Lecture notes on Business studies and Accountancy

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CONTENTS S.No Topic Page No I Rationale, General Objectives, Methodology , Syllabus and 02 Design of the paper and Mark distribution for topics. II Chapter wise Chapter Summary and Practice Questions 1. Introduction to Management 08 2. Principles of Management 16 35 3. Management and Business Environment 4. Planning 44 5. Organizing 53 6. Staffing 71 7. Directing 85 104 8. Controlling 9. Financial Management 111 10. Financial Markets 125 11. Marketing Management 140 12. Consumer Protection 166 III PROJECT WORK 175 IV GUIDELINES FOR PRACTICALS, THEORY PAPER AND 187 HOW TO STUDY BUSINESS STUDIES V Practice Questions Chapter – 1 –Pg – 191 Chapter – 5–Pg -208 Chapter – 9–Pg -228 Chapter – 2–Pg -197 Chapter – 6–Pg - 214 Chapter – 10–Pg - 236 Chapter – 3–Pg -202 Chapter – 7–Pg - 221 Chapter – 11–Pg - 241 Chapter – 4–Pg -204 Chapter – 8–Pg - 225 Chapter - 12–Pg - 248 Class XII/ Business Studies: Study Material/ 1 RATIONALE, GENERAL LEARNING OBJECTIVES, METHODOLOGY AND SYLLABUS FOR THE ACADEMIC YEAR 2015-16: BUSINESS STUDIES The courses in Business Studies and Accountancy are introduced at + 2 stage of Senior Secondary Education as formal commerce education is provided after first ten years of schooling. Therefore, it becomes necessary that instructions in these subjects are given in such a manner that students have a good understanding of the principles and practices bearing in business (trade and industry) as well as their relationship with the society. Business is a dynamic process that brings together technology, natural resources and human initiative in a constantly changing global environment. To understand the framework in which a business operates, a detailed study of the organisation and management of business processes and its interaction with the environment is required. Globalization has changed the way firms transact their business. Information Technology is becoming a part of business operations in more and more organisations. Computerised systems are fast replacing other systems. E-business and other related concepts are picking up fast which need to be emphasized in the curriculum. The course in Business Studies will prepare students to analyse, manage, evaluate and respond to changes which affect business. It provides a way of looking at and interacting with the business environment. It recognizes the fact that business influences and is influenced by social, political, legal and economic forces. It allows students to appreciate that business is an integral component of society and develops an understanding of many social and ethical issues. Therefore, to acquire basic knowledge of the business world, a course in Business Studies would be useful. It also informs students of a range of study and work options and bridges the gap between school and work. General Learning Objectives of the Subject:  To develop in students an understanding of the processes of business and its environment;  To acquaint students with the dynamic nature and inter-dependent aspects of business;  To develop an interest in the theory and practice of business, trade and industry;  To familiarize students with theoretical foundations of organizing, managing and handling operations of a business firm;  To help students appreciate the economic and social significance of business activity and the social cost and benefits arising there from;  To acquaint students with the practice of managing the operations and resources of business;  To prepare students to function more effectively and responsibly as consumers, employers, employees and citizens;  To help students in making the transition from school to the world of work including self- employment;  To develop in students a business attitude and skills to be precise and articulate. Class XII/ Business Studies: Study Material/ 2 Methodology  Topics will be discussed in class.  A handout to cover topics not given adequately in the text will be given wherever required.  Flow charts to facilitate quick recap will be used for revision.  Assignments to cover previous year Board questions will be given for writing practice.  Extra question covering HOTS questions for the chapter will be discussed in class.  A monthly class test will be given to assess learning of students. Syllabus for Annual Paper 3 Hours 80 Marks DESIGN OF 80 MARK QUESTION PAPER Total Marks Marks per Question 1 3 4 5 6 Number Of Questions 8 5 6 3 3 Total Marks 80 08 15 24 15 18 marks Part A Principles and Functions of Management Marks: 50 Periods 1.Introduction to Management 16 14 2. Principles of Management 14 3. Business Environment 12 4. Planning 14 14 5. Organizing 18 6. Staffing 20 16 7. Directing 18 8. Controlling 14 Marks:50 120 Part B: Business Finance and Marketing Marks: Periods 9. Financial Management 15 22 10. Financial Markets 20 11. Marketing Management 15 32 12. Consumer Protection 16 Part C: Project 20 30 Marks:50 Periods:120 Class XII/ Business Studies: Study Material/ 3 Part A: Principles & Functions of Management: Unit I: Nature and Significance of Management  Management- concept, objectives and importance.  Management as Science, Art and Profession.  Levels of Management  Management functions- planning, organising, staffing, directing and controlling.  Coordination- concept and importance.  Concept includes meaning and characteristics/features.  Objectives - organizational, social and personal.  Management as art- Features of art and the existence of these features in management.  Management as science- Features of science and the existence of these features in management. Management as profession- features of profession and the existence of these features in management.  Levels of management-Functions of management at top, middle and supervisory levels with names of job positions.  Discuss the concept and characteristics of coordination.Explain the importance of coordination. Unit 2: Principles of Management  Principles of Management- concept and significance.  Fayol's principles of management.  Taylor's Scientific management- principles and techniques.  Meaning of principles of management. Nature of principles of management by stating their basic characteristics.  Significance or need of principles of management.  Principles of Scientific. Management given by Taylor- Science, not rule of thumb; Harmony, not discord; Cooperation, not individualism; Development of each and every person to his or her greatest efficiency and prosperity.  Taylor's techniques of Scientific management: Functional Foremanship; Standardisation and Simplification; Work study: Method study, Motion study, Time study, Fatigue study. Differential piece wage system.  Basis of his thought  Mental Revolution. Unit 3: Management and Business Environment  Business Environment- concept and importance.  Dimensions of Business Environment- Economic, Social, Technological, Political and Legal.  Impact of Government policy changes on business with special reference to liberalization, privatization and globalization in India.  Dimensions of Business Environment- meaning and components only. Appreciate the managerial response to changes Unit 4: Planning  Concept, importance and limitations.  Planning process  Single use and standing plans. Objectives, Strategy, Policy, Procedure, Method, Rule, Budget and Programme.  Limitations- internal and external.  Meaning of single use and standing plans. Class XII/ Business Studies: Study Material/ 4 Unit 5: Organising  Concept and importance.  Organising Process.  Structure of organisation- functional and divisional- concept. Formal and informal organisationconcept.  Delegation: concept, elements and importance.  Decentralization: concept and importance.  Structure of organisation- functional and divisional-Explain the advantages, disadvantages and suitability of functional and divisional structure.  Formal and informal – concept, advantages, disadvantages of formal and informal organization.  Difference between delegation and decentralization. Unit 6: Staffing  Concept and importance of staffing.  Staffing as a part of Human Resource Management- concept.  Staffing process  Recruitment- sources  Selection -process  Training and Development- Concept and importance. Methods of training- on the job and off the job- Induction training, vestibule training, apprenticeship training and internship training.  Recruitment Sources- Internal-promotion, transfer; External -Direct recruitment, Casual callers, Advertisements-(newspapers, journals, television), Employment Exchange, Placement Agencies and Management Consultants, Campus Recruitment, Web Publishing, Labour Contractors, Recommendations of employees .  Methods of on-the-job training and off-the job training-meaning. induction training, vestibule training, apprenticeship training and internship training. Unit 7: Directing  Concept and importance  Elements of Directing - Supervision- concept, functions of a supervisor. - Motivation- concept, Maslow's hierarchy of needs, Financial and non-financial incentives. - Leadership- concept, styles- authoritative, democratic and laissez faire. - Communication-concept, formal and informal communication; barriers to effective communication, how to overcome the barriers. o Motivation- Financial incentives-meaning, types- Pay and Allowances, Productivity linked wage incentive ,bonus, Profit sharing, co-partnership/stock option, Retirement benefits, Perquisites; Non-financial incentives- meaning, types-Status, Career advancement opportunity, Job enrichment, Job security, Employee recognition programmes, Job enrichment, Employee participation, Employee empowerment.  Formal and informal communication- concept;  Barriers to effective communication- semantic barriers ( badly expressed message, symbols with different meanings, faulty translations, unclarified assumptions, technical jargon), psychological barriers (premature evaluation, lack of attention, distrust), organizational barriers (organisational policy, rules and regulations, complexity in organisational structure, organizational facilities), personal barriers ( fear of challenge to authority, lack of confidence of superior on his subordinates,unwillingness to communicate, lack of proper incentives).  How to overcome barriers: Communicate according to the needs of the receiver, clarify the ideas before Class XII/ Business Studies: Study Material/ 5 communication, be aware of the language, tone and content of the message, communicate for present as well for the future, ensure proper feedback and be a good listener. Unit 8: Controlling  Concept, nature and importance  Relationship between planning and controlling  Steps in the process of control Part B: Business Finance and Marketing: Unit 9: Financial Management  Concept and objectives of financial management.  Financial decisions: investment, financing and dividend and factors affecting.  Financial planning – concept, objectives and importance.  Capital Structure – Concept and factors determining the choice of an appropriate capital structure.  Fixed and Working Capital - Concept and factors affecting their requirements.  Factors affecting capital budgeting decisions- cash flows of the project, the rate of return, investment criteria involved.  Factors affecting financing decision-cash flow position of the company, cost, risk, floatation costs, fixed operating costs, control considerations, state of the capital market, Return on investment, tax rate, flexibility, regulatory framework .  Factors affecting dividend decision- amount of earnings, stability of earnings, stability of dividends, growth opportunities, cash flow position, shareholder's preference, taxation policy, stock market reaction, access to capital market, legal constraints, contractual constraints.  Factors affecting fixed capital requirement- Nature of business, scale of operations, choice of technique, technology upgradation, growth prospects, diversification, financing alternatives, level of collaboration.  Working capital- concept of operating cycle, factors affecting working capital requirement- Nature of business, scale of operations, business cycle, seasonal factors, production cycle, credit allowed, credit availed, availability of raw material. Unit 10: Financial Markets  Financial Markets: Concept and types.  Money market and its instruments.  Capital market and its types (primary and secondary)  Stock Exchange- Functions and trading procedure.  Securities and Exchange Board of India (SEBI)- objectives and functions. Meaning of depository services and Demat account as used in the trading procedure of securities.  Types of financial market- money market and capital market- meaning.  Money market instruments- Treasury bill, commercial paper, call money, certificate of deposit, commercial bill.  Capital market -Types- primary and secondary market- concept.  Differences between: Capital and money markets; Primary and Secondary markets Class XII/ Business Studies: Study Material/ 6 Unit 11: Marketing Management  Selling, Marketing – Concept, features of Marketing, difference between marketing and selling.  Marketing management- Concept.  Marketing Functions.  Marketing management philosophies.  Marketing Mix - Concept & elements o Product-Concept, branding, labeling and packaging. o Price- Concept , Factors determining price. o Physical Distribution- concept, components of Physical distribution, channels of distribution: types, facors determimimg choice of channels. o Promotion- Concept and elements; advertising-concept, role, objections to advertising, personal selling-concept and qualities of a good salesman, sales promotion- concept and techniques, public relations- concept and role.  Marketing mix elements- Product, price, place, promotion  Branding, labeling, packaging- concept and functions .  Choice of channels of distribution- factors affecting choice of channel- product related factors, company characteristics, competitive factors, market factors, environmental factors Unit 12: Consumer Protection  Concept and importance of consumer protection.  Consumer Protection Act 1986 o Meaning of consumer and consumer protection o Rights and responsibilities of consumers o Who can file a complaint and against whom? o Redressal machinery. o Remedies available.  Consumer awareness-Role of consumer organizations and NGOs Class XII/ Business Studies: Study Material/ 7 Introduction To Management Definition  According to Koontz and O‟Donnell,” Management is creating an internal environment of an enterprise where individuals working together in groups perform efficiently and effectively towards achievement of group goals.”  Management, has therefore, been defined as a process of getting things done with the aim of achieving goals effectively and efficiently. There are certain terms which require elaboration. These are:  Process: means the primary functions or activities that management performs to get things done. These functions are planning, organising, staffing, directing and controlling  Effectively: Being effective or doing work effectively basically means finishing the given task. Effectiveness in management is concerned with doing the right task, completing activities and achieving goals. In other words, it is concerned with the end result.  Efficiently: means doing the task correctly and with minimum cost. There is a kind of cost- benefit analysis involved and the relationship between inputs and outputs.  Suppose, a company‘s target production is 5000 units in a year and the budgeted expenses was Rs 20,00,000. If the firm is able to achieve the target of 5,000 units but spends Rs 27,00,000 then the firm is effective but not efficient. On the other hand, if the firm is able to achieve the target of 5,000 units and spends Rs 20,00,000 to do but takes on year and 3 months, then the firm is efficient but not effective. Features/Characteristics of Management 1. Goal oriented process: goals should be simple and clearly stated. Management unites the efforts of different individuals in the organisation towards achieving these goals 2. All pervasive: all types of organizations, all levels and all departments. 3. Multi dimensional: complex activity with 3 dimensions  Management of work: Management translates work in terms of goals to be achieved and assigns the means to achieve it. This is done in terms of problems to be solved, decisions to be made, plans to be established, budgets to be prepared, responsibilities to be assigned and authority to be delegated.  Management of people: Has two dimensions - employees as individuals with diverse needs and behavior + individuals as a group of people. Management make people work towards achieving the organisation‘s goals, by making their strengths effective and their weaknesses irrelevant.  Management of operations: every organization has some basic product or service that requires a production process →flow of input material + technology for transforming this input into the desired output for consumption. This is interlinked with both the management of work and the management of people. 4. Continuous process: mgt. is an ongoing series of continuous, composite, but separate functions (planning, organising, directing, staffing and controlling) simultaneously performed . Class XII/ Business Studies: Study Material/ 8 5. Group activity: a firm is a collection of individuals with different needs, different purpose for joining the organization but they work towards fulfilling the common organizational goal. Team work and coordination of individual effort in a common direction enables all its members to grow and develop as needs and opportunities change. 6. Dynamic function: Management adapts itself to the changing environment. External environment consists of various social, economic and political factors and, an organisation must change itself and its goals according to the needs of the environment. 7. Intangible force: cannot be seen but its presence can be felt → targets are met according to plans, employees are happy and satisfied, and there is orderliness instead of chaos. Objectives of Management Objectives are 1 Ends towards which activities of an organization are directed 2 Standards against which performance is assessed. Organisational Obj Social Objectives Personal/ Individual Obj Setting and achieving It involves the creation of benefit for society. Objectives seeking to reconcile objectives for the personal goals of employees organisation. with organisational objectives for harmony in the organisation. 1. Survival(earn 1. Giving employment opportunities to 1. Fair remuneration enough revenue disadvantaged sections of society. 2. Good working conditions to cover costs) 2. Providing basic amenities like schools and 3. Opportunities for training 2. Profit(covers crèches to for employee‘s children. and development and costs+risks) 3. Providing good quality goods at fair prices personal growth 3. Growth(in the 4. Using environmental friendly methods of 4. Participation in long run in terms production management of ↑in sales, no. of 5. Avoidance of unfair trade practices 5. Recognition and employees, satisfaction. variety of 6. Conducting business in a lawful manner products, capital 7. Paying taxes promptly investment etc) 4. Optimum utilization of resources Class XII/ Business Studies: Study Material/ 9 Nature of Management I Management as an Art II Management as a Science III Management as a Profession Art implies personal application Science can be defined as a Profession can be defined as an of knowledge with ingenuity, systematic body of knowledge occupation backed by specialized skill and creativity to achieve pertaining to a specific field of knowledge and training. desired results study. It contains principles and facts which explain a phenomenon Features of Art: Features of a Profession Features of science: 1. Existence of theoretical 1. Systematic body of knowledge: 1. Body of knowledge: knowledge 2. Restricted entry(thro (that establish cause and effect 2. Personalized Application: examination or education) relationship.) (use of basic knowledge 2. Principles based on 3. Professional association varies from individual to experiments: (under controlled 4. Ethical code of conduct (that individual.) guides the behavior of its conditions) 3. Based on practice and 3. Principles have universal members) Creativity:(involves creative 5. Service motive (by rendering validity practice of existing dedicated and committed 4. Principles establish cause and theoretical knowledge) effect relationship. services)  There is a lot of literature  There is a lot of literature  There is a lot of literature available w.r.t various areas available w.r.t various areas of available w.r.t various areas of of mgt such as mkt, finance mgt such as mkt, finance etc . mgt such as mkt, finance etc . etc .  Principles of management are  No restriction on appointment  Managers apply these based on repeated experiments of managers. But professional management theories in and observations. But since knowledge and training is their unique manner management deals with human desirable depending on their practice, behavior, outcomes may not  There are associations such as imagination, initiative and always be accurately AIMA and they lay down a innovation. predicted/replicated. code of conduct but  Manager applies this  Principles ≠ exact so not membership is not compulsory. acquired knowledge in a universal. They have to be  Stated goal of oganisations and personalized and skillful modified according to management is profit manner in the light of the situations. maximization but effective and realities of a given situation efficient management also serve giving rise to different styles society by providing quality gds of management. at reasonable prices. Conclusion: Conclusion: Conclusion: All the features of art are present Management satisfies some of the Management satisfies some of the in management and are broadly features of science but not all. features of profession but not all. fulfilled, so we can say that  Inexact/social/soft/behavioral  So, management is not regarded management is an art. science. as a full fledged profession like medicine/law etc  It is the art of getting work  Concerned with human done by others. behavior which can‘t be  but management is fast moving  It is, however not a Fine Art studied under controlled in that direction experiments and can‘t be like painting or music predicted with absolute accuracy. Class XII/ Business Studies: Study Material/ 10 Importance of Management 1. Management helps in achieving group goals: The task of a manager is to give a common direction to the individual effort in achieving the overall goal of the organisation. 2. Management increases efficiency: The aim of a manager is to reduce costs and increase productivity through better planning, organising, directing, staffing and controlling the activities of the organisation. 3. Management creates a dynamic organisation: Environment is constantly changing. Individuals resist change as it often means moving from a familiar, secure environment into a newer and more challenging one. Management helps people adapt to these changes →organisation →maintain its competitive edge. 4. Management helps in achieving personal objectives: So that individual members are able to achieve personal goals while contributing to the overall organisational objective. Motivation and leadership → individuals to develop team spirit, cooperation and commitment to group success. 5. Management helps in the development of society: It helps to provide good quality products and services, creates employment opportunities, adopts new technology for the greater good of the people and leads the path towards growth and development. o Levels of Management - Top, Middle, Supervisory  The Chain of superiors and subordinates from the highest level to the lowest is known as chain of command or management hierarchy or scalar chain.  It is an authority-responsibility relationship that binds individuals as superiors and subordinates and gives rise to different levels in an organization.  Generally this chain is divided into three categories. These are called „levels of management‟ Top Level Middle Level Lower Level Functions: Functions: Functions: 1. Integrate diverse elements and 1. Link between top and lower 1. Interact with actual coordinate activities of different levels of management. workforce and develop departments in one direction. 2. Implementing and healthy relations with the 2. Responsible for welfare and controlling plans and workers survival of the organization. strategies formulated by top 2. Pass on instructions of 3. Determining overall objectives management. middle level management to and strategies for their 3. Interpretation of the policies the workers. achievements. of the top level 3. Maintain standards of 4. Responsible for business management. quality, minimize wastage activities and its impact on 4. Ensure that their department and ensure steady flow of society. has necessary personnel. output. 5. Organizing activities to be 5. Assign duties and 4. Maintain safety standards. performed by persons working responsibilities to the 5. Motivate the employees. at the middle level personnel in their 6. Represent 6. Assembling all resources. departments. problems/grievances of 7. Liaison with the outside world 6. Motivating persons to workers before middle level achieve desired objectives. management. 7. Co-operate with other 7. Help middle level departments. management in recruiting, 8. Responsible for first line selecting and appointing the Class XII/ Business Studies: Study Material/ 11 managers. workers. Top Level Middle Level Lower Level Designations: Designations: Designations: Chief Executive Officer, Chief Divisional heads, Operations Supervisors, Foremen, Clerk Operating Officer, president, Vice- manager, Executive officers, (Also called Supervisory Level/ President/Managers with highest Plant Superintendent Etc. Operational Level Management) authority from different functional levels. o Management Functions or Steps in the Process of Management Management is described as the process of planning, organising, directing and controlling the efforts of organisational members and of using organisational resources to achieve specific goals.  Planning, Organizing, Staffing, Directing & Controlling 1. Planning  It refers to ―deciding in advance what to do, how to do, when to do and who is going to do it. It bridges the gap between where we are and where we want to go.‖  Cannot prevent problems but can predict it and prepare contingency plans to deal with them. o It involves s the following decisions: 1 Establishing objectives 3 Formulating policies, procedures 2 Making forecasts 4 Drawing programmes, schedules etc. 2. Organising  Organizing the activities and resources and establish the organization structure to execute the plan.  It involves assigning duties, grouping tasks, establishing authority and allocating resources required to carry out a specific plan.  Proper organisational techniques help in the accomplishment of work and promote both the efficiency of operations and the effectiveness of results.  Organizing process involves the following steps: 1 Identifying the activities necessary to achieve the objectives 2 Grouping similar activities into manageable units or departments 3 Assigning duties and responsibilities 4 Delegating necessary authority to carry on the assigned task 5 Defining working relationships among individuals 3. Staffing 1. Staffing refers to the manning of the organization and aims at putting the right person at the right job. 2. It also refers to the human resources function of management and involves the foll: activities: Class XII/ Business Studies: Study Material/ 12 1 Manpower planning. i.e. determining the number and quality of employees required in the organization 2 Recruitment ,Selection and Placement of right persons 3 Training and development 4 Appraisal, transfer and promotion 5 Employee remuneration 4. Directing  Once the employees are appointed, there is need to instruct them and get the work done.  Directing refers to giving directions or instructions to employees. Managers act as friends, counselors, leaders to guide the employees.  So the important elements of Directing are: 1 Supervision-overseeing employees at work 2 Motivation-giving them incentives 3 Leadership-ability to influence employees 4 Communication-to create mutual understanding and team work 5. Controlling  Controlling involves monitoring organizational performance and comparing it with the organizational objectives.  It involves finding out the deviations if any and finding out corrective measures to come on the path of the plan.  It involves the following steps: 1 Setting standards for desired performance 2 Measuring actual performance 3 Comparing actual performance with the set standards 4 Finding out deviations 5 Analyzing deviations and taking corrective actions. Co-ordination  According to Mooney,‖ Co-ordination may be defined as the orderly arrangement of group effort to provide unity of action in pursuit of a common purpose.”  