Kerala Plus Two Business Studies (DHSE) cheat sheet

Management is defined as the process of getting things done with the aim of achieving goals effectively and efficiently; effectiveness means completing the task on time, efficiency means doing it with minimum cost and resources.

Effectiveness and efficiency are independent: a firm can be effective but inefficient (goal achieved at high cost) or efficient but ineffective (low cost but poor-quality output that misses the goal).

Management is a goal-oriented, pervasive, continuous, intangible, composite and dynamic process; it is also both a science (organised body of knowledge) and an art (personal application).

Three levels of management: top (policy and strategy, e.g. board of directors), middle (interpret policy, departmental heads), supervisory (foreman, supervisor - directly oversees workers).

Functions of management are grouped as POSDC: planning, organising, staffing, directing and controlling; these are performed at every level, differing only in the share of time spent.

Management as a profession: it has a body of knowledge and a code of conduct, but entry is not restricted by law and fees are not fixed, so it is a profession only in a partial sense.

Coordinating is not a separate function but the essence of management, present in every function from planning to controlling.

Significance: helps achieve group goals, increases efficiency, creates a dynamic organisation, helps societal development, and integrates individual interests with organisational goals.

Management is socially invisible and intangible; its presence is inferred from results such as orderliness, reduced wastage and goal attainment.

F.W. Taylor's Scientific Management rests on four principles: science, not rule of thumb; harmony, not discord; cooperation, not individualism; development of each person to greatest efficiency and prosperity.

Taylor's techniques: time study (standard time per task), motion study (eliminate unnecessary movements), functional foremanship (8 specialists: route clerk, instruction card clerk, time and cost clerk, disciplinarian, speed boss, gang boss, repair boss, inspector), and differential piece wage system.

Taylor's differential piece rate pays a higher rate per piece for output above standard and a lower rate below it, rewarding efficiency rather than merely attendance.

Henri Fayol's 14 principles include division of work, authority and responsibility, discipline, unity of command, unity of direction, subordination of individual interest to general interest, remuneration, centralisation, scalar chain, order, equity, stability of personnel, initiative and esprit de corps.

Unity of command means one boss per subordinate; unity of direction means one head and one plan for activities having the same objective - the two are distinct.

Scalar chain is the formal line of authority from top to bottom; the gang plank is a shortcut permitted between two employees of equal rank in emergencies to avoid delay.

Esprit de corps means union is strength - management should build team spirit; equity means kindness and justice in dealings with employees.

Taylor focused on the shop floor and productivity with a mechanical view; Fayol focused on the whole organisation with a general administrative view, so their principles are complementary, not competing.

Technique vs principle: techniques are methods of doing work (time study), principles are general guidelines for managerial behaviour (unity of command).

Business environment means the sum of all external forces - economic, social, technological, political, legal and demographic - that affect a firm's performance but lie outside its control.

Features: totality of external forces, specific and general forces, inter-relatedness, dynamic nature, uncertainty, complexity and relativity (what is an opportunity for one firm may be a threat to another).

Dimensions: economic environment (interest rates, inflation, income levels), social environment (customs, values, family structure), technological environment, political environment, legal environment and demographic environment.

Importance: helps identify opportunities and threats early, gives the firm a first-mover advantage, helps tap useful resources, assists in coping with rapid change, and helps in planning and policy formulation.

Economic environment includes micro factors (customers, competitors, suppliers, public) and macro factors (national income, inflation, trade cycle, fiscal and monetary policy).

Legal environment is a subset of political environment; it includes legislation such as the Companies Act, Consumer Protection Act and labour laws that constrain business decisions.

Social environment changes (e.g. working women, nuclear families, health consciousness) create new demand and must be scanned continuously.

Environmental scanning is the systematic monitoring of the environment; it precedes planning and reduces the risk of strategic surprise.

Demonetisation, liberalisation and GST are examples of changes in the economic and political-legal environment that reshape business decisions.

Planning is deciding in advance what to do, how to do it, when to do it and who is to do it; it bridges the gap between where we are and where we want to go.

Features: primary function of management, forward-looking, continuous, intellectual process, involves choice among alternatives, focuses on objectives and is pervasive across levels.

Limitations: leads to rigidity, may not work in a dynamic environment, reduces creativity, involves huge cost, is time-consuming, and does not guarantee success.

Steps in planning: setting objectives, developing premises, identifying alternative courses of action, evaluating alternatives, selecting an alternative, implementing the plan and follow-up action.

Planning premises are assumptions about the future environment on which plans are based; they may be internal or external, controllable or non-controllable.

