Features of Management
1. Continuous and never ending process: Management is a Process. It includes four main functions,
viz., Planning, Organizing, Directing and Controlling. The manager has to plan and organize all
the activities. He had to give proper Directions to his subordinates. He also has to Control all the
activities. The manager has to perform these functions continuously. Therefore, management is
a continuous and never ending process.
2. Getting things done through people: The managers do not do the work themselves. They get the
work done through the workers. The workers should not be treated like slaves. They should not
be tricked, threatened or forced to do the work. A favorable work environment should b e
created and maintained.
3. Result oriented science and art: Management is result oriented because it gives a lot of
importance to "Results". Examples of Results like, increase in market share, increase in profits,
etc. Management always wants to get the best results at all times.
4. Multidisciplinary in nature: Management has to get the work done through people. It has to
manage people. This is a very difficult job because different people have different emotions,
feelings, aspirations, etc. Similarly, the same person may have different emotions at different
times. So, management is a very complex job. Therefore, management uses knowledge from
many different subjects such as Economics, Information Technology, Psychology, Sociology, etc.
Therefore, it is multidisciplinary in nature.
5. A group and not an individual activity: Management is not an individual activity. It is a group
activity. It uses group (employees) efforts to achieve group (owners) objectives. It tries to satisfy
the needs and wants of a group (consumers). Nowadays, importance is given to the team
(group) and not to individuals.
Importance of Management
1. Management helps in achieving group goals: Management is required not for itself but for
achieving the goals of the organisation. 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: All organisations have to function in an
environment which is constantly changing. It is generally seen that individuals in an organisation
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 so that the
organisation is able to maintain its competitive edge.
4. Management helps in achieving personal objectives: A manager motivates and leads his team in
such a manner that individual members are able to achieve personal goals while contributing to
the overall organisational objective. Through motivation and leadership the management helps
individuals to develop team spirit, cooperation and commitment to group success.
5. Management helps in the development of society: An organization has multiple objectives to
serve the purpose of the different groups that constitute it. In the process of fulfilling all the se,
management helps in the development of the organisation and through that it helps in the
development of society. It helps to provide good quality products and services, creates
employment opportunities, adopts new techno-logy for the greater good of the people and
leads the path towards growth and development.
Management as a Profession
1.
2.
3.
4.
All over the world there is marked growth in management as a discipline. It is based on a
systematic body of knowledge comprising well-defined principles based on a variety of business
situations. This knowledge can be acquired at different colleges and professional institutes and
through a number of books and journals. The subject of management is taught at different
institutions.
There is no restriction on anyone being designated or appointed as manager in any business
enterprise. Anyone can be called a manager irrespective of the educational qualifications
possessed. Unlike professions such as medicine or law which require a practicing doctor or
lawyer to possess valid degrees, nowhere in the world is it mandatory for a manager to possess
any such specific degree. But professional knowledge and training is considered to be a
desirable qualification, since there is greater demand for those who possess degrees or
diplomas from reputed institutions. Therefore, as such the second criterion has not been strictly
met.
There are several associations of practicing managers in India, like the AIMA (All India
Management Association) that has laid down a code of conduct to regulate the activities of their
members. There is, however, no compulsion for managers to be members of such an association
nor does it have any statutory backing.
The basic purpose of management is to help the organisation achieve its stated goal. This may
be profit maximisation for a business enterprise and service for a hospital. However, profit
maximisation as the objective of management does not hold true and is fast changing.
Therefore, if an organisation has a good management team that is efficient and ef fective it
automatically serves society by providing good quality products at reasonable prices.
Features of Coordination
1. Coordination integrates group efforts: Coordination unifies unrelated or diverse interests into
purposeful work activity. It gives a common focus to group effort to ensure that performance is
as it was planned and scheduled.
2. Coordination ensures unity of action: The purpose of coordination is to secure unity of action in
the realization of a common purpose. It acts as the binding force between departments and
ensures that all action is aimed at achieving the goals of the organization. You have observed
that at Fabmart, the production and sales department have to coordinate their work, so that
production takes place according to the demand in the market.
3. Coordination is a continuous process: Coordination is not a one -time function but a continuous
process. It begins at the planning stage and continues till controlling. A woman plans her winter
collection in the month of June itself. She has to then ensure that there is adequate workforce
and continuously monitor whether production is proceeding according to plans. Her marketing
department also has to be briefed in time to prepare their promotional and advertising
campaigns.
4. Coordination is an all pervasive function: Coordination is required at all levels of management
due to the interdependent nature of activities of various departments. It integrates the efforts
of different departments and different levels.
5. Coordination is the responsibility of all managers: Coordination is the function of every manager
in the organisation. Top level managers need to coordinate with their subordinates to ensure
that the overall policies for the organisation are duly carried out. Middle level management
coordinates with both the top level and first line managers.
Management as a Science
Science is characterized by following main features:
1. Universally acceptance principles - Scientific principles represents basic truth about a particular
field of enquiry. These principles may be applied in all situations, at all time & at all places. E.g. law of gravitation which can be applied in all countries irrespective of the time. Management
also contains some fundamental principles which can be applied universally like the Principle of
Unity of Command i.e. one man, one boss. This principle is applicable to all type of organization business or non-business.
2. Experimentation & Observation - Scientific principles are derived through scientific investigation
& researching i.e. they are based on logic. E.g. the principle that earth goes round the sun has
been scientifically proved.
3. Management principles are also based on scientific enquiry & observation and not only on t he
opinion of Henry Fayol. They have been developed through experiments & practical experiences
of large no. of managers. E.g. it is observed that fair remuneration to personal helps in creating a
satisfied work force.
4. Cause & Effect Relationship - Principles of science lay down cause and effect relationship
between various variables. E.g. when metals are heated, they are expanded. The cause is
heating & result is expansion. The same is true for management, therefore it also establishes
cause and effect relationship.
5. Test of Validity & Predictability - Validity of scientific principles can be tested at any time or any
number of times i.e. they stand the test of time. Each time these tests will give same result.
Moreover future events can be predicted with reasonable accuracy by using scientific principles.
Management as an Art
1. A successful manager practices the art of management in the day-to-day job of managing an
enterprise based on study, observation and experience. There is a lot of literature availab le in
various areas of management like marketing, finance and human resources which the manager
has to specialise in. There is existence of theoretical knowledge.
2. There are various theories of management, as propounded by many management thinkers,
which prescribe certain universal principles. A manager applies these scientific methods and
body of knowledge to a given situation, an issue or a problem, in his own unique manner. A
good manager works through a combination of practice, creativity, imagination, i nitiative and
innovation. A manager achieves perfection after long practice. Students of management also
apply these principles differently depending on how creative they are.
3. A manager applies this acquired knowledge in a personalised and skillful manner in the light of
the realities of a given situation. He is involved in the activities of the organisation, studies
critical situations and formulates his own theories for use in a given situation. This gives rise to
different styles of management The best managers are committed and dedicated individuals;
highly trained and educated, with personal qualities such as ambition, self - motivation,
creativity and imagination, a desire for development of the self and the organisation they belong
to. All management practices are based on the same set of principles; what distinguishes a
successful manager from a less successful one is the ability to put these principles into practice.
Levels of Management
Generally speaking there are three levels in the hierarchy of an organisation.
1. Top Management: They consists of the senior-most executives of the organisation by whatever
name they are called. They are usually referred to as the chairman, the chief executive officer, chief
operating officer, president and vice-president. Top management is a team consisting of managers
from different functional levels. Their basic task is to integrate diverse elements and coordinate the
activities of different departments according to the overall objectives of the organisation. These top
level managers are responsible for the welfare and survival of the organisation.
2. Middle Management: is the link between top and lower level managers. They are subordinate to top
managers and superior to the first line managers. They are usually known as division heads,
operations manager or plant superintendent. Middle management is responsible f or implementing
and controlling plans and strategies developed by top management. At the same time they are
responsible for all the activities of first line managers. Their main task is to carry out the plans
formulated by the top managers.
3. Supervisory or Operational Management: Foremen and supervisors comprise the lower level in the
hierarchy of the organisation. Supervisors directly oversee the efforts of the workforce. Their
authority and responsibility is limited according to the plans drawn by the top management.
Supervisory management plays a very important role in the organisation since they interact with the
actual work force and pass on instructions of the middle management to the workers. Through their
efforts quality of output is maintained, wastage of materials is minimised and safety standards are
maintained. The quality of workmanship and the quantity of output depends on the hard work,
discipline and loyalty of the workers.
Fayol’s Principles
(i) Division of Work: Work is divided into small tasks/jobs. A trained specialist who is competent is
required to perform each job. Thus, division of work leads to specialisation. According to Fayol, “The
intent of division of work is to produce more and better work for the same effort. Specialisation is the
most efficient way to use human effort.”
(ii) Authority and Responsibility: According to Fayol, “Authority is the right to give orders and obtain
obedience, and responsibility is the corollary of authority. The two types of authority are official
authority, which is the authority to command, and personal authority which is the authority of the
individual manager.”
(iii) Discipline: Discipline is the obedience to organisational rules and employment agreement which are
necessary for the working of the organisation. According to Fayol, discipline requires good superiors at
all levels, clear and fair agreements and judicious application of penalties.
(iv) Unity of Command: According to Fayol there should be one and only one boss for every individual
employee. If an employee gets orders from two superiors at the same time the principle of unity of
command is violated. The principle of unity of command states that each participant in a formal
organisation should receive orders from and be responsible to only one superior. Fayol gave a lot of
importance to this principle.
(v) Unity of Direction: All the units of an organisation should be moving towards the same objectives
through coordinated and focussed efforts. Each group of activities having the same objective must have
one head and one plan. This ensures unity of action and coordination.
Scientific Management Principles
1. Science not Rule of Thumb: Taylor pioneered the introduction of the method of scientific inquiry
into the domain of management practice. We have already referred to the limitations of the rule of
thumb approach of management. As different managers would follow their indigenous rules of
thumb, it is but a statement of the obvious that all would not be equally effective. Taylor believed
that there was only one best method to maximise efficiency. This method can be developed through
study and analysis. The method so developed should substitute ‘Rule of Thumb’ throughout the
organisation.
2. Harmony, Not Discord: Factory system of production implied that managers served as a link
between the owners and the workers. Since as managers they had the mandate to ‘get work done’
from the workers, it should not be difficult for you to appreciate that there always existed the
possibility of a kind of class-conflict, the mangers versus workers. Taylor recognised that this conflict
helped none, the workers, the managers or the factory owners. He emphasised that there should be
complete harmony between the management and workers.
3. Cooperation, Not Individualism: There should be complete cooperation between the labour and the
management instead of individualism. This principle is an extension of principle of ‘Harmony not
discord’. Competition should be replaced by cooperation. Both should realise that they need e ach
other. For this, management should not close its ears to any constructive suggestions made by the
employees.
4. Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity: Industrial
efficiency depends to a large extent on personnel competencies. As such, scientific management
also stood for worker development. Worker training was essential also to learn the ‘best method’
developed as a consequence of the scientific approach. Taylor was of the view that the concern for
efficiency could be built in right from the process of employee selection. Each person should be
scientifically selected.
Steps in Organizing Process
1. Identification and division of work: The first step in the process of organising involves identifying and
dividing the work that has to be done in accordance with previously determined plans.
2. Departmentalization: Once work has been divided into small and manageable activities then those
activities which are similar in nature are grouped together. Such sets facilitate specialisation. This
grouping process is called departmentalization. Departments can be created using several criteria as
a basis. Examples of some of the most popularly used basis are territory (north, south, west etc.)
and products (appliances, clothes, cosmetics etc).
3. Assignment of duties: It is necessary to allocate work to various employees. Once departments have
been formed, each of them is placed under the charge of an individual. Jobs are then allocated to
the members of each department in accordance to their skills and competencies. It is essential for
effective performance that a proper match is made between the nature of a job and the ability of an
individual. The work must be assigned to those who are best fitted to perform it well.
4. Establishing reporting relationships: Merely allocating work is not enough. Each individual should
also know who he has to take orders from and to whom he is accountable. The establishment of
such clear relationships helps to create a hierarchal structure and helps i n coordination amongst
various departments.
Elements of Delegation
1.
2.
3.
Responsibility: Responsibility means the work assigned to an individual. It includes all the
physical and mental activities to be performed by the employees at a particular job position. The
process of delegation begins when manager passes on some of his responsibilities to his
subordinates which means responsibility can be delegated.
Authority: Authority means power to take decision. To carry on the responsibilities every
employee need to have some authority. So, when managers are passing their responsibilities to
the subordinates, they also pass some of the authority to the subordinates. The delegating
authority is the second step of organizing process. While sharing the authority managers keep in
mind that the authority matching to the responsibility should only be delegated. They shall not
pass all their authority to their subordinates.
Accountability: To make sure that the employees or subordinates perform their responsibilities
in their expected manner, the accountability is created. Accountability means subordinates will
be answerable for the non-completion of the task; creating accountability is the third and fi nal
step of delegation process.
Importance of Delegation
1.
2.
3.
4.
5.
Effective management: In the delegation process managers pass routine work to the
subordinates. So they are free to concentrate on other important matters. The main job of
managers is to get the work done effectively and by delegating the authorities and
responsibilities managers can get the work done effectively and efficiently from the
subordinates.
Employees’ Development: As a result of delegation employees get more opportunities to utilise
their talents. It allows them to develop those skills which help them to perform complex task.
Delegation help in making better future managers by giving them chance to use their skills, gain
experience of work related to higher job position.
Motivation of employees: In the delegation when the manager is sharing his responsibilities and
authority with the subordinates it motivates the subordinates as they develop the feeling of
belongingness and trust which is shown to them by their superiors. Some employees can be
motivated by such kind of non-financial incentives.
Facilitates organizational growth: In the process of delegation when the managers are passing
their responsibility and authority to the subordinates they keep in mind the qualification and
capability of all the subordinates. This leads to division of work and specialization which is very
important for organisational growth.
Basis of Management Hierarchy: Delegation establishes superior-subordinate relationship which
is the base for hierarchy of managers. The extent of power delegated to subordinates decides
who will report to whom, and the power at each job position forms the Management Hierarchy.
Authority and Responsibility
Authority
Responsibility
1) Authority refers to right to take decision due to 1) Responsibility is the obligation of a
your managerial position.
subordinate to properly perform the assigned
duty.
2) Authority determines superior subordinate
2) It arises from superior subordinate relationship
relationship. As subordinate communicates his
because subordinate is bound to perform the
decisions to subordinate expecting compliance
duty assigned by his superior.
from him as per his directions.
(3) Authority is restricted by law and rules and
3) Responsibility flows upward because
regulations of the organisation.
subordinate will always be responsible to his
superior
(4) Authority arises from the scalar chain which
links various job positions.
(5) Authority flows upward as we go higher up in
management hierarchy the scope of authority
increases.
Importance of decentralization
1. Develop initiative among subordinates: Passing of authority at middle and lower level shows the trust
and faith of top level in their subordinates and this trust and faith motivate the employees working at
different levels as they are allowed to take decisions without seeking the approval of superiors.
2. Develop managerial talent for future: In the decentralisation managers working at lower and middle
level also learn the art of making decisions. They get the experience of performing activities of top
executives and learn to manage the authority given to them.
3. Quick decision-making: In the decentralisation process decision-making is not restricted in few hands
only but decision-making power is entrusted to all the managers who are taking actions or performing
the activities. This leads to faster decision because employees who have to perform the activities are
allowed to take decision also.