Force that binds all other forces of management.  Runs thro all activities such as production, sales finance etc to ensure continuity in the working of the firm.  Implicit and inherent in all management functions. Characteristics of Coordination: 1. Coordination integrates group efforts: unifies unrelated or diverse interests into purposeful work activity +gives a common focus to group effort +ensure that performance is as it was scheduled. 2. Coordination ensures unity of action: binding force between departments and ensures that all action is aimed at achieving the goals of the organisation. Class XII/ Business Studies: Study Material/ 13 3. Coordination is a continuous process: begins at the planning stage and continues till controlling. 4. Coordination is an all pervasive function: all levels , all departments. 5. Coordination is the responsibility of all managers:  Top level managers →coordinate with their subordinates to ensure that the overall policies for the organisation are duly carried out.  Middle level management →with both the top level and first line managers.  Operational level management →activities of its workers to ensure that work proceeds according to plans. 6. Coordination is a deliberate function: coordination must be a conscious and deliberate effort. Cooperation in the absence of coordination may lead to wasted effort and coordination without cooperation may lead to dissatisfaction among employees. Coordination, therefore, is not a separate function of management, but its very essence. Need For Coordination: Advantages/Need of Co-ordination (These are the situations when a firm will require co-ordination) 1) Growth in size:  The need of co-ordination increases with the size of the organization, because in large organizations there are more number of people working, each individual having his own needs, objectives, beliefs and style of working. Co-ordination therefore brings harmony. 2) Functional differentiation:  Generally functions of an organization are divided into different departments, sections or divisions and each department has its own objectives, policies, style of working and may try to work in isolation and independently.  So, there is more need to relate and bring together activities of different sections as they are a part of one organization only as all depts.  And individuals are interdependent and depend on each other to perform their activities. 3) Specialization:  Specialists tend to focus on their area of specialization and may tend to overlook the overall picture of the organization. Therefore co-ordination is required between efforts of various specialists as also between specialists and others in the organization.  This will help reconcile the differences in approach, interest or opinions of experts.  Managing inter- dependencies: o In the organization the performance of each employee affects the performance of others and working of one department affects the working of others. Therefore it is necessary to co-ordinate them so that the organization can achieve its goals. IMPORTANCE OF COORDINATION • Ensures unity of action • Erases interdepartmental conflicts • Promotes harmonious implementation of plans • Helps in maintaining a high degree of morale amongst employees Class XII/ Business Studies: Study Material/ 14 Nature of co-ordination Co-ordination is required at all the levels: 1. Co-ordination integrates group  Needed in all departments as well as at all levels of efforts: management. 2. Co-ordination ensures unity of  Not the responsibility of the top management only. But of action: managers at all levels. 3. Co-ordination is a continuous  The top management process: o efforts of all departments and individuals are 4. Co-ordination is an all pervasive there in one direction function: o Co-ordination between organizational goals and 5. Co-ordination is the responsibility the goals of their respective departments and of all mangers: units. 6. Co-ordination is a deliberate  The middle level management function: o Co-ordinate their departmental plans with the 7. Essence of management: plans of the other departments.  Lower level o Integrate the activities of workers towards achievement of organizational objectives. Co-Ordination As The Essence Of Management Co-ordination plays a vital role in all the functions of management. It is not a separate function rather it is the essence of management .i.e. it is required in all the functions of management. Co-ordination and Planning Co-ordination and Organizing In ‗planning‘ co-ordination is required between In ‗Organizing‘ co-ordination is required between 1 Master plan of the enterprise and the plans of 1 Authority, responsibility and Accountability different departments or divisions of an individual 2 Objectives and the available resources 2 Different resources of an organization and 3 Different functional managers activities to be performed Co-ordination and Staffing Co-ordination and Directing In ‗Staffing‘ co-ordination is required between: In ‗Directing‘ co-ordination is required between: 1 Skills and abilities of employees and jobs 1 Between superiors and subordinates assigned to them 2 Among orders, instructions, guidelines and 2 Performance and rewards/compensation suggestions 3 Between technique of production and 3 Between situations and leadership styles, training communication media etc. Co-ordination and Controlling In ‗Controlling‘ co-ordination is required between: 1 Standards fixed and actual performance 2 Type of deviation and corrective measures 3 Correction of deviation and achievement of objectives. Class XII/ Business Studies: Study Material/ 15 Principles