UPMSP Class 12 Business Studies 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.

Three levels of management: top management (board of directors, CEO, managing director) frames policies and objectives; middle management (departmental heads) interprets policy and assigns duties; supervisory management (supervisors, foremen) oversees day-to-day operations and worker performance.

Three managerial functions are the core of the process: planning (setting goals and choosing a course of action), organising (arranging resources and tasks), staffing (filling positions with competent people), plus directing and controlling to complete the five-function cycle.

Management is a goal-oriented, pervasive, continuous, multidimensional activity: it is multidimensional because it covers management of work, management of people and management of operations.

Management is both a science and an art: it has organised knowledge and a cause-effect relationship (science) but also requires personal skill and creativity in application (art); it is a profession only partly because entry is not restricted by a mandatory licence.

Coordination is not a separate function but the essence of management, synchronising the efforts of all departments and levels; it is achieved through planning, organising, staffing, directing and controlling.

Objectives of management: organisational objectives (profit, growth, survival), social objectives (environmental protection, community welfare, employment) and personal objectives (employee salary, job satisfaction, growth).

Importance of management: helps achieve group goals, increases efficiency, creates a dynamic organisation, helps in the development of society, and provides stability and coordination to the enterprise.

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

Taylor's techniques: time study (standard time for a task), motion study (eliminating unnecessary movements), functional foremanship (eight bosses: route clerk, instruction card clerk, time and cost clerk, disciplinarian, gang boss, speed boss, repair boss, inspector), differential piece wage system and standardisation of work.

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 and decentralisation, scalar chain, order, equity, stability of tenure, initiative and esprit de corps.

Unity of command means one subordinate receives orders from only one superior; unity of direction means one head and one plan for a group of activities with the same objective. Violating unity of command causes confusion and conflict.

The scalar chain is the formal line of authority from top to bottom; the gang plank is a shortcut that allows two employees at the same level to communicate directly in an emergency, bypassing the chain.

Fayol's principle of authority and responsibility states that authority must be balanced by responsibility; giving responsibility without authority makes a manager ineffective, and authority without responsibility invites misuse.

Taylor's differential piece wage system pays a higher rate per unit to workers who produce above the standard output and a lower rate to those below it, using wages as a motivator for efficiency.

Fayol's principles are general guidelines applicable to all types of organisations, whereas Taylor's techniques focus on shop-floor productivity; Fayol is regarded as the father of general management and Taylor as the father of scientific management.

Business environment means the sum of all individuals, institutions and other forces external to a business that affect its performance; it is divided into micro environment (specific forces) and macro environment (general forces).

Micro environment components: suppliers, customers, competitors, market intermediaries, the public and the organisation itself; these directly and immediately affect day-to-day operations.

Macro environment components: economic, social, technological, political and legal environments; these affect all firms in an industry and are largely beyond a firm's control.

Features of business environment: totality of external forces, specific and general forces, inter-relatedness, dynamic nature, uncertainty and relativity (environment differs from country to country and region to region).

Dimensions of the economic environment include interest rates, inflation, income levels, stock market movements and the stage of the business cycle; these shape demand and cost of capital.

Importance of understanding the environment: it helps in identifying opportunities and threats, tapping useful resources, coping with rapid change, assisting in planning and policy formulation, and improving performance.

The social environment covers customs, values, family structure, education and consumer preferences; the technological environment covers new processes, products and innovations that can make existing products obsolete.

Legal environment includes legislation such as the Companies Act, Consumer Protection Act and labour laws; political environment includes the political system, government attitude and stability of the ruling party.

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 be.

Features of planning: it focuses on objectives, is a primary function of management, is pervasive, is continuous, is futuristic, involves decision-making and is a mental exercise.

Planning process steps: setting objectives, developing premises, identifying alternative courses of action, evaluating alternatives, selecting an alternative, implementing the plan and follow-up action.

A plan is a specific statement of what is to be done; a planning premise is an assumption about the future environment on which plans are based; forecasts and assumptions must be clearly stated.

Types of plans: objectives (end states), strategy (comprehensive long-term plan for dealing with the environment), policy (general guideline for decision-making), procedure (sequence of steps), rule (specific do/don't statement) and programme and budget.

A strategy differs from a policy: a strategy is a broad plan to meet competition and achieve objectives, while a policy is a standing guideline that defines the boundaries within which decisions are made.

Limitations of planning: it may not work in a dynamic environment, it reduces flexibility, it involves huge costs and time, it may become rigid, and it does not guarantee success.

Planning and controlling are inseparable twins: planning provides the standards against which performance is measured, and controlling supplies information for future planning.

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

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

Organisation structure types: functional structure (grouping by function such as production, marketing, finance) and divisional structure (grouping by product, territory or customer); functional suits single-product firms, divisional suits multi-product firms.

Formal organisation is deliberately designed and defined by rules with clear authority; informal organisation arises from social interaction and has no written rules but meets social needs and speeds up communication.

Delegation is the downward transfer of authority from a superior to a subordinate; its elements are authority, responsibility and accountability. Authority can be delegated, responsibility can be assigned, but accountability cannot be delegated.

Centralisation means authority is retained at the top; decentralisation means authority is dispersed to lower levels; decentralisation is a philosophy of participative management, not merely the absence of centralisation.

Span of management (span of control) is the number of subordinates a superior can effectively supervise; a narrow span produces a tall structure with many levels, a wide span produces a flat structure.

Importance of organising: benefits of specialisation, clarity in working relationships, optimum use of resources, adaptation to change, effective administration, growth and development of personnel.

Staffing is the process of filling positions with competent people and keeping them satisfied; it includes manpower planning, recruitment, selection, placement, training and development, and remuneration.

Manpower planning estimates the number and type of people needed and matches them with available human resources; it involves demand forecasting, supply forecasting and gap analysis.

Recruitment is searching for prospective employees and stimulating them to apply; sources are internal (promotion, transfer) and external (advertisements, employment exchanges, campus recruitment, consultants, recommendations).

Selection is the process of choosing the most suitable candidate; steps include preliminary screening, selection tests, employment interview, reference checks, selection decision, medical examination and job offer.

Selection tests include intelligence tests, aptitude tests, personality tests, trade tests and interest tests; an interview is a formal in-depth conversation to assess suitability.

Training is a systematic process of increasing the knowledge and skills of employees for a particular job; development refers to overall growth of an employee's personality and capabilities.

Methods of training: on-the-job (apprenticeship, coaching, internship, job rotation) and off-the-job (vestibule training, classroom lectures, case studies, role playing, computer modelling).

Remuneration components include basic pay, dearness allowance, house rent allowance, dearness, provident fund, gratuity and fringe benefits; incentives may be financial (bonus, commission) or non-financial (recognition, job enrichment).

Directing is instructing, guiding, supervising and motivating people to achieve organisational objectives; its elements are supervision, motivation, leadership and communication.

Supervision means instructing, guiding and monitoring workers at work; a supervisor is the link between management and workers and acts as a gang boss, a mediator and a mentor.

Maslow's need hierarchy orders needs as physiological, safety, social (affiliation), esteem and self-actualisation; a satisfied need no longer motivates, and needs are met in ascending order.

Motivation theories: Maslow's hierarchy, Herzberg's two-factor theory (hygiene factors such as pay and working conditions prevent dissatisfaction; motivators such as recognition and growth create satisfaction), and McGregor's Theory X (workers dislike work) and Theory Y (workers accept responsibility).

Financial incentives include pay, dearness allowance, bonus, profit sharing, co-partnