arise.
• The process involves evaluating your current financial situation, identifying your goals and then developing and implementing relevant recommendations.
• Financial planning is holistic and broad, and it can encompass a variety of services,
• Rather than focusing on a single aspect of your finances, it views clients as real people with a variety of goals and responsibilities.
• It then addresses a number of financial realities to figure out how to best enable people to make the most of their lives.
• Financial planning is not the same as asset management. Asset management generally refers to managing investments for a client.
• This includes choosing the stocks, bonds, mutual funds and other investments in which a client should invest their money

The correct answer is It helps in improving employee motivation

Key Points

• Controlling refers to the process of evaluation and assessment of the work done. Under the process of controlling, standards are set for various tasks and activities. 
• Accordingly, the various tasks and activities are evaluated against the set standards. 
• Deviations from the set targets are identified, and corrective actions to be taken are decided. 
• controlling refers to the process of ensuring that the various activities and tasks in the organisation are carried out according to the pre-defined goals and objectives. 
• It ensures that deviations if any are identified and appropriate corrective action is taken

Importance of Controlling in an Organisation

Achieving goals:

• Controlling ensures that various activities are carried out correctly according to the plans.
• It ensures that deviations if any are identified and appropriate corrective action is taken.
• This helps the organisation to be on track and achieve its goals.

Reviewing standards:

• An effective control system ensures that the standards are set accurately.
• As the business environment changes, it ensures that the standards are also reviewed so as to adapt to the changes taking place.

Enables efficiency in resource utilisation:

• An effective control system ensures that there is minimum wastage of resources.
• In other words, it ensures that the resources are utilised optimally and in the most efficient manner.

Better motivation:

• With controlling, employees know what is expected from them and how their performance would be evaluated.
• This clarity motivates employees to perform better.

Maintain order:

• Controlling helps to keep a close watch on the activities and behaviour of employees.
• In this way, it helps in maintaining order and discipline in the organisation.

Ensures coordination:

• With proper controlling, the efforts of the various departments can be unified towards the common goals and objectives of the organisation.
• The existence of predefined standards of evaluation ensures coordination in the activities of various departments

The correct answer is Planning Function

Key Points

• Controlling refers to the process of evaluation and assessment of the work done.
• Under the process of controlling, standards are set for various tasks and activities. 
• Accordingly, the various tasks and activities are evaluated against the set standards. 
• Deviations from the set targets are identified, and corrective actions to be taken are decided. 
• Controlling refers to the process of ensuring that the various activities and tasks in the organisation are carried out according to the pre-defined goals and objectives. 
• It ensures that deviations if any are identified and appropriate corrective action is taken

Nature of Controlling

• Goal-oriented function: It ensures that everyone follows the plan or the work is accomplished as per the plan and tries to achieve the goals of the organization.
• Pervasive function: It is an activity performed not only by top level managers but also by managers working at all levels, i.e. top, middle and operational levels.
• Both backward- and forward-looking function: The work which is done is assessed and deviations from the pre-determined standards are evaluated. Based on the deviations, the controlling function seeks to take the required corrective action. In this way, controlling evaluates the actual performance by comparing it with and guides future actions.
• Continuous function: Controlling is an ongoing process. This function is carried out till the time an organisation survives.

The correct answer is the scope for induction of fresh talent is reduced

Key Points

• Recruitment refers to the process of searching and attracting the required personnel for a job.
• It is the process of finding the potential candidates and instigating them to apply for the job.
• Recruitment refers  the overall process of identifying, sourcing, screening, shortlisting, and interviewing candidates for jobs (either permanent or temporary) within an organization.
• Recruitment can also refer to the processes involved in choosing individuals for unpaid roles

Disadvantages of External Sources of Recruitment

• The following are some of the disadvantages of hiring from outside sources: 

Limited Understanding of the Organisation

• When a candidate is chosen through an external recruitment process, there is a potential that he or she will have a limited awareness of the company's environment.

Existing Employees are Dissatisfied

• Existing personnel may be dissatisfied and frustrated as a result of external recruitment. They may believe that their chances of advancement have dwindled. When a corporation selects a new application for a senior job above existing prospects, there is a greater likelihood that present employees would display some type of internal conflict among company authorities.

Lengthy Procedure

• It takes a long time to recruit from outside sources. To begin the selection process, the company must announce the openings and wait for applications. External recruitment has a number of drawbacks, including the fact that it takes time because most organisations promote their open positions on the internet.

Expensive

• Recruiting personnel from outside sources is quite expensive. A significant amount of money must be spent on advertising and application processing. Because the majority of the external recruitment procedure deals with brand new candidates, organisations must devise a compensation scale for that candidate that reflects his or her aptitude and skill.

Risk

• There's a chance that the candidate chosen for the job isn't deserving of the position, and that he or she will take advantage of the company's predicament.

Recruits Wrong Candidates

• External advertising strategies are used on a broad scale through print media, attracting a high number of applications who are unfit for the job opening

The correct answer is Helps in promotion of the products

Key Points

• Promotion is a marketing tool, used as a strategy to communicate between the sellers and buyers.
• Through this, the seller tries to influence and convince the buyers to buy their products or services.
• It assists in spreading the word about the product or services or company to the people.
• The company uses this process to improve its public image.
• This technique of marketing creates an interest in the mindset of the customers and can also retain them as a loyal customer.
• Promotion is a fundamental component of the marketing mix, which has 4 Ps:

1. Product,
2. Price,
3. Place, and
4. Promotion.

• It is also an essential element promotional plan or mix, which includes advertising, self and sales promotion, direct marketing publicity, trade shows, events, etc.,

The correct answer is Product designing and development

Key Points

• Marketing is a very broad term and cannot be explained in a few words. Marketing is an essential business function that helps in making the customers aware of the products or services that are offered by a business.
• “Marketing is the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.”
• Functions of marketing are those aspects that define the practice of marketing and are being discussed in detail in this article.

The following are the functions of marketing:

Identify needs of the consumer:

• The first steps in marketing function is to identify the needs and wants of the consumer that are present in the market. Companies or businesses must therefore gather information on the customer and perform analysis on the collected information.
• By doing this they can present the product or service that matches closely with the customer needs and wants.

Planning:

• The next step in marketing function is planning. It is considered very important for a business to have a plan. The management should be very clear about the company objectives and what it wishes to achieve from the created plan.The company should then chalk out a timeline that is essential for achieving the objectives.

Product Development:

• After the details are received from the consumer research, the product is developed for use by the consumers. There are many factors that are essential for a product to be accepted by the customer, a few factors among the many are product design, durability and cost.

Standardisation and Grading:

• Standardisation refers to the process of ensuring uniformity in the product which means that a product developed by a business shall be standard for every consumer with the same quality and design and this is one of the key aspects that needs to be maintained by the business.
• Grading is referred to as the process of classifying products that are similar in quality and characteristics. Grading helps in making the customer know about the quality of the product offered. It helps in making customers understand that the products conform to highest quality standards.

Packing and Labelling:

• The first impressions of a product are its packaging and the label attached to it. Therefore, packaging and labelling should be looked after very well. It is a well known fact that a great packaging and labelling goes a long way in ensuring product success.
• Branding: Branding is referred to as the process of identifying the name of the producer with the product. Certain brands are there in the market which have a lot of goodwill and any product coming from the same brand will be accepted more warmly by the consumers. Although, having a separate identity for the product can be helpful.

Customer Service:

• A company has to set-up various kinds of customer service based on their product. It can be pre-sales, technical support, customer support, maintenance services, etc.

Pricing:

• It can be regarded as one of the most important parts of marketing function. It is the price of a product that determines whether it will be successful or a failure. Some other factors are market demand, competition, price of competitors.
• The company or business should understand clearly that bringing about frequent changes in the price of a product can lead to confusion in the minds of consumers.

Promotion:

• Promotion is the process of making the customers aware of the product by presenting it to customers across various channels of promotion and entice them to buy the product.
• The major channels of promotion are: advertising, media, personal selling and promotion (publicity). An ideal promotion mix will be a combination of all or some methods.

Distribution:

• Distribution refers to the movement of consumer goods to the point of consumption. A company must ensure that the correct channel of distribution is selected for the product.
• The mode of distribution is dependent on the factors such as shelf life, market concentration and capital requirements. Proper management of inventory is also essential.

Transportation:

• Transportation is defined as the physical movement of goods from one place to another. In other words, it is the movement of goods from the place of production to the place of consumption.
• Also, the correct mode of transportation can be selected based on the geographical boundaries of the market.

Warehousing:

• Warehousing of products creates time utility. It is often seen that there is a gap between the time a product is produced and the time when it is consumed. Companies like to maintain the smooth flow of goods even when the products are of seasonal nature. Warehousing and storing provide the opportunity to provide goods during off-season also.

The correct answer is Decentralisation

Key Points

• Delegation of authority refers to the transfer of authority from the level of supervisor to the level of subordinates.
• Delegation is the downward transfer of authority from the manager to the subordinate.
• Delegation of authority is important as the superior in an organisation is not able to manage all the work by himself.
• Delegation of authority helps the managers to focus on more important functions of the organisation that need to be taken care of on priority.
• Delegation is the transfer of responsibility which is less important and can be performed by the subordinates.
• This also brings a sense of responsibility to the work done by the subordinates and paves the way for growth of the subordinates.
• Transfer of authority to subordinates does not mean that the subordinate is accountable for the actions, it is the superior who will be accountable for all the actions. Only tasks that can be completed effectively by the subordinates are delegated without the actual transfer of accountability.

Elements of Delegation

• Delegation consists of the following elements.
• 1. Authority
• 2. Responsibility
• 3. Accountability

Authority:

• One of the essential elements of delegation is authority which is the power to complete an assigned task.
• Without authority a subordinate is unable to execute the task perfectly. In order to complete the task as is expected by the manager, the manager has to provide authority of executing that task to the subordinate.

Responsibility:

• Responsibility is another element of delegation which is assigning the subordinate a task that needs to be executed.
• When the superior assigns any task to the subordinate it becomes the obligation of the subordinate to perform that task with responsibility.
• The feeling of responsibility arises from the superior subordinate relationship where a subordinate is obliged to perform the job as assigned by the superior.

Accountability:

• Accountability element of delegation refers to the answerability of a subordinate to his superior for the job or task that is assigned.
• Accountability flows in an upward direction, which means the subordinate is accountable to the superior.
• Although the subordinate is accountable to the superior, the actual accountability of that task and its outcome rests with the superior as accountability is not transferred to the subordinate, it is just imposed till the time the task is completed.

The correct answer is Organising

Key Points

• Organising is that function of business management that deals with identifying and grouping different activities in the organisation. 
• it also deals with bringing together the physical, financial, and human resources required and established to achieve organisational goals. 
• As per Fayol, “To organise a business is to provide it with everything useful to its functioning; raw materials, machines and tools, capital and personnel.”

Importance of organising:

• Benefits of specialization:
• Since a portion of the total work is allocated to each worker and not the entire job or assignment, the division of work into smaller units and repetitive output contributes to specialization, which therefore encourages specialization. In turn, specialization leads to productive & rapid task efficiency.
• The clarity in working relationships:
• Organizing is essential because it helps to build well-defined roles and also to explain the boundaries of each job’s authority and obligation.
• Optimum utilisation of resources:
• Proper job allocation prevents job overlap/duplication, which helps prevent confusion and minimise waste of resources and efforts.
• Adaptation to change:
• Organising indeed enables a well-designed organizational structure that is flexible and facilitates adjustment to changes in workload caused by technology, products, resources and markets-related changes in the external environment.
• Effective administration:
• Organizing provides a clear description of jobs and related tasks that helps to avoid confusion and duplication, and this clarity in working relationships allows work to be properly executed, resulting in effective management.
• Development of personnel:
• On the part of the staff, the sound organization encourages initiative and relative thinking.
• It reduces their workload when managers delegate their authority to concentrate on more important growth & innovation issues. 
• Expansion and growth:
• good organising also contributes to an enterprise’s growth & diversification by adding more jobs, departments, line managers, product lines, new geographical territories, etc.

The correct answer is Functional Structure

Key Points

• A functional organisational design is a structure used to coordinate employees, and they are grouped depending on their particular abilities and knowledge. 
• It is a vertically structured organisation with all divisions regarding jobs, from the President to the Finance department and Sales departments, to client care, to representatives doled out to one service or product are defined.
• Meaning: Functional structure refers to the division of whole organisation according to major functions to be performed by it.

