Karnataka II PUC Business Studies (KSEAB) cheat sheet

Definition (Koontz and O'Donnell): management is the process of getting things done with the aim of achieving goals effectively and efficiently.

Efficiency means doing the task correctly at minimum cost; effectiveness means doing the right task and completing it on time. A firm can be effective yet inefficient.

Characteristics: goal-oriented, all-pervasive, multidimensional (management of work, people and operations), continuous process, group activity, dynamic function, intangible force.

Objectives: organisational (survival, profit, growth), social (public welfare, clean environment, employment generation) and personal (salary, job satisfaction, growth of employees).

Levels: top level (objectives and policy), middle level (departmental targets and implementation), supervisory level (day-to-day supervision by foremen and supervisors).

Five functions: planning, organising, staffing, directing and controlling; coordination is not a sixth function but the essence that runs through all five.

Coordination features: integration of group effort, not a one-time act, continuous, all-pervasive, deliberate; achieved through planning, organising, staffing, directing and controlling.

Management as science (systematic body of knowledge and principles based on observation), as art (personal skill and practice), as profession (only partly, since no degree or licence is compulsory).

Significance: helps achieve group goals, increases efficiency, creates a dynamic organisation and contributes to the development of society.

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

Unity of command means one boss per subordinate (prevents confusion); unity of direction means one head and one plan for a group of activities having the same objective (prevents duplication of effort).

Gang plank is Fayol's shortcut in the scalar chain that lets employees at the same level communicate directly in an emergency, avoiding delay.

Taylor's principles: science, not rule of thumb; harmony, not discord; cooperation, not individualism; development of each person to his or her greatest efficiency and prosperity.

Functional foremanship: eight specialists under one worker. Planning side: route clerk, instruction card clerk, time and cost clerk, disciplinarian. Production side: speed boss, gang boss, repair boss, inspector.

Techniques of scientific management: time study, motion study, method study, fatigue study, differential piece wage system, standardisation and simplification of work.

Differential piece wage system: workers who complete the standard output get a higher piece rate, while those below the standard get a lower rate, rewarding efficiency.

Nature of principles: universal applicability, general guidelines, flexible, relative and contingent, mainly behavioural; they do not provide readymade solutions for every situation.

Taylor versus Fayol: Taylor worked from the shop floor upward on scientific management; Fayol worked from the top downward on general administration.

Definition: the sum of all individuals, institutions and other forces outside the business that may affect its performance but lie beyond its control.

Features: totality of external forces, both specific and general forces, inter-relatedness, dynamic nature, uncertainty, complexity and relativity.

Dimensions: economic, social, technological, political and legal environment.

Economic environment includes interest rates, inflation, income and purchasing power, stock market indices, value of the rupee, tax rates and the business cycle.

Social environment includes customs, traditions, values, family structure, education level, urbanisation and consumer lifestyle.

Importance: identify opportunities and gain first-mover advantage, identify threats and early warning signals, tap useful resources, cope with rapid change, assist in planning, improve performance.

Liberalisation of 1991: abolition of industrial licensing for most industries, dereservation of public-sector areas, freer foreign investment, and replacement of the MRTP Act 1969 by the Competition Act 2002.

Privatisation means disinvestment of public-sector units; globalisation means integration of the domestic economy with the world economy through trade, outsourcing and WTO commitments.

Specific forces (customers, suppliers, competitors, investors) affect day-to-day operations; general forces (economic, social, political, legal, technological) affect long-term strategy.

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

Features: focus on objectives, primary function of management, pervasive, mental exercise, continuous process, futuristic, involves choosing among alternatives.

Process: setting objectives, developing premises, identifying alternative courses, evaluating alternatives, selecting an alternative, implementing the plan, follow-up action.

Importance: provides direction, reduces risk of uncertainty, reduces overlapping and wasteful activities, promotes innovative ideas, facilitates decision-making, sets standards for controlling.

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

Single-use plans: programme and budget. Standing plans: objectives, strategy, policy, procedure, rule and method.

Policy is a general statement guiding thinking; procedure is the chronological sequence of steps for a routine activity; rule is a specific do or do not with a penalty; method is the prescribed way of performing one step of a procedure.

Planning and controlling are inseparable twins: planning is prescriptive and forward-looking, controlling is evaluative and backward-looking, and control has no standards without plans.

Planning premises are assumptions about the future environment, internal or external, on which plans are built; demand forecasts and expected government policy are examples.

Definition: identifying and grouping work, assigning duties, delegating authority and creating reporting relationships so that people work together effectively towards objectives.