4. Relief to top level management: In the process of decentralisation top level managers are not
overburdened with the responsibilities and authority as they systematically pass the authority and
responsibilities at different levels and they become free to concentrate on core and important issues.
5. Facilitates growth: Decentralisation grants more autonomy or freedom to lower level. This helps the
subordinates to do the work in the manner best suited for their department. When each department is
doing to their best then productivity increases and it will generate more revenue which can be used for
expansion.
Authority and Accountability
Authority
1) Authority refers to right to take decision due to
your managerial position.
2) Authority determines superior subordinate
relationship. As subordinate communicates his
decisions to subordinate expecting compliance
from him as per his directions.
(3) Authority is restricted by law and rules and
regulations of the organisation.
(4) Authority arises from the scalar chain which
links various job positions.
(5) Authority flows upward as we go higher up in
management hierarchy the scope of authority
increases.
Accountability
1) Accountability refers to answerable for the
final output.
2) It cannot be delegated or passed.
3) It enforced through regular feedback on the
extent of work accomplished.
4) If flows upward, i.e., subordinate will be
accountable to his superior.
Different Type of Organization
Formal Organisation
1. Formal organisation is a system of consciously coordinated activities of two or more persons
toward a common objective. established chain of command has to be followed which increases
the time taken for decision making.
2. Poor organisation practices may not provide adequate recognition to creative talent, since it
does not allow any deviations from rigidly laid down polices.
3. It is difficult to understand all human relationships in an enterprise as it places more emphasis
on structure and work. Hence, the formal organisation does not provide a complete picture of
how an organisation works.
Informal Organisation
Interaction among people at work gives rise to a ‘network of social relationships among employees’
called the informal organisation. Informal organisation emerges from within the formal organisation
when people interact beyond their officially defined roles.
1. An informal organisation originates from within the formal organisation as a result of personal
interaction among employees.
2. The standards of behaviour evolve from group norms rather than officially laid down rules and
regulations.
3. Independent channels of communication without specified direction of flow of information are
developed by group members.
4. It emerges spontaneously and is not deliberately created by the management.
Difference between Formal and Informal Organization
Basis
Meaning
Origin
Authority
Behavior
Flow of
Communication
Nature
Formal organisation
Structure of authority relationships
created by the management
Arises as a result of company rules
and policies
Arises by virtue of position in
management
It is directed by rules
Informal organisation
Network of social relationships arising out of
interaction among employees
Arises as a result of social interaction
Arises out of personal qualities
There is no set behaviour pattern
Flow of communication is not through a
Communication takes place through
planned route. It can take place in any
the scalar chain
direction
Rigid
Flexible
Importance of Organization
1. Benefits of specialization: Organizing leads to a systematic allocation of jobs amongst the work
force. This reduces the workload as well as enhances productivity because of the specific workers
performing a specific job on a regular basis. Repetitive performance of a particular task allows a
worker to gain experience in that area and leads to specialisation.
2. Clarity in working relationships: The establishment of working relationships clarifies lines of
communication and specifies who is to report to whom. This removes ambiguity in transfer of
information and instructions. It helps in creating a hierarchical order thereby enabling the fixation of
responsibility and specification of the extent of authority to be exercised by an individual.
3. Optimum utilization of resources: Organising leads to the proper usage of all material, financial and
human resources. The proper assignment of jobs avoids overlapping of work and also makes
possible the best use of resources. Avoidance of duplication of work helps in preventing confusion
and minimizing the wastage of resources and efforts.
4. Adaptation to change: The process of organising allows a business enterprise to accommodate
changes in the business environment. It allows the organisation structure to be suitably modified
and the revision of inter-relationships amongst managerial levels to pave the way for a smooth
transition. It also provides much needed stability to the enterprise as it can then continue to survive
and grow in spite of changes.
5. Effective administration: Organising provides a clear description of jobs and related duties. This
helps to avoid confusion and duplication. Clarity in working relationships enabl es proper execution
of work. Management of an enterprise thereby becomes easy and this brings effectiveness in
administration.
Importance of Staffing
1. Efficient Performance of Other Functions: Staffing is the key to the efficient performance of other
functions of management. If an organisation does not have competent personnel, it can’t perform
planning, organisation and control functions properly.
2. Effective Use of Technology and Other Resources: It is the human factor that is instrumental in the
effective utilisation of latest technology, capital, material, etc. the management can ensure right kinds
of personnel by performing the staffing function.
3. Optimum Utilisation of Human Resources: The wage bill of big concerns is quite high. They also spend
money on recruitment, selection, training and development of employees. In order to get the optimum
output from the personnel, the staffing function should be performed in an efficient manner.
4. Development of Human Capital: The management is required to determine the manpower
requirements well in advance. It has also to train and develop the existing personnel for career
advancement. This will meet the requirements of the company in future.
5. Motivation of Human Resources: The behaviour of individuals is shaped by many factors such as
education level, needs, socio-cultural factors, etc. that is why, the human aspect of organisation has
become very important. The workers can be motivated through financial and non-financial incentives.
Types of Selection Tests
1. Intelligence Tests: Intelligence tests measure general ability for intellectual performance. The
core concept underlying in intelligence test is mental age. It is presumed that with physical age,
intelligence also grows. Exceptions to this may be there.
2. Aptitude Test: Aptitude tests measure ability and skills of the testee. These tests measure and
indicate how well a person would be able to perform after training and not what he/she has
done^. Thus, aptitude tests are used to predict the future ability/performance of a person.
3. Interest Tests: These tests are designed to discover a person’s area of interest, and to identify
the kind of work that will satisfy him. Interest is a prerequisite to successfully perform some
task. These tests owe their origin to the vocational efforts.
4. Achievement Tests: Achievement / Proficiency tests measure a person’s potential in a given
area/job. In other words, these tests measure what a person can do based on skill or knowledge
already acquired by him/her.
5. Personality Tests: These tests are also known as ‘personality inventories’. These tests are
designed to measure the dimensions of personality i.e., personality traits such as interpersonal
competence, dominance- submission, extroversions-introversions, self-confidence, ability to
lead and ambition.
Selection Interviews
1. Structured Interview: Here, every single detail of the interview is decided in advance. The
questions to be asked, the order in which the questions will be asked, the time given to each
candidate, the information to be collected from each candidate, etc. is all decided in advance
2. Stress Interview: The purpose of this interview is to find out how the candidate behaves in a
stressful situation. That is, whether the candidate gets angry or gets confused or gets frightened
or gets nervous or remains cool in a stressful situation
3. Panel Interview: Panel means a selection committee or interview committee that is appointed
for interviewing the candidates. The panel may include three or five members. They ask
questions to the candidates about different aspects. They give marks to each candidate.
4. Group Interview: Here, all the candidates or small groups of candidates are interviewed
together. The time of the interviewer is saved. A group interview is similar to a group discussion.
Benefits of Training
1. Economy in Operations: Trained personnel will be able to make better and economical use of
materials and equipment’s. Wastage will be low.
2. Greater Productivity: A well trained employee usually shows greater productivity and higher
quality of work-output than an untrained employee. Training increases the skills of the
employees in the performance of a particular job. An increase in the skills usually helps to
increase both quantity and quality of output.
3. Uniformity of Procedures: With the help of training, the best available methods of work can be
standardized and made available to all employees. Standardization will make high levels of
performance rule rather than the exception.
4. Less Supervision: If the employees are given proper training, the responsibility of supervision is
lessened. Training does not eliminate the need for supervision, but it reduces the need fo r
detailed and constant supervision.
5. Systematic Imparting of Skills: A systematic training program helps to reduce the learning time
to reach the acceptable level of performance. The employees need not learn by trial and error
or by observing others and waste time if the formal training program exists in the organization.
Importance of Directing
1. It Initiates Action: The employees are appointed up to the first three functions of management
(planning, organizing and staffing). But they cannot commence the ir job until they are not
informed about what to do and how to do the manager performs this job through direction.