Advantages of Functional Structure

• Benefits of Specialisation: 
• The whole company is divided into many departments on the basis of major activities to be performed.
• Each department is headed by an expert manager This results in more and better work being accomplished in much lesser time. Hence, the benefits of specialization become available.
• Coordination is Established
• All the persons working within a department are specialists of their respective jobs.
• It makes the coordination easier at the department level
• Managerial Efficiency 
• Managerial Efficiency is increased it helps in increasing managerial efficiency because of performing the same work once and again.
• Further, this results in increased profit
• Minimal Duplication of Efforts: In this type of organisation unnecessary duplication of efforts is eliminated
• For example, the function of finance is only carried out by the finance department.
• There is no need to establish two or more departments at makes it possible to utilise the human and other resources effectively
• Training is Facilitated: it facilities the training of personnel as the focus is only on a limited range of skills. 
• For example, the employees of finance department are given training of financial issues

The correct answer is All of the Above

Key Points

• Organising includes appointing assignments, gathering tasks into offices, designating authority, and distributing assets across the association.
• During the organising process, administrators coordinate employees, assets, procedures, and policies to work with the objectives distinguished in the plan.

Process of Organizing:
Organizing involves assigning responsibilities, grouping them into offices, delegating power, and distributing assets throughout the organization.
During the organizational operations, administrators organize employees, assets, processes, and regulations to work with the plan's goals.
The organizing process involves the following steps:

1. Identification of Objectives and Activity Division
2. Identifying and categorizing job tasks
3. Activity grouping.
4. Gathering Human as well as Material Resources
5. Establishing Power and Responsibility
6. Creating a Relationship Structure
7. Establishing the Control Span and Decentralization
8. Teamwork.
9. Offering Physical Facilities as well as an Appropriate Environment
10. Formation of a Structural Connection for Overall Control
11. Examining and Reorganisation

The correct answer is Planning does not guarantee success

Key Points

• There are so many other unknown factors to be considered.
• Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions
• Limitations of Planning

Planning Leads to Rigidity

• The plans are rigid in nature and have to be complied with throughout the organisation.
• Such rigidity of plans may be internal as well as external.
• Internal rigidity relates to plans, policies, programs, rules, and methods, etc.
• External rigidity relates to political, industrial, technological, legal and economic changes, etc.

Planning May Not Work in Dynamic Environment

• The environment in which a business survives is dynamic as it keeps on changing.
• It is difficult for an organisation to access future trends, the taste of customers, natural calamity, competitors’ policies and effects of changes in the different components of the environment.
• The organisation has to constantly adapt itself to changes because it is difficult to forecast the future changes with absolute accuracy.
• The dynamic environment may sometimes lead to failure of plans.

Planning Reduces Creativity

• Planning is mostly done by the top management and other members
• like middle and lower levels of management have to follow these plans.
• They can’t deviate or change the plans made by their seniors.
• Under such circumstances, employees become orders following machines and don’t involve creative thinking from their side.
• Such rigidity to comply with the laid plans kills the creativity of some talented persons.
• Formulation of plans can be too much costly because there is a lot of time and money is involved.
• Some costs are incidental in nature like- expenses on boardroom meetings, discussions with professional experts and preliminary investigations to find out the feasibility of the plan.
• Checking the accuracy of facts and scientific calculations may involve lots of time.
• Sometimes, cost incurred may not justify the benefits derived from the plans; it may leave a harmful effect on the enterprise.

Planning is a Time-consuming  Process

• Planning is a very lengthy process as it consumes a lot of time for collection, analysis, and interpretation of data.
• Due to such a lengthy process, sometimes decisions get delayed, opportunities are lost and there is not much time left for the implementation of plans..