Process: division of work, departmentation, assignment of duties, establishing reporting relationships.

Importance: benefits of specialisation, clarity in working relationships, optimum utilisation of resources, adaptability to change, development of personnel, expansion and growth.

Functional structure groups activities by function such as production, marketing and finance; suitable for single-product firms, it gives specialisation but may cause departmental conflict and delayed decisions.

Divisional structure groups activities by product or division; suitable for multi-product firms, it gives product focus and accountability but causes duplication of resources and higher cost.

Elements of delegation: authority (right to command), responsibility (obligation to perform the task), accountability (answerability to the superior, which flows upward and cannot be delegated).

Principles of delegation: scalar chain, authority, responsibility, accountability and managerial principle (delegate to the level where competence exists).

Decentralisation is the systematic delegation of authority at all levels; it is an extension of delegation, gives autonomy, and is a philosophy rather than a mere technique.

Factors favouring decentralisation: large size of the organisation, need for quick decisions, growth and diversification plans, better control techniques, and a supportive organisational culture.

Definition: filling positions in the organisation and keeping them filled, that is, finding the right person for the right job.

Staffing process: estimating manpower requirements, recruitment, selection, placement and orientation, training and development, performance appraisal, promotion and career planning, compensation.

Internal recruitment sources: transfer and promotion. External: direct recruitment, casual callers, advertisement, employment exchange, campus recruitment, recommendations, labour contractors, web publishing, placement agencies.

Selection process: preliminary screening, selection tests, employment interview, reference checks, selection decision, medical examination, job offer, contract of employment.

Selection tests: intelligence, aptitude, personality, trade (proficiency) and interest tests.

Training versus development: training is job-specific and short-term; development is career-oriented and long-term.

On-the-job methods: apprenticeship, coaching, internship, job rotation, committee assignment. Off-the-job methods: classroom lectures, vestibule training, films, case study, computer modelling, conference.

Benefits of training: higher productivity, fewer accidents, better quality, less need for supervision, higher morale and employee empowerment.

Staffing is a part of human resource management; it is a line responsibility of every manager, supported by the human resource department.

Definition: instructing, guiding, counselling, motivating and leading people so that they work willingly towards organisational objectives.

Features: initiates action, continuous process, flows from top to bottom, human element involved, pervasive in nature.

Four elements: supervision, motivation, leadership and communication.

Maslow's hierarchy from bottom to top: physiological, safety, social or belonging, esteem, self-actualisation; a satisfied need ceases to motivate.

Financial incentives: pay and allowances, dearness allowance, bonus, profit sharing, stock options, commission, retirement benefits.

Non-financial incentives: status, organisational responsibility, recognition, job security, promotion, job enrichment, employee participation.

Communication: formal (downward, upward, horizontal, diagonal) and informal (grapevine). Barriers are semantic, psychological, organisational and personal.

Leadership styles: autocratic (leader decides alone), democratic (leader consults subordinates), laissez-faire (complete freedom to subordinates).

Principles of directing include maximum individual contribution, harmony of objectives, unity of command, appropriate direction technique, managerial communication and effective leadership.

Definition: comparing actual performance with standards and taking corrective action so that activities conform to plans.

Nature: goal-oriented, pervasive, both backward-looking (review of past performance) and forward-looking (improving future performance), continuous, dynamic and closely linked to planning.

Process: setting performance standards, measuring actual performance, comparing actual with standards, analysing deviations, taking corrective action.

Critical point control: focus on key result areas where a small deviation would seriously damage performance, rather than on every minor activity.

Management by exception: investigate only those deviations that go beyond the permissible range; minor deviations are left to subordinates, saving time and effort.

Importance: accomplishment of goals, judging accuracy of standards, efficient use of resources, improving employee morale, ensuring order and discipline, facilitating coordination, improving future planning.

Limitations: difficulty in setting quantitative standards, little control over external factors, resistance from employees, costliness, and delay in taking control action.

Planning and controlling are inseparable: planning supplies the standards, controlling verifies whether they are met; planning is prescriptive, controlling is evaluative.

Standards may be quantitative (output, cost, time, sales volume) or qualitative (managerial performance, employee morale, customer satisfaction).

Definition: the activity concerned with the procurement of funds and their effective utilisation in the business.

Three decisions: investment decision (capital budgeting), financing decision (debt-equity mix) and dividend decision.

Profit maximisation versus wealth maximisation: wealth maximisation, meaning maximising the market value of shares, is preferred because it considers risk and the time value of money.