Types of plans: standing plans (objectives, strategy, policy, procedure, rule, method) and single-use plans (programme, budget); policies are general guides, rules are specific and rigid.

A strategy is a comprehensive plan for accomplishing objectives; a policy is a general statement that guides decision-making; a procedure is a chronological sequence of steps.

A budget is a statement of expected results expressed in numerical terms and is a single-use plan; a programme is a detailed statement of activities for a project.

Planning is the primary function because all other functions - organising, staffing, directing and controlling - are performed within the framework of plans.

Organising is the process of identifying and grouping work, defining and delegating responsibility and authority, and establishing relationships to enable people to work together effectively.

Steps: identification and division of work, departmentalisation, assignment of duties, and establishing reporting relationships.

Organisation structure types: functional structure (grouping by functions, suitable for single-product firms) and divisional structure (grouping by product or territory, suitable for multi-product firms).

Functional structure advantages: specialisation, easier supervision, economies of scale; disadvantage: departmental conflicts and functional empires.

Divisional structure advantages: product specialisation, accountability and faster decisions; disadvantage: duplication of resources and higher cost.

Delegation is the downward transfer of authority from a superior to a subordinate; elements are authority, responsibility and accountability; authority flows downward, accountability flows upward.

Authority can be delegated but responsibility cannot; accountability cannot be delegated and remains with the delegating superior.

Decentralisation is the systematic dispersal of decision-making authority to lower levels; it is an extension of delegation and is not the same as delegation, which is between one superior and one subordinate.

Span of management (span of control) refers to the number of subordinates a manager can effectively supervise; a narrow span gives a tall structure, a wide span gives a flat structure.

Staffing is the process of filling positions with competent people: manpower planning, recruitment, selection, placement, training and development, performance appraisal, promotion and compensation.

Recruitment is searching for prospective employees and stimulating them to apply; it is positive, while selection is negative because it rejects unsuitable candidates.

Internal sources of recruitment: promotion, transfer, internal memo, employee recommendations; external sources: direct recruitment, casual callers, advertisement, employment exchange, campus recruitment, consultants, contractors and online portals.

Selection is a series of steps: preliminary screening, selection tests, employment interview, reference checks, selection decision, medical examination, job offer and contract of employment.

Types of selection tests: intelligence, aptitude, personality, trade or proficiency, interest and graphology tests.

Training means imparting specific job-related skills; development means overall growth of the employee; training is short-term and development is long-term.

Training methods: on-the-job (apprenticeship, coaching, internship, job rotation) and off-the-job (classroom lectures, films, case study, computer modelling, vestibule training).

Performance appraisal compares actual performance against standards; it is the basis for promotion, transfer, training needs and compensation decisions.

A compensation plan includes wages and salaries, incentives, bonus, fringe benefits and perquisites; it should be fair and motivate employees.

Directing means instructing, guiding, counselling, motivating and leading people to achieve organisational objectives; it is a continuous, human and pervasive function.

Elements of directing: supervision, motivation, leadership and communication.

Maslow's need hierarchy from bottom to top: physiological, safety, social (affection), esteem and self-actualisation needs; a satisfied need ceases to motivate.

Financial and non-financial incentives: financial (pay, bonus, profit sharing, co-partnership, retirement benefits) and non-financial (status, recognition, job security, employee participation, delegation, job enrichment).

Leadership styles: autocratic (leader takes decisions alone), democratic (participation of subordinates) and laissez-faire (full freedom to subordinates); a democratic style generally raises morale.

Communication is the exchange of information and understanding between two or more persons; the process involves sender, message, encoding, channel, receiver, decoding and feedback.

Formal communication flows through the chain of command (downward, upward, horizontal); informal communication (grapevine) is faster but less reliable and may distort messages.

Barriers to communication: semantic (language, poor vocabulary), psychological (premature evaluation, distrust), organisational (rigid structure, status) and personal (fear, lack of confidence).

Supervision means overseeing subordinates at work; the supervisor is the link between management and workers and is known as the 'gatekeeper' or 'man in the middle'.

Controlling is the process of ensuring that actual activities conform to planned activities; it compares performance with standards and takes corrective action.

Steps in controlling: setting performance standards, measuring actual performance, comparing actual with standards, analysing deviations and taking corrective action.

Controlling is both backward-looking (compares past performance) and forward-looking (corrects future action); it is the last function but is closely linked to planning.

Planning and controlling are inseparable: planning is the basis of control, and control provides the information for future planning; planning without control is meaningless.

Critical point control means focusing attention on key result areas (KRAs) rather than on every minor activity.

Management by exception means attending only to significant deviations beyond the acceptable range, leaving minor deviations to subordinates.