Planning Does Not Guarantee Success

• The success of an enterprise is possible only when plans are properly drawn up and implemented.
• Plans become meaningless if it is not translated into action.
• Managers have a tendency to rely on previously tried and tested successful plans.
• It is not necessary that a successful plan in the past will bring success in the future also as every business organisation survives in a dynamic and uncertain environment.
• Plans must be implemented in the light of changing environment otherwise it may lead to failure of the business

The correct answer is Strategy

Key Points

• Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions.
• Types of Plan

Objective

• The base of planning is objective which represents end towards which all the organizational activities are directed.
• “Objective are the goals, aims, or purpose that organizations wish to achieve over varying periods of time” Mc Farland
• Example- to increase sales revenue by 10%
• Features
• Measurable in nature.
• It can be for the long term or short term.
• It can be single or multiple.
• It must be achievable or feasible.
• Result oriented
• Clear and specific
• All the activities are guided towards the objective.

Strategy

• Originally strategy was used in a military action plan. Now strategies are used in business plans. It is an imperative and comprehensive plan designed to achieve the organizational objective.
• “ The determination of basic long-term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary to carry out these goals” Chandler
• Example- techniques for sale promotion
• Features

1. To determine long-term objective.
2. It is designed to achieve the specific objective.
3. It is consistent and directs future goals.

Policies

• Policies are designed for all levels of management. It is made under limited guidelines for unified performance
• “A policy is verbal, written, or implied, overall guide setting up boundaries that supply general limits and direction in which managerial action takes place” Terry
• Example – no credit sale of a product X
• Features

1. Design to implement the strategy
2. Instructions and guidelines to be followed.
3. Based on objective

Procedures

• It is a sequence of steps that need to be followed by management for achieving future goals. They specify the series of activities that need to be performed to accomplish a particular goal.
• “Procedure prescribes the manner or methods through which work is to be performed.” Allen
• Example- the procedure to be followed for school admission.
• Features

1. Series of the task to carry different activities of a department.
2. Goal oriented
3. Chronological order.

Rules

• Rules are special actions need to be followed strictly by the management.
• “A rule requires that a specific and definite action with respect to a situation”
• Example- no smoking in premises
• Features

1. Specific in nature
2. Involve punishment for non -compliance.
3. Code of conduct
4. Rigid and compulsive

 Programmes

• It is the combination of Goals, Policies, Procedures, and rules to achieve the special objective.
• “Programme is a mixture of procedures, policies, rules, assigned works and elements necessary for operating the group of activities smoothly” Koontz O Donnell
• Example- development of a product
• Features

1. Enhances systematic working.
2. Designed for the definite objective.
3. Design for effective use of resources

Budget

• It is the monetary expression for the business plan that needs to be followed in future. with the help of budget, the cost is controlled.
• “A budget is a financial statement and quantitative statement prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective.” Institute of Cost and work accountants, London
• Feature

1. Monitor the cost and expenditure.
2. Based on past figures and future possibilities

The correct answer is Top level

Key Points

• They comprise of the senior-most executives of the company. They are normally regarded as the Chairman, the Chief Executive Officer (CEO), the Chief Operating Officer (COO), President and Vice-president (VP). 
• Top management is a team consisting of managers from various operational levels, managing marketing, finance, etc., 
• For instance, the Chief Finance Officer (CFO)and, Vice President (marketing) whose primary task is to combine various components and regulate the actions of different units according to the overall objectives of the company.
• These top-level managers are accountable for the progress and continuation of the establishment.
• They investigate the trading atmosphere and its connections to the survival of the company. 
• They form the overall organizational aims and approaches for their accomplishment.
• They are held responsible for all the pursuits of the company and for its influence on society. 
• The job of the top manager is difficult and stressful, necessitating long hours and dedication to the company.
• Following are the main designations assigned to individuals working at this level:

1. Managing Director
2. Board of Directors
3. Chairperson
4. Chief executive Officers
5. Chief product Officers
6. Chief technology Officers
7. Functions performed at top level of management are :
8. Making strategies and goals for the organization.
9. Taking decisions regarding activities to be performed.
10. Framing policies for the organization.
11. Responsible for the welfare and survival of the organization.

The correct answer is Motivation

Key Points

• Communication may be defined as a process concerning exchange of facts or ideas between persons holding different positions in an organisation to achieve mutual harmony.
• The communication process is dynamic in nature rather than a static phenomenon.
• Communication process as such must be considered a continuous and dynamic inter-action, both affecting and being affected by many variables.
  ​

Additional Information

​(1) Sender:

The person who intends to convey the message with the intention of passing information and ideas to others is known as sender or communicator.