of Management Principle A principle is a fundamental statement of truth that provides guidance to thought and action. Principles of Management Principles of management are broad and general guidelines for managerial decision making and behavior (i.e. they guide the practice of management). Management principles Vs. Pure science principles Basis Management Principles Pure Science Principles 1. Nature Flexible Rigid 2. Applicability Applied with creativity as they Applied in absolute/static manner influence human behaviour 3.Change Have to keep pace with the changing Do not change with time. business environment Principles Techniques Values They are procedures or methods  They are guidelines to take  They are rules of behaviour decisions or actions while which involve a series of steps to be which are acceptable or taken to accomplish desired goals. practicing techniques. desirable.  They are formed after a lot of  They are ethical in nature and research in work situations. have moral connotations.  They are formed through common practice. Nature of Management Principles: Significance of Management Principles: 1. Universal Applicability: 1. Providing Useful Insights To Managers: 2. General Guidelines: 2. Optimum Utilization Of Resources: 3. Formed By Practice And Experimentation: 3. Scientific Decisions: 4. Flexible: 4. Meeting Changing Environmental Requirements: 5. Mainly Behavioral: 5. Fulfilling Social Responsibilities: 6. Cause And Effect Relationship: 6. Management Training, Education And Research 7. Contingent/Relative: 7. Effective Management Nature of Management Principles:  Universal Applicability: Apply to all types of business organizations but extent of their applicability varies with nature of firm, scale of operations etc.  General Guidelines: Do not provide readymade solutions to all managerial operations but as a guideline to managerial action as business principles are complex, dynamic and are a result of many factors.. Class XII/ Business Studies: Study Material/ 16  Formed By Practice And Experimentation: By experimentation and the collective wisdom and experience of managers.  Flexible: give enough discretion to managers + Can be modified under different conditions by managers, depending upon the requirement of the company and type of employees.  Mainly Behavioral: Aimed at influencing human behavior + Enable a better understanding of the relationship between human and material relationships in achieving organizational goals + help to improve working relationships  Cause and Effect Relationship: Tell us that if a particular principle is applied in a situation, what might be the effect.  Contingent/Relative: The application of management principles is contingent or dependent upon situations prevailing in the organization at different points of time. Significance of Management Principles:  Providing Useful Insights To Managers: Improve knwledge, ability and understanding of managers under managerial situations + Enables managers to learn from their mistakes and conserve time  Optimum Utilization Of Resources: Firm has limited resources and have to be used in a manner that they give maximum benefit with minimum cost + Principles of management provide guidance for optimum utilization of resources.  Scientific Decisions: Advocates taking thoughtful decisions that are based on facts and justifiable in terms of intended purpose. They must be objective decisions, free from bias + Emphasize on logic rather than blind faith and help managers to settle problems systematically.  Meeting Changing Environmental Requirements: Modern principles act as flexible guidelines that can be modified to meet the needs of changing environment in which the business operates.  Fulfilling Social Responsibilities: Direct businessmen to discharge their social responsibilities towards various groups.  Management Training, Education And Research: Management principles are the base for further research and development for already existing management practices.  (refer to examples given in pages 35-40 as you may be given these examples ans asked to identify the feature/importance) F. W.TAYLOR (1856-1915) Major contributions of Taylor  Introduced scientific methods in management, as opposed to the rule of thumb.  Emphasised on scientifically analysis of work and proposed to find, ‗one best way‘ to do work, by conducting time, motion and method studies.  Sought to increase the efficiency of workers by eliminating wastage of all types.  Emphasised on the need to have mental revolution – a complete change in the outlook for both workers and management. Class XII/ Business Studies: Study Material/ 17  Wrote a book on ‗shop floor‟ and an article, on‘ principles of Scientific Management‟, based on his findings and experiments. Taylor coined the term ‗Scientific Management.‘and gave a new thinking to management. For his contributions ,he came to be known as „The Father of Scientific Management‟. Scientific Management According to Taylor, ‘Scientific Management is knowing exactly what you want your men to do and seeing that they do it in the best and the cheapest way‟. It includes finding the most efficient methods of production, scientific selection and training of workers, proper allotment of duties and work and achieving cooperation between workers and management. Principles of Scientific Management Techniques of Scientific Management a. Science and not rule of thumb 1. Functional foremanship b. Harmony and not discord 2. Standardization and simplification of work c. Co-operation and not individualism 3. Method study d. Development of each and every person to 4. Motion study his/her greatest efficiency and prosperity 5. Time study 6. Fatigue study 7. Differential piece rate system Principles of Scientific Management:  Science and not rule of thumb: o Each job must be performed on the basis of scientific enquiry and not on the basis of intuition or hit and trial method. o One best method of doing a job must be developed to maximize efficiency.  