2. It Integrates Employees Efforts: Many employees work in an organization. The activities of all
are co-related. Success of an organization is possible only when everybody does their job
efficiently. If any one of employees in the employees- chain does not perform up to the mark, it
adversely affects the performance of the remaining employees.
3. It is the Means of Motivation: The objectives of an organization can only be achieved by
motivated employees. Motivated employees work with full dedication and with a feel of
belongingness. Now the question is: how can the employees be motivated? The work of
motivating employees can be accomplished through the Directing function of management.
4. It Facilitates Implementing Changes: Often, the employees show resistance to change in their
organizational structure. But with the changing demand of time, it needs to be implemented /
enforced. Managers through the medium of Direction shapes the mindset of the employees in a
manner that they willfully accept changes.
5. It Facilitates Implementing Changes: Often, the employees show resistance to change in their
organizational structure. But with the changing demand of time, it needs to be implemented /
enforced. Managers through the medium of Direction shapes the mindset of the employees in a
manner that they willfully accept changes.
6. It Creates Balance in the Organization: Sometimes there is a clash between individual and
organizational objective. Directing helps to settle down these clashes and creates a balance in
the organization.
Importance of Supervision
1. Ensures Issuing of Instructions: The supervisor makes sure that all the instructions are
communicated to each and every employee. The top level and middle level, plan out all the
instructions but the instructions are issued only by supervisory level management.
2. Facilitates Control: Control means match between actual and planned output. Whenever
the workers are under constant supervision or monitoring then step by step check is kept
and if they are deviating from plan then immediate instructions are issued by the supervisor.
By this constant monitoring, the supervision function ensures strict control over the
activities of subordinates
3. Optimum Utilization of Resources: When the workers are constantly monitored or observed
then they always use the resources in the best possible manner which leads to minimum
wastage. But if there is no supervision or check on workers the y may result in wastage of
resources.
4. Discipline: The strict supervision and guidance of supervisor encourages the employees and
workers to be more disciplined in their activities. Under the guidance of supervisor the
workers follow a fixed or strict time-table and execute the plans in right directions.
5. Feedback: The supervisors are directly dealing with the subordinates. So they are the best
persons to give feedbacks of subordinates. They give the report regarding the working of
every worker which becomes the base for the performance appraisal for the employees.
Styles of Leadership
1. Autocratic or Authoritarian leadership: An autocratic leader centralizes power and decisionmaking in himself. He gives orders, assigns tasks and duties without consulting the e mployees.
The leader takes full authority and assumes full responsibility.
2. Democratic or Participative leadership: Participative or democratic leaders decentralize
authority. It is characterized by consultation with the subordinates and their participation in the
formulation of plans and policies. He encourages participation in decision-making.
3. The Laissez-faire or Free-rein leadership: Free-rein leaders avoid power and responsibility. The
laissez-faire or non-interfering type of leader passes on the responsibility for decision-making to
his subordinates and takes a minimum of initiative in administration. He gives no direction and
allows the group to establish its own goals and work out its own problems.
4. Paternalistic leadership: Under this management style the leader assumes that his function is
fatherly or paternal. Paternalism means papa knows best. The relationship between the leader
and his group is the same as the relationship between the head of the family and the members
of the family. The leader guides and protects his subordinates as members of his family.
Importance of Communication
1. Acts as basis of coordination: Communication acts as basis of coordination. It provides coordination
among departments, activities and persons in the organisation. Such coordination is provided by
explaining about organisational goals, the mode of their achievement and inter relationships
between different individuals etc.
2. Helps in smooth working of an enterprise: Communication makes possible for the smooth and
unrestricted working of the enterprise. All organisational interactions depend on comm- unications.
The job of a manager is to coordinate the human and physical elements of an organisation into an
efficient and active working unit that achieves common objectives.
3. Acts as basis of decision making: Communication provides needed information for decision making.
In its absence, it may not be possible for the managers to take any meaningful decision. Only on the
basis of communication of relevant information one can take right decision.
4. Increases managerial efficiency: Communication is essential for quick and effective performance of
managerial functions. The management conveys the goals and targets, issues instructions, allocates
jobs and responsibilities and looks after the performance of subordinates.
5. Promotes cooperation and industrial peace: Efficient operation is the aim of all prudent
management. It may be possible only when there is industrial peace in the factory and mutual
cooperation between management and workers.
Maslow’s Theory
Abraham Maslow, a well-known Psychologist in a classic paper
published in 1943, outlined the elements of an overall theory of
motivation. These are:
(iii)
(iv)
(v)
(i)
Basic Physiological Needs: These needs are most basic
in the hierarchy and corresponds to primary needs. Hunger,
thirst, shelter, sleep and sex are some examples of these needs.
In the organisational context, basic salary helps to satisfy these
needs.
(ii)
Safety/Security Needs: These needs provide security
and protection from physical and emotional harm. Examples: job security, stability of
income, Pension plans etc.,
Affiliation/Belonging Needs: These needs refer to affection, sense of belongingness,
acceptance and friendship.
Esteem Needs: These include factors such as self-respect, autonomy status, recognition
and attention.
Self Actualisation Needs: It is the highest level of need in the hierarchy. It refers to the
drive to become what one is capable of becoming. These needs include growth, self fulfillment and achievement of goals.
Qualities of a Successful Leader
1. Physical features: Physical features like height, weight, health, appearance determine the
physical personality of an individual. It is believed that good physical features attract people.
Health and endurance help a leader to work hard which inspires others to work with same
tempo.
2. Knowledge: A good leader should have required knowledge and competence. Only such person
can instruct subordinates correctly and influence them.
3. Integrity: A leader should possess high level of integrity and honesty. He should be a role model
to others regarding the ethics and values.
4. Initiative: A leader should have courage and initiative. He should not wait for opportunities
come to his way, rather he should grab the opportunity and use it to the advantage of
organization.
5. Communication skills: A leader should be a good communicator. He should have the capacity to
clearly explain his ideas and make the people to understand his ideas. He should be not only
good speaker but a good listener, teacher, counsellor and persuader.
6. Motivation skills: A leader should be an effective motivator. He should understand the needs of
people and motivate them through satisfying their needs.
Barriers to Effective Communication
1. Badly expressed message: Some times intended meaning may not be conveyed by a manager to his
subordinates. These badly expressed messages may be an account of inadequate vocabulary, usage
of wrong words, omission of needed words etc.
2. Symbols with different meanings: A word may have several meanings. Receiver has to perceive one
such meaning for the word used by communicator.
3. Faulty translations: Sometimes the communications originally drafted in one language (e.g., English)
need to be translated to the language understandable to workers (e.g., Hindi). If the translator is not
proficient with both the languages, mistakes may creep in causing different meanings to the
communication.
4. Unclarified assumptions: Some communications may have certain assumptions which are subject to
different interpretations. For example, a boss may instruct his subordinate, “Take care of our guest”.
Boss may mean that subordinate should take care of transport, food, accommodation of the guest
until he leaves the place. The subordinate may interpret that guest should be taken to hotel with
care. Actually, the guest suffers due to these unclarified assumptions.
5. Technical jargon: It is usually found that specialists use technical jargon while explaining to persons
who are not specialists in the concerned field. Therefore, they may not understand the actual
meaning of many such words.
Ways to Overcome Barriers of Communication
1. Clarify the ideas before communication: The problem to be communicated to subordinates
should be clear in all its perspective to the executive himself. The entire problem should be
studied in depth, analysed and stated in such a manner that is clearly conveyed to subordinates.
2. Communicate according to the needs of receiver: The level of understanding of receiver should
be crystal clear to the communicator. Manager should adjust his communication according to
the education and understanding levels of subordinates.
3. Consult others before communicating: Before actually communicating the message, it is better
to involve others in developing a plan for communication. Participation and involvement of subordinates may help to gain ready acceptance and willing cooperation of subordinates.
4. Be aware of languages, tone and content of message: The contents of the message, tone, and
language used, manner in which the message is to be communicated are the important aspects
of effective communication. The language used should be understandable to the receiver and
should not offend the sentiments of listeners. The message should be stimulating to evoke
response from the listeners.
5. Convey things of help and value to listeners: While conveying message to others, it is better to
know the interests and needs of the people with whom you are communicating. If the message
relates directly or indirectly to such interests and needs it certainly evokes response from
communicatee.
6. Ensure proper feedback: The communicator may ensure the success of communication by
asking questions regarding the message conveyed. The receiver of communication may also b e
encouraged to respond to communication. The communication process may be improved by the
feedback received to make it more responsive.
7. Communicate for present as well as future: Generally, communication is needed to meet the
existing commitments, to maintain consistency, the communication should aim at future goals
of the enterprise also.
8. Follow up communications: There should be regular follow up and review on the instructions
given to subordinates. Such follow up measures help in removing hurdles if any in imp lementing
the instructions.
Importance of Controlling
Importance of Controlling Control is an indispensable function of management. Without control the best
of plans can go awry. A good control system helps an organization in the following ways:
1. Accomplishing organizational goals: The controlling function measures progress towards the
organizational goals and brings to light the deviations, if any, and indicates corrective action. It,
thus, guides the organization and keeps it on the right track so that organizational goals might
be achieved.
2. Judging accuracy of standards: A good control system enables management to verify whether
the standards set are accurate and objective. An efficient control system keeps a careful check
on the changes taking place in the organization and in the environment and helps to review and
revise the standards in light of such changes.
3. Making efficient use of resources: By exercising control, a manager seeks to reduce wastage and
spoilage of resources. Each activity is performed in accordance with predetermined standards
and norms. This ensures that resources are used in the most effective and efficient manner.
4. Improving employee motivation: A good control system ensures that employees know well in
advance what they are expected to do and what are the standards of performance on the basis
of which they will be appraised. It, thus, motivates them and helps them to give better
performance.
5. Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the
organization. It helps to minimize dishonest behavior on the part of the employees by keeping a
close check on their activities. The box explains how an import-export company was able to
track dishonest employees by using computer monitoring as a part of their control system.
Requirements of a Good Standard
1.
2.
3.
4.
5.
Fixing the Control Standards / Objectives / Targets: A standard is a criterion (base) which is used
to measure the performance of the subordinates. The standards should be as clear as possible.
It should be easily understood by both superiors and subordinates. The responsibility of each
individual should also be clearly defined i.e. everyone should be responsible for achieving a
particular goal, objective, target, etc. For e.g. The marketing department fixes a standard - "We
will sell 2,000 units of product X in one month". So here the standard is 2,000 units.
Measuring the Actual Performances: After establishing the standards, the subordinates should
be provided with all the resources for performing the job. They should be prope rly directed and
motivated to perform the job. Similarly, they should be properly supervised.
Comparison: The actual performances of the subordinates are compared with established
standards, and then the deviations are found out. The deviations which are found o ut may be
positive or negative. Generally, minor (small) deviations are ignored. However, major deviations
should be immediately addressed and reported to the top management. PERT, Budge tary
Control, Observation, Inspection, Reports, etc. are some of the methods used for comparison.
Corrective Action: After finding out the negative deviations and their causes, the managers
should take steps to correct these deviations. Corrective actions should be taken promptly.
Corrective action may include, changing the standards, providing better motivation, giving
better training, using better machines, etc. The management should take essential steps to
prevent these deviations in the future.
Follow-up: After taking corrective action, the management must do a follow-up. Follow-up is
done to find out whether the corrective actions are taken properly. It also finds out whether the
deviations and their causes are removed. If follow-up is done properly, then the actual
performance will be equal to or better than the established standards.
Importance of Financial Management
The importance of financial management to a firm are as follows:
1.
2.
3.
4.
Financial Management Helps Setting Clear Goal: Clarity of the goal is important for any firm.
Financial management defines the goal of the firm in clear terms (maximization of the
shareholders wealth). Setting goal helps to judge whether the decisions taken are in the best
interest of the shareholders or not. Financial management also direct the efforts of all functional
areas of business towards achieving the goal and facilitates among the functional areas of the
firm.
Financial Management Helps Efficient Utilization Of Resources: Firms use fixed as well as current
assets which involve huge investment. Acquiring and holding assets that do not earn minimum
return do not add value to the shareholders. Moreover, wrong decision regarding the purchase
and disposal of fixed assets can cause threat to the survival of the firm. The application of
financial management techniques (such as capital budgeting techniques) helps to answer the
questions like which asset to buy, when to buy and whether to replace the existing asset with
new one or not.
Financial Management Helps Deciding Sources Of Financing: Firms collect long-term funds
mainly for purchasing permanent assets. The sources of long term finance may be equity shares,
preference shares, bond, term loan etc. The firm needs to decide the appropriate mix of these
sources and amount of long-term funds; otherwise the firm will have to bear higher cost and
expose to higher risk. Financial management (capital structure theories) guides in selecting
these sources of financing.
Financial Management Helps Making Dividend Decision: Dividend is the return to the
shareholders. The firm is not legally obliged to pay dividend to the shareholders. However, how
much to pay out of the earning is a vital issue. Financial management (dividend policies and
theories) helps a firm to decide how much to pay as dividend and how much to retain in the
firm.
Financial Decision and its Types
1. Investment Decision: A firm’s resources are scarce in comparison to the uses to which they
can be put. A firm, therefore, has to choose where to invest these resources, so that they
are able to earn the highest possible return for their investors. The investment decision,
therefore, relates to how the firm’s funds are invested in different assets. Investment
decision can be long term or short-term. A long-term investment decision is also called a
Capital Budgeting decision. It involves committing the finance on a long-term basis. For
example, making investment in a new machine to replace an existing
2. Financing Decision: This decision is about the quantum of finance to be raised from various
long-term sources (short-term sources are studied in working capital management). It
involves identification of various available sources. The main sources of funds for a firm are
shareholders funds and borrowed funds. Shareholders funds refer to equity capital and
retained earnings.
Borrowed funds refer to finance raised as debentures or other forms of debt. A firm has to
decide the proportion of funds to be raised from either source based on their basic
characteristics. Interest on borrowed funds have to be paid regardless of whether or not a
firm has made a profit.
3. Dividend Decision: The third important decision that every financial manager has to take
relates to the distribution of dividend. Dividend is that portion of profit which is distributed
to shareholders. The decision involved here is how much of the profit earned by company
(after paying tax) is to be distributed to the shareholders and how much of it should be
retained in the business for meeting the investment requirements.
Importance of Financial Planning
1. It tries to forecast what may happen in future under different business situations.
2. It helps in avoiding business shocks and surprises and helps the company in preparing for the
future.
3. If helps in coordinating various business functions e.g., sales and production functions, by
providing clear policies and procedures.
4. Detailed plans of action prepared under financial planning reduce waste, duplication of efforts,
and gaps in planning.
5. It tries to link the present with the future.
6. It provides a link between investment and financing decisions on a continuous basis.
7. By spelling out detailed objectives for various business segments, it makes the evaluation of
actual performance easier.
Money Market Instruments
1.
2.
3.
4.
5.
Treasury bill: A Treasury bill is basically an instrument of short-term borrowing by the
Government of India maturing in less than one year. They are also known as Zero Coupon Bonds
issued by the Reserve Bank of India on behalf of the Central Government to meet its short -term
requirement of funds. Treasury bills are issued in the form of a promissory note .
Commercial Paper: Commercial paper is a short-term unsecured promissory note, negotiable
and transferable by endorsement and delivery with a fixed maturity period. It is issued by large
and creditworthy companies to raise short-term funds at lower rates of interest than market
rates. It usually has a maturity period of 15 days to one year.
Call Money: Call money is short term finance repayable on demand, with a maturity period of
one day to fifteen days, used for inter-bank transactions. Commercial banks have to maintain a
minimum cash balance known as cash reserve ratio. The Reserve Bank of India changes the cash
reserve ratio from time to time which in turn affects the amount of funds available to be given
as loans by commercial banks. Call money is a method by which banks borrow from each other
to be able to maintain the cash reserve ratio.
Certificate of Deposit: Certificates of deposit (CD) are unsecured, negotiable, short-term
instruments in bearer form, issued by commercial banks and development financial institutions.
They can be issued to individuals, corporations and companies during periods of tight liquidity
when the deposit growth of banks is slow but the demand for credit is high. They help to
mobilize a large amount of money for short periods.
Commercial Bill: A commercial bill is a bill of exchange used to finance the working capital
requirements of business firms. It is a short-term, negotiable, self-liquidating instrument which
is used to finance the credit sales of firms. When goods are sold on credit, the buyer becomes
liable to make payment on a specific date in future.
Money and Capital Markets Difference
Factor
Maturity Period
Credit Instruments
Money Market
The money market deals in the
lending and borrowing of shortterm finance (i.e., for one year
or less)
The main credit instruments of
the money market are call
money, collateral loans,
acceptances, bills of exchange.
Nature of Credit Instruments
Institutions
Insturments are Homogenous
Important institutions operating
in the' money market are
central banks, commercial
banks, acceptance houses,
nonbank financial institutions,
bill brokers, etc
Purpose of Loan
The money market meets the
short-term credit needs of
business; it provides working
capital to the industrialists
Risk
The degree of risk is small in the
money market
The basic role of money market
is that of liquidity adjustment
Basic Role
Capital Market
Capital market deals in the
lending and borrowing of longterm finance (i.e., for more than
one year).
On the other hand, the main
instruments used in the capital
market are stocks, shares,
debentures, bonds, securities of
the government.
Instruments are heterogenous
Important institutions of the
capital market are stock
exchanges, commercial banks
and nonbank institutions, such
as insurance companies,
mortgage banks, building
societies, etc.
The capital market, on the other
hand, caters the long-term
credit needs of the industrialists
and provides fixed capital to
buy land, machinery, etc.
The risk is much greater in
capital market
The basic role of capital market
is that of putting capital to
work, preferably to long-term,
secure and productive
employment
Trading Procedure in a Stock Exchange
1.
2.
3.
4.
5.
Selection of a broker: The buying and selling of securities can only be done through SEBI
registered brokers who are members of the Stock Exchange. The broker can be an individual,
partnership firms or corporate bodies. So the first step is to select a broker who will buy/sell
securities on behalf of the investor or speculator.
Opening Demat Account with Depository: Demat (Dematerialized) account refer to an account
which an Indian citizen must open with the depository participant (banks or stock brokers) to
trade in listed securities in electronic form. Second step in trading procedure is to open a Demat
account.
Placing the Order: After opening the Demat Account, the investor can place the order. The order
can be placed to the broker either (DP) personally or through phone, email, etc.
Executing the Order: As per the Instructions of the investor, the broker executes the order i.e.
he buys or sells the securities. Broker prepares a contract note for the order executed. The
contract note contains the name and the price of securities, name of parties and brokerage
(commission) charged by him. Contract note is signed by the broker.
Settlement: This means actual transfer of securities. This is the last stage in the trading of
securities done by the broker on behalf of their clients. There can be two types of settlement.
a) On the spot settlement: It means settlement is done immediately and on spot
settlement follows. T + 2 rolling settlement. This means any trade taking place on
Monday gets settled by Wednesday.
b) Forward settlement: It means settlement will take place on some future date. It can be T
+ 5 or T + 7, etc. All trading in stock exchanges takes place between 9.55 am and 3.30
pm. Monday to Friday.
Services offered by a Depository
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Depository helps in converting physical holding of securities to electronic holding.
Keeps custody of investor’s holdings.
Eliminates the risks involved in physical certificates.
Reduces brokerage charges.
Reduces time taken to clear each transaction due to absence of paper work.
All corporate benefits are paid out through demat account.
Enables e-trading to investors.
Procedure for pledging demat shares is easy to raise money from lenders.
Stamp duty is not applicable for transfer of securities in demat mode.
Allows easy monitoring of the investors account through demat.
Elements of Product Mix
1.
2.
3.
4.
5.
Width: The width of a company's product mix pertains to the number of product lines that a
company sells. For example, if a company has two product lines, its product mix width is two.
Small and upstart businesses will usually not have a wide product mix. It is more practical to
start with some basic products and build market share. Later on, a company's technology may
allow the company to diversify into other industries and build the width of the product mix.
Length: Product mix length pertains to the number of total products or items in a company's
product mix, according to Philip Kotler's textbook "Marketing Manage ment: Analysis, Planning,
Implementation and Control." For example, ABC company may have two product lines, and five
brands within each product line. Thus, ABC's product mix length would be 10. Companies that
have multiple product lines will sometimes keep track of their average length per product line.
In the above case, the average length of an ABC Company's product line is five.
Depth: Depth of a product mix pertains to the total number of variations for each product.
Variations can include size, flavor and any other distinguishing characteristic. For example, if a
company sells three sizes and two flavors of toothpaste, that particular brand of toothpaste has
a depth of six. Just like length, companies sometimes report the average depth of their product
lines; or the depth of a specific product line.
Consistency: Product mix consistency pertains to how closely related product lines are to one
another--in terms of use, production and distribution. A company's product mix may be
consistent in distribution but vastly different in use. For example, a small company may sell its
health bars and health magazine in retail stores. However, one product is edible and the other is
not. The production consistency of these products would vary as well.
Product Market Mix Strategy: Small companies usually start out with a product mix limited in
width, depth and length; and have a high level of consistency. However, over time, the company
may want to differentiate products or acquire new ones to enter new markets. A company can
also sell the existing products to new markets by coming up with new uses for their product.
Factors Affecting Pricing Decisions
1.
2.
3.
4.
5.
Cost: While fixing the prices of a product, the firm should consider the cost involved in
producing the product. This cost includes both the variable and fixed costs. Thus, while fixing the
prices, the firm must be able to recover both the variable and fixed costs.
The predetermined objectives: While fixing the prices of the product, the marketer should
con-sider the objectives of the firm. For instance, if the objective of a firm is to increase return
on investment, then it may charge a higher price, and if the objective is to capture a large
market share, then it may charge a lower price.
Competition: While fixing the price of the product, the firm needs to study the degree of
competi-tion in the market. If there is high competition, the prices may be kept low to
effectively face the competition, and if competition is low, the prices may be kept high.
Consumers: The marketer should consider various consumer factors while fixing the prices. The
consumer factors that must be considered includes the price sensitivity of the buyer, purchasing
power, and so on.
Government control: Government rules and regulation must be considered while fixing the
prices. In certain products, government may announce administered prices, and therefore the
mar-keter has to consider such regulation while fixing the prices.
Channels of Distribution
Direct Channel (Zero Level)
The most simple and the shortest mode of distribution is direct distribution, where in the goods are
made directly available by the manufacturers to customers, without involving any intermediary. This is
also called zero level channel. A straight and direct relationship is established between the manufacturer
and the customer. For example, when a manufacturer sells his goods through his own retail outlets (e.g.,
Mc Donald, Bata); it is referred to as direct channel. Similarly, mail order selling, internet selling and
selling through own sales force, (e.g., Eureka Forbes) are example of direct selling or zero level channel.
Indirect Channels
1. Manufacturer-Retailer Consumer (One Level Channel): In this form of arrangement one intermediary
i.e., retailers is used between the manufacturers and the customers. That is, goods pass from the
manufacture to the retailers who, in turn, sell them to the final users. For example, Maruti Udyog sells
its cars and vans through company approved retailers. This type of distribution network enables the
manufacturers to cover wide area of market while retaining control over the Channels.