 (2) Ideas:
This is the subject matter of the communication. This may be an opinion, attitude, feelings, views, orders, or suggestions.
 (3) Encoding:
Since the subject matter of communication is theoretical and intangible, its further passing requires the use of certain symbols such as words, actions or pictures, etc. Conversion of subject matter into these symbols is the process of encoding.
 (4) Communication Channel:
The person who is interested in communicating has to choose the channel for sending the required information, ideas, etc. This information is transmitted to the receiver through certain channels which may be either formal or informal.
 (5) Receiver:
The receiver is the person who receives the message or for whom the message is meant. It is the receiver who tries to understand the message in the best possible manner in achieving the desired objectives.
 (6) Decoding:
The person who receives the message or symbol from the communicator tries to convert the same in such a way so that he may extract its meaning to his complete understanding.
 (7) Feedback:
Feedback is the process of ensuring that the receiver has received the message and understood it in the same sense as the sender meant it.

The correct answer is Rogers

Key Points

• One of the more recent models of the communication process is provided by Everett Rogers and D. Lawrence Kincaid (1981). 
• The authors described what they termed a convergence model of communication that stressed the importance of information and the manner in which information links individuals together in social networks. 
• They described communication as a process in which individuals create and share information with one another in order to reach mutual understanding. 
• This cyclical process involves giving meaning to information that was exchanged between two or more individuals as they move towards one another, and to unite in a common interest or focus. 
• In explaining the matter in which the convergence process was thought to operate, they indicated that communication always begins with "and then---" to remind us that something has occurred before we begin to observe the process.

The correct answer is Informal system of communication

Key Points

• Communication that takes place without following the formal lines of communication is said to be informal communication. 
• Informal system of communication is generally referred to as the ‘grapevine’
• because it spreads throughout the organization with its branches going out in all directions in utter disregard to the levels of authority.
• grapevine communication is informal in nature taking place within the organization linking the members like they are gossipping.
• Grapevine is an informal channel of business communication. It is because it stretches throughout the organization in all directions irrespective of the authority levels.
   

Additional InformationTypes of Grapevine network:

1. Single strand:  In this network, each person communicates with the other in a sequence.
2. Gossip network: In this type of network, each person communicates with all other persons on a non-selective basis.
3. Probability network: In this network, the individual communicates randomly with other individuals.
4. Cluster Network:  In this network, the individual communicates with only those people whom he trusts. Out of these four types of networks, the Cluster network is the most popular in organizations.

The correct answer is Trait theories

Key Points

• Trait theory (also called dispositional theory) is an approach to the study of human personality.
• Trait theorists are primarily interested in the measurement of traits, which can be defined as habitual patterns of behaviour, thought, and emotion.
• Personality traits reflect people's characteristic patterns of thoughts, feelings, and behaviours.
• Trait theory in psychology rests on the idea that people differ from one another based on the strength and intensity of basic trait dimensions.
   

Additional Information

Leadership: 

• Leadership is that element of directing that involves motivation and persuasion in order to achieve the desired goals. 
• A leader is defined as a person who is able to influence other people and inspires them to follow the instructions provided.
• In other words, leadership is the act of leading, guiding, and motivating subordinates to achieve organizational goals

The correct answer is Motivation

Key Points

• Motivation means the process of making subordinates to act in a desired manner to achieve certain organizational goals.
• Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards the achievement of organizational goals.
• Leadership is that element of directing that involves motivation and persuasion in order to achieve the desired goals. 
• A leader is defined as a person who is able to influence other people and inspires them to follow the instructions provided.
• In other words, leadership is the act of leading, guiding, and motivating subordinates to achieve organizational goals.
• Leadership is a quality of an individual to guide and influence people to work in right the direction.
• A leader will have good interpersonal relationship with the followers.
• Leadership is a continuous process which helps in achievement of the objectives.
• Leadership is a process which brings about change in follower's behavior and makes it productive.

All the options are principles of management except Option 3 i.e. Unity of Managers.