Harmony and not discord: o Between management and workers. o Management should be willing to share gains of the firm with the workers and workers should work hard and accept change for the good of the firm and not go on strikes. o There should be ‗Mental Revolution‘ = both should transform their way of thinking – interest of the two are the same and long term prosperity of management cannot be at the cost of management and vice versa.(eg –Japanese culture) (Similar to Principle of Espirit De Corps given by Fayol)  Co-operation and not individualism: o Extension of harmony and not discord. o Both should develop understanding and secure mutual co-operation. o Management should give importance to suggestions made by the workers and workers must desist from going on strikes and making unreasonable demands. (Similar to Principle of Espirit De Corps given by Fayol)  Development of each and every person to his/her greatest efficiency and prosperity: o Industrial efficiency depends upon efficiency and competency of workers. o Efficiency should be built in right from the process of employee selection, assignment of work on the basis of their capabilities, giving training when needed. Class XII/ Business Studies: Study Material/ 18 Techniques of Scientific Management: 1. Functional Foremanship Factory Manager Planning Incharge Production Incharge Route Clerk Time & Cost Instruction Disciplinarian Inspector Gang Speed Repair Clerk Card Clerk Boss Boss Boss Workman Taylor suggested division of work of the factory manager into two sub- departments: planning department and production department.  He realized that, a single foreman/supervisor cannot be expected to be an expert in all aspects of work and therefore he suggested appointment of eight supervisors to give instructions to a single worker.  Out of them, four would work under the planning incharge and would be responsible for planning and the other four would work under the production incharge and would be responsible for execution. Specialists under the Planning In charge: 1. Route Clerk: would specify route/sequence production operations 2. Instruction Card Clerk: would draft instructions for workers, in handling their jobs. 3. Time and Cost Clerk: would fix  Dates for starting and completing work as per schedule.  Cost sheet to determine expenses for material, labour and other overheads. 4. Disciplinarian: would ensure systematic performance of jobs by enforcing rules and regulations. Specialists under the Production In charge: 1. Gang Boss: would do all preliminary work—keeps materials, machines, tools etc. ready for workers. 2. Speed Boss: would ensure timely and accurate completion of jobs. 3. Inspector: would check quality of work done by workers. 4. .Repair Boss: would ensure that machines and tools are kept in proper working conditions and are maintained and repaired properly. Class XII/ Business Studies: Study Material/ 19 Standardization and Simplification of Work  Methods of production should be analyzed scientifically and the best method should be developed by conducting various work studies (time, method, motion and fatigue).Then it should used as the standard, throughout the organization.  Standardization refers to the process of setting standards for every business activity. It can be standardization of process, raw materials, time, product, machinery, methods, working conditions. It is done with a view to: i. To reduce a given line or product to fixed types, sizes and characteristics. ii. To establish interchange ability of manufactured parts and products. iii. To establish standards of excellence and quality in materials. iv. To establish standards of performance of men and machines.  Therefore standardization ensures: i. The product is according to a predetermined type, form, design, size, weight, quality etc. ii. Manufacture of identical parts and components which are interchangeable with one another. iii. Standards are established as regards quality of manufactured goods. iv. Standards are established for workers and machines at all levels.  Simplification aims to eliminate unnecessary diversity in products as more varieties would mean more inventory, more machinery, more labour cost etc.  Simplification would lead to savings in cost of labour, machines and tools. 3. Work Study  Work study means a comprehensive and objective assessment and analysis of all the operations involved in performing the various jobs in the organization.  This is done with a purpose of producing maximum possible output of the best quality at minimum costs.  It has 4 components: time study, motion study, method study and fatigue study. a. Time Study  It is a technique used to measure the time that may be taken by an average worker of reasonable skill and efficiency to perform a job well defined job.  To conduct time study, the job is broken into a number of elements and the time taken to complete each element is noted with the help of a stopwatch. After adding necessary time for rest periods, the standard time of each element of the job and the standard time for performing the complete job is determined. Many techniques such as process charts, operation research etc are used for this purpose.  Purpose of time study id that it helps to determine: i. Standard time required to do a job and number of workers to be employed. ii. A standard task/fair day‘s work for the workman iii. To determine the number of employees to be employed iv. To determine labour costs and to frame suitable incentive schemes. Class XII/ Business Studies: Study Material/ 20

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