2. Manufacturer-Wholesaler-Retailer- Consumer (Two Level Channel): This is the most commonly
adopted distribution network for most consumer goods like soaps, oils, clothes, rice, sugar and pulses.
Here the wholesaler and retailer function as connecting links between the manufacturer and consumer.
Use of two middlemen in the channel network enables the manufacturer to cover a larger market area.
3. Manufacturer-Agent-Wholesaler- Retailer-Consumer (Three Level Channel): In this case,
manufactures use their own selling agents or brokers who connect them with wholesalers and then the
retailers. Thus, one more level is added to the levels discussed in the proceeding arrangement. It is done
particularly when the manufacturer carries a limited product line and has to cover a wide market. An
agent in each major area is appointed, who in turn contact the wholesalers.
Objectives of Advertising
1.
2.
3.
4.
5.
6.
Creation of Demand: The main objective of the advertisement is to create a favorable climate
for maintaining of improving sales. Customers are to be reminded about the product and the
brand. It may induce new customers to buy the product by informing them its qualities since it is
possible that some of the customers may change their brands.
Facing the Competition: Another important objective of the advertisement is to face to
competition. Under competitive conditions, advertisement helps to build up brand image and
brand loyalty and when customers have developed brand loyalty, becomes difficult for the
middlemen to change it.
Creating or Enhancing Goodwill: Large scale advertising is often undertaken with the objective
of creating or enhancing the goodwill of the advertising company. This, in turn, increases the
market receptiveness of the company’s product and helps the salesmen to win customers easily.
Informing the Changes to the Customers: Whenever changes are made in the prices, channels of
distribution or in the product by way of any improvement in quality, size, weight, brand,
packing, etc., they must be informed to the public by the producer through advertisement.
Neutralizing Competitor’s Advertising: Advertising is unavoidable to complete with or neutralize
competitor’s advertising. When competitors are adopting intensive advertising as their
promotional strategy, it is reasonable to follow similar practices to neutralize their effects. In
such cases, it is essential for the manufacturer to create a different image of his product.
Barring New Entrants: From the advertiser’s point of view, a strongly built image through long
advertising helps to keep new entrants away. The advertisement builds up a certain monopoly
are for the product in which new entrants find it difficult to enter
Merits of Advertising
1. Mass Reach: Advertising is a medium through which a large number of people can be reached
over a vast geographical area. For example, an advertisement message placed in a national daily
reaches lakhs of its subscribers.
2. Enhancing Customer Satisfaction and Confidence: Advertising creates confidence amongst
prospective buyers as they feel more comfortable and assured about the product quality and
hence feel more satisfied.
3. Expressiveness: With the developments in art, computer designs, and graphics, advertising has
developed into one of the most forceful medium of communication. With the special effects
that can be created, even simple products and messages can look ve ry attractive.
4. Economy: Advertising is a very economical mode of communication if large number of people
are to be reached. Because of its wide reach, the overall cost of advertising gets spread over
numerous communication links established. As a result per -unit cost of reach comes low.
Limitations of Advertising
1. Less Forceful: Advertising is an impersonal form of communication. It is less forceful than the
personal selling as there is no compulsion on the prospects to pay attention to the message.
2. Lack of Feedback: The evaluation of the effectiveness of advertising message is very difficult as
there is no immediate and accurate feedback mechanism of the message that is delivered.
3. Inflexibility: Advertising is less flexible as the message is standardized and is not tailor made to
the requirements of the different customer groups.
4. Low Effectiveness: As the volume of advertising is getting more and more expanded it is
becoming difficult to make advertising messages heard by the target prospects. This i s affecting
the effectiveness of advertising.
Arguments against Advertising
1. Adds to Cost: The opponents of advertising argue that advertising unnecessarily adds to the cost of
product, which is ultimately passed on to the buyers in the form of high prices. An advertisement o n TV,
for a few seconds, for example, costs the marketers several lakhs of rupees.
2. Undermines Social Values: Another important criticism of advertising is that it undermines social
values and promotes materialism. It breeds discontent among people as they come to know about new
products and feel dissatisfied with their present state of affairs. Some advertisements show new life
styles, which don’t find social approval.
3. Confuses the Buyers: Another criticism against advertisement is that so many products are being
advertised which makes similar claims that the buyer gets confused as to which one is true and which
one should be relied upon. For example, we may note similar claims of whiteness or stain removing
abilities in competing brands of detergent powder or claims of whiteness of tooth or ‘feelings of
freshness’ in competing brands of toothpaste that it is sometimes confusing to us as to which one t o
buy.
4. Encourages Sale of Inferior Products: Advertising does not distinguish between superior and inferior
products and persuade people to purchase even the inferior products. In fact superiority and inferiority
depends on the quality, which is a relative concept.
5. Some Advertisements are in Bad Taste: Another criticism against advertising is that some
advertisements are in bad taste. These show something which in not approved by some people say
advertisements showing women dancing when not required or running after a man because he is
wearing a particular suit or using a particular perfume are certainly not good. Some advertisements
distort the relationship like employer employee and are quite offensive.
Features of a good advertisement copy
1. It Should Be Simple: The first important ingredient of an advertisement copy is that it should be
written in simple language. It should be capable of proper understanding. It should not use
ornamental and tough words rather short, simple and properly understandable words.
2. It Should Be Capable Of Holding The Reader’s Attention: An advertisement copy should be
capable of holding the attention of the reader. It should be presented in such a manner which
attracts the consumer immediately.
3. It Must Be Suggestive: The advertisement copy should be capable of suggesting the reader
about the utility and use of the product. Effective slogans can be used to give suggestions to the
people.
4. It Should Have Conviction Value: The advertisement copy shall be able to have ever lasting
impression on the reader, if the suggestions are backed by convincing arguments. The reader
should not have any doubt on the quality of the product. He should be fully convinced and
satisfied.
5. It Should Educate The People: The advertisement copy should tell the people about the use and
operation of a product. It should also impart new uses of a product with which the people are
not familiar. An advertisement copy containing information with regard to use, sources from
where the product can be obtained, price and services available along with the product is
greatly helpful in enhancing the demand and enlarging the sales.
6. It Should Have Memorising Value: The advertisement copy should be prepared in such a manner
that a reader gets ever lasting impression about the product. It can be successfull y created by
repeating the advertisement time and again. Repetition projects the permanent image about
the product on the reader’s mind.
7. It Should Be True: An advertisement copy should be truthful. It should not misrepresent and
conceal the true facts about the product. Rather it should clearly lay down the limitations in the
product. For example, a cloth merchant should clearly specify about the fading of colour and
shrinkage of yarn, if it is so.
Features of Personal Selling
1. Personal Form: Under personal selling a personal contact is established between the buyers and the
salesman. In other words, both the parties face each other
2. Development of Relationship: Personal selling results in the development of personal relationship
between the sales person and the possible buyer. Such a relationship has an important place in
sales.
3. Oral Conversation: There is oral conversation between the sales person and the buyer regarding the
features of the product, i.e., price, color, shape, design, method of using, etc.
4. Quick solution of Queries: The prospective buyer can make inquiries regarding the product.
Salesman answers these queries quickly and removes any doubts in the mind of the buyer.
5. Receipt of Additional Information: Normally, before introducing its product, a company is aware of
the preferences of the probable buyers. Nevertheless, during the course of personal selling, when
the sales person is in direct contact with the buyers he/she gathers additional information regarding
their tastes and likings.
6. Real Sale: Under personal selling, the buyers are not only informed about the product but the goods
are actually sold to them.
Objectives of Sales Promotion
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To increase sales by publicity through the media which are complementary to press and poster
advertising.
To disseminate information through salesmen, dealers etc., so as to ensure the product getting
into satisfactory use by the ultimate consumers.
To stimulate customers to make purchases at the point of purchase.
To prompt existing customers to buy more.