Types of control: feed-forward (before activity), concurrent (during activity) and feedback (after activity) control.

A deviation is significant when it exceeds the acceptable range; the manager must then find the cause and take corrective action.

Controlling is a continuous, dynamic and pervasive process; it is not a one-time activity and is exercised at all levels of management.

Financial management deals with planning, acquiring, utilising and disposing of funds to maximise the wealth of shareholders; its objective is wealth maximisation, not merely profit maximisation.

Three financial decisions: investment decision (capital budgeting and working capital), financing decision (debt-equity mix) and dividend decision (distribution of profit).

Capital budgeting techniques: payback period, average rate of return, net present value (NPV), internal rate of return (IRR) and profitability index; NPV and IRR consider the time value of money.

Capital structure refers to the mix of debt and equity; a high debt component raises financial risk and interest burden but may increase return on equity through trading on equity.

Fixed capital refers to long-term assets; factors affecting it include nature of business, scale of operations, technology, growth prospects and choice of technique.

Working capital is the excess of current assets over current liabilities; factors include nature of business, business cycle, operating cycle, credit allowed and credit availed.

Working capital = Current Assets − Current Liabilities; it measures liquidity and the ability to meet short-term obligations.

Dividend decision depends on earnings, stability, cash flow, growth opportunities, tax and legal constraints; a stable dividend policy signals confidence to investors.

Financial planning ensures adequate funds, avoids idle or excessive funds, and helps the firm meet its objectives without financial strain.

Financial market is a market for the creation and exchange of financial assets; it is divided into money market (short-term, up to one year) and capital market (long-term).

Money market instruments: call money, treasury bills, commercial paper, certificate of deposit and commercial bill; the market is regulated by the RBI.

Capital market has a primary market (new issues) and a secondary market (stock exchange); the primary market is regulated by SEBI.

Methods of issuing securities in the primary market: offer through prospectus, offer for sale, private placement, rights issue and e-IPOs.

A stock exchange provides liquidity, price discovery, safety of transactions and helps in raising capital; NSE and BSE are the major Indian stock exchanges.

SEBI was set up in 1988 and given statutory status in 1992; its functions are protective, regulatory and developmental.

A demat account holds securities in electronic form; it reduces paper work and the risk of loss or theft of share certificates.

Depositories in India are NSDL and CDSL; they hold securities in electronic form and transfer them through depository participants.

The National Stock Exchange introduced screen-based trading in India; the BSE Sensex and NSE Nifty are the key market indices.

Marketing is the process of identifying and satisfying customer needs profitably; marketing management is the management of the marketing function.

Marketing mix = 4Ps: product, price, place and promotion; for services it extends to 7Ps with people, process and physical evidence.

Product is a bundle of utilities; its levels are core product, actual product and augmented product; branding, packaging and labelling are important product decisions.

Pricing factors: cost of production, utility and demand, competition, government regulation and objectives of the firm; pricing methods include cost-plus, penetration and skimming.

Channels of distribution: direct (zero level) and indirect (one, two or three level); a longer channel adds intermediaries and cost but widens reach.

Promotion mix: advertising, sales promotion, personal selling, publicity and public relations; advertising is paid, impersonal and mass communication.

Advertising objectives: to inform, to persuade and to remind; it is a paid form of non-personal communication by an identified sponsor.

Physical distribution involves transportation, warehousing, inventory control and order processing; it ensures the product reaches the customer at the right time and place.

Marketing vs selling: marketing focuses on customer needs and starts before production; selling focuses on the product and starts after production.

A consumer is a person who buys goods or hires services for consideration for personal use and not for resale or commercial purpose.

Consumer rights: right to safety, right to be informed, right to choose, right to be heard, right to seek redressal, right to consumer education and right to a healthy environment.

Consumer responsibilities: be aware of rights, buy quality-certified products, read labels, ask for a cash memo, and file a complaint for genuine grievances.

The Consumer Protection Act, 2019 replaced the 1986 Act; it set up the Central Consumer Protection Authority (CCPA) and added e-commerce and product liability provisions.

Three-tier redressal machinery: District Commission (up to ₹50 lakh), State Commission (₹50 lakh to ₹2 crore) and National Commission (above ₹2 crore).

A complaint must be filed within two years of the cause of action; the limitation period may be condoned for sufficient cause.

The CCPA can investigate, recall unsafe goods, order refunds, and impose penalties on misleading advertisements and unfair trade practices.

Ways of consumer protection: self-regulation by business, consumer awareness, legislative measures and consumer courts.

A cash memo is proof of purchase and is essential for filing a complaint; the right to be informed includes the right to know quality, quantity, price and standard.