Capital structure factors: cash flow position, interest coverage ratio, return on investment, cost of debt, tax rate, floatation costs, flexibility, control, regulatory framework, stock market conditions, capital market conditions.

Fixed capital factors: nature and scale of business, choice of technique, technology upgradation, growth prospects, diversification, financing alternatives, level of collaboration, lease financing.

Working capital factors: nature of business, business cycle, operating cycle, credit allowed to customers, credit availed from suppliers, operating efficiency, availability of raw material.

Trading on equity: using debt in the capital structure to raise earnings per share when return on investment exceeds the after-tax cost of debt.

Dividend decision factors: earnings, stability of earnings, cash flow position, growth opportunities, stability of dividend, shareholders' preference, taxation, stock market reaction, legal and contractual constraints.

Objectives of financial planning: ensure adequate funds at the right time and avoid idle or excessive funds; its components are the capital structure plan and the financial plan.

Definition: an institutional arrangement in which savings are mobilised from surplus units and channelised to deficit units, thereby converting savings into investment.

Money market deals in short-term funds up to one year; capital market deals in medium and long-term funds through equity and debt securities.

Money market instruments: call money, treasury bills, commercial paper, certificate of deposit and commercial bill.

Primary market (new issue market) methods: offer through prospectus, offer for sale, private placement, rights issue and e-IPO.

Secondary market (stock exchange) functions: provides liquidity, price discovery, safety of transactions, spread of the equity cult and contribution to economic growth.

SEBI was set up in 1988 and became a statutory body in 1992; its objectives are to protect investors' interests, regulate the securities market and promote its development.

Trading procedure: choose a broker, open a demat and trading account, place the order, execution and matching on the exchange, settlement through the clearing corporation, transfer in the depository.

SENSEX is the benchmark index of BSE and NIFTY of NSE; NSDL and CDSL are the two depositories in India.

Primary market deals directly between the issuing company and investors; the secondary market deals between investors, so the company receives no fresh funds there.

Marketing is the process of identifying customer needs and satisfying them profitably; selling is only one part of marketing, whereas marketing begins before production and continues after sale.

Marketing mix: product, price, place (physical distribution) and promotion.

Functions of marketing: gathering market information, marketing planning, product design and development, standardisation and grading, packaging and labelling, branding, customer support services, pricing, promotion, physical distribution, transportation, storage, selling.

Product classification: consumer products (convenience, shopping, speciality, unsought) and industrial products (raw material, capital equipment, components, supplies).

Brand components: brand name (can be spoken), brand mark (visual but not speakable), trademark (legally protected brand or part of it).

Packaging levels: primary (immediate wrapper), secondary (protects the primary package) and transportation (for bulk transport). Functions: product protection, identification, convenience and promotion.

Labelling functions: describes the product, grades it, identifies the brand, promotes it, and gives statutory information such as ingredients, quantity and expiry date.

Promotion mix: advertising, sales promotion, personal selling and publicity; advertising is paid, impersonal mass communication by an identified sponsor.

Factors affecting price: cost, utility and demand, competition, government regulation, pricing objectives and marketing methods used. Channel levels: zero level (direct), one level (retailer), two level (wholesaler, retailer), three level (agent, wholesaler, retailer).

Consumer: a person who buys goods or hires services for personal use and not for resale or any commercial purpose.

Six consumer rights: right to safety, right to be informed, right to choose, right to be heard, right to seek redressal, right to consumer education.

Right to be informed gives access to details of the manufacturer, price, quantity, ingredients, batch number, date of manufacture, expiry date and directions for use.

The Consumer Protection Act 2019 created a three-tier quasi-judicial machinery: District Commission, State Commission and National Commission.

Pecuniary jurisdiction under the 2021 rules: District Commission up to 50 lakh rupees, State Commission above 50 lakh and up to 2 crore rupees, National Commission above 2 crore rupees (the 2019 Act originally set 1 crore and 10 crore).

A complaint must be filed within two years of the cause of action; appeal against a District Commission order lies with the State Commission within 30 days, and against a State Commission order with the National Commission within 30 days.

Who may file: the consumer, a registered consumer association, the Central or State government, a legal heir or representative, or a group of consumers with the same interest.

Reliefs include removal of the defect, replacement of goods, refund of price, compensation for loss or injury, and discontinuation of unfair or restrictive trade practices.

Quality certification marks: ISI for industrial goods, AGMARK for agricultural products, Hallmark for gold jewellery and FSSAI for food products.