To introduce new products.
To attract new customers.
To meet competition from others effectively.
To check seasonal decline in the volume of sales.
Methods of Sales Promotion
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Discount: Under this method, the customers are offered products on less than the listed price.
For example, giving a discount of 30% on the sale of Liberty Shoes.
Refunds: Under this method, some part of the price of an article is refunded to the customer on
showing proof of purchase. For example, refunding an amount of 5/- on showing the empty
packet of the product priced 100/-.
Product Combination: Under this method, along with the main product some other product is
offered to the customer as a gift. The following are some of the examples:
Quantity Gift: Under this method, some extra quantity of the main product is passed on as a gift
to the customers. For example, 25% extra toothpaste in a packet of 200 gm tooth paste.
Similarly, a free gift of one shirt on the purchase of two shirts.
Instant Draw and Assigned Gift: Under this method, a customer is asked to scratch a card on the
purchase of a product and the name of the product is inscribed thereupon which is immediately
offered to the customer as a gift. For example, on buying a car when the card is scratched such
gifts are offered – TV, Refrigerator, Computer, Mixer, Dinner Set, Wristwatch, T-shirt, Iron Press,
etc.
Consumer Rights
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Right to Safety: The consumer has a right to be protected against goods and services whi ch are
hazardous to life and health. For instance, electrical appliances which are manufactured with
substandard products or do not conform to the safety norms might cause serious injury. Thus,
consumers are educated that they should use electrical appliances which are ISI marked as this
would be an assurance of such products meeting quality specifications.
Right to be informed: The consumer has a right to have complete information about the product
he intends to buy including its ingredients, date of manufacture, price, quantity, directions for
use, etc. It is because of this reason that the legal framework in India requires the manufactures
to provide such information on the package and label of the product.
Right to Choose: The consumer has the freedom to choose from a variety of products at
competitive prices. This implies that the marketers should offer a wide variety of products in
terms of quality, brand, prices, size, etc. and allow the consumer to make a choice from amongst
these.
Right to be heard: The consumer has a right to file a complaint and to be heard in case of
dissatisfaction with a good or a service. It is because of this reason that many enlightened
business firms have set up their own consumer service and grievance cells. Many consumer
organizations are also working towards this direction and helping consumers in Redressal of
their grievances.
Right to seek Redressal: The consumer has a right to get relief in case the product or service falls
short of his expectations. The Consumer Protection Act provides a number of reliefs to the
consumers including replacement of the product, removal of defect in the product,
compensation paid for any loss or injury suffered by the consumer, etc.
Right to Consumer Education: The consumer has a right to acquire knowledge and to be a wellinformed consumer throughout life. He should be aware about his rights and the reliefs
available to him in case of a product or service falling short of his expectations. Many consumer
organizations and some enlightened businesses are taking an active part in educating consumers
in this respect.
Consumer Responsibilities
1. Be aware about various goods and services available in the market so that an intelligent and wise
choice can be made.
2. Buy only standardized goods as they provide quality assurance. Thus, look for ISI mark on electrical
goods, FPO mark on food products, Hallmark on jewelry etc.
3. Learn about the risks associated with products and services, follow manufacturer’s instructions and
use the products safely.
4. Read labels carefully so as to have information about prices, net weight, manufacturing and expiry
dates, etc.
5. Assert yourself to ensure that you get a fair deal.
6. Be honest in your dealings. Choose only from legal goods and services and discourage unscrupulous
practices like black-marketing, hoarding etc.
7. Ask for a cash memo on purchase of goods or services. This would serve as a proof of the purchase
made.
8. File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods
purchased or services availed. Do not fail to take an action even whe n the amount involved is small.
Importance of consumer Protection
1. Consumer Ignorance: In the light of widespread ignorance of consumers about their rights and
reliefs available to them, it becomes necessary to educate them about the same so as to achieve
consumer awareness.
2. Unorganized Consumers: Consumers need to be organized in the form of consumer organizations
which would take care of their interests. Though, in India, we do have consumer organizations which
are working in this direction, adequate protection is required to be given to consumers till these
organizations become powerful enough to protect and promote the interests of consumers.
3. Widespread Exploitation of Consumers: Consumers might be exploited by unscrupulous, exploitative
and unfair trade practices like defective and unsafe products, adulteration, false and misleading
advertising, hoarding, black-marketing etc. Consumers need protection against such malpractices of
the sellers. From the point of view of Business A business must also lay emphasis on protecting the
consumers and adequately satisfying them.
4. Social Responsibility: A business has social responsibilities towards various interest groups. Business
organizations make money by selling goods and providing services to consumers. Thus, consumers
form an important group among the many stakeholders of business and like other stakeholders,
their interest has to be well taken care of.
5. Moral Justification: It is the moral duty of any business to take care of consumer’s interest and avoid
any form of their exploitation. Thus, a business must avoid unscrupulous, exploitative and unfair
trade practices like defective and unsafe products, adulteration, false and misleading advertising,
hoarding, black marketing etc.
District Forum
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The District Forum consists of a President and two other members, one of whom sh ould be a
woman. They all are appointed by the State Government concerned.
A complaint can to be made to the appropriate District Forum when the value of the goods or
services in question, along with the compensation claimed, does not exceed Rs. 20 lakhs.
On receiving the complaint, the District Forum shall refer the complaint to the party against
whom the complaint is filed. If required, the goods or a sample thereof, shall be sent for testing
in a laboratory.
The District Forum shall pass an order after considering the test report from the laboratory and
hearing to the party against whom the complaint is filed.
In case the aggrieved party is not satisfied with the order of the District Forum, he can appeal
before the State Commission within 30 days of the passing of the order.
State Forum
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Each State Commission consists of a President and not less than two other members, one of
whom should be a woman.
They are appointed by the State Government concerned. A complaint can to be made to the
appropriate State Commission when the value of the goods or services in question, along with
the compensation claimed, exceeds Rs. 20 lakhs but does not exceed Rs. 1 crore.
The appeals against the orders of a District Forum can also be filed before the State
Commission. On receiving the complaint, the State Commission shall refer the complaint to the
party against whom the complaint is filed.
If required, the goods or a sample thereof, shall be sent for testing in a laboratory.
The State Commission shall pass an order after considering the test report from the laboratory
and hearing to the party against whom the complaint is filed.
In case the aggrieved party is not satisfied with the order of the State Commission, he can
appeal before the National Commission within 30 days of the passing of the order.
National Forum
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The National Commission consists of a President and at least four other members, one of whom
should be a woman. They are appointed by the Central Government.
A complaint can to be made to the National Commission when the value of the goods or
services in question, along with the compensation claimed, exceeds Rs. 1 crore. The appeals
against the orders of a State Commission can also be filed before the National Commission.
On receiving the complaint, the National Commission shall refer the complaint to the party
against whom the complaint is filed. If required, the goods or a sample thereof, shall be sent for
testing in a laboratory.
The National Commission shall pass an order after considering the test report from the
laboratory and hearing to the party against whom the complaint is filed.
An order passed by the National Commission in a matter of its original jurisdiction is appealable
before the Supreme Court.
This means that only those appeals where the value of goods and services in question, along
with the compensation claimed, exceeded Rs.1 crore and where the aggrieved party was not
satisfied with the order of the National Commission, can be taken to the Supreme Court of India.
Moreover, in a case decided by the District Forum, the appeal can be filed before the State
Commission and, thereafter, the order of the State Commission can be challenged before the
National Commission
Remedies Under Consumer Protection Act
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Remove the defect in the product or to see that the defect in the products are removed.
To replace the goods – to get the replacement of goods
To return the price of the goods – to get back the prices of the goods.
To pay compensation – to receive compensation
To discontinue any unfair trade practice – to see that unfair trade practices are discontinued
Not to offer hazardous goods for sale – to restrict the sale of hazardous goods.
To seize the hazardous goods – to see that the hazardous goods are seized.