Fayol's principles are listed below: 

1. Division of Work – When employees are specialized, the output can increase because they become increasingly skilled and efficient.
2. Authority – Managers must have the authority to give orders, but they must also keep in mind that with authority comes responsibility.
3. Discipline – Discipline must be upheld in organizations, but methods for doing so can vary.
4. Unity of Command – Employees should have only one direct supervisor.
5. Unity of Direction – Teams with the same objective should be working under the direction of one manager, using one plan. This will ensure that action is properly coordinated.
6. Subordination of Individual Interests to the General Interest – The interests of one employee should not be allowed to become more important than those of the group. This includes managers.
7. Remuneration – Employee satisfaction depends on fair remuneration for everyone. This includes financial and non-financial compensation.
8. Centralization – This principle refers to how close employees are to the decision-making process. It is important to aim for an appropriate balance.
9. Scalar Chain – Employees should be aware of where they stand in the organization's hierarchy or chain of command.
10. Order – The workplace facilities must be clean, tidy, and safe for employees. Everything should have its place.
11. Equity – Managers should be fair to staff at all times, both maintaining discipline as necessary and acting with kindness where appropriate.
12. Stability of Tenure of Personnel – Managers should strive to minimize employee turnover. Personnel planning should be a priority.
13. Initiative – Employees should be given the necessary level of freedom to create and carry out plans.
14. Esprit de Corps – Organizations should strive to promote team spirit and unity.

The Correct answer is Option 3

Decentralization:

1. Decentralization refers to the passing of authority to make decisions to the lowest possible level in the organizational hierarchy.

2. As there is more autonomy at the lower ranks, the span of control of top managers is small, and there are relatively few tears in the organization.

3. According to Koontz and O'Donnell, "Decentralization of authority is a fundamental phase to delegation. To the extent that authority is not delegated, it is centralized."

4. Further, Henri Fayol has said – “everything that goes to increase the importance of the subordinate’s role is decentralization.” 

Important Points

Following are the characteristics of decentralization:

• ​It is more suitable for large organizations rather than small ones.
• It produces autonomous and self-sustaining units.
• It increases the significant role of subordinates.
• The subordinates are held accountable for the work.
• It follows bottom-up philosophy and emphasizes political, cultural, and learning dynamics.
• It is the end result of a well-thought-out policy of delegating authority to the lowest managerial level.
• The decision-making method used is democratic and participative.
• High level of participation and accountability; thus low risk to not-invented-here behaviour.
• It is a process applicable to the organization as a whole.

Therefore, it is more suitable for small organizations rather than large ones, is not a characteristic of decentralization.

The correct answer is Option 1 

Key Points

• It refers to the process of instructing, guiding, counselling, motivating, and leading people in the organization to achieve its objectives.
• The heart of the management process is said to be directing.
• Planning, organising, and staffing are all meaningless if the guidance function is absent.
• The act of directing initiates action, and it is from this point that the actual labour begins. Human considerations are thought to play a role in direction.

Important Points 

The correct answer is option 1 

Key Points 

In simple terms, staffing means ‘putting people to jobs’. 
According to Theo Haimann, “The staffing function pertains to the recruitment, selection, development, training and compensation of subordinate managers.”

It can be defined as one of the most important functions of management. Staffing involves the process of filling the vacant position of the right personnel at the right job, at right time.

Important Points

Importance: 

• It is helpful in discovering and obtaining competent personnel.
• It helps in increasing performance.
• It is helpful in optimum utilization of the resources.
• It is helpful in the continuous survival and growth of the enterprise.
• It is helpful in improving job satisfaction and morale of employees.

By profession, FW Taylor was a mechanical engineer.

• Frederick Winslow Taylor (March 20, 1856 – March 21, 1915) was an American mechanical engineer. He was widely known for his methods to improve industrial efficiency.
• He was one of the first management consultants.
• Taylor was one of the intellectual leaders of the Efficiency Movement and his ideas, broadly conceived, was highly influential in the Progressive Era (the 1890s–1920s).
• In 1911, Taylor summed up his efficiency techniques in his book The Principles of Scientific Management which, in 2001, Fellows of the Academy of Management voted the most influential management book of the twentieth century.
• His pioneering work in applying engineering principles to the work done on the factory floor was instrumental in the creation and development of the branch of engineering that is now known as industrial engineering.
• Taylor made his name, and was most proud of his work, in scientific management; however, he made his fortune patenting steel-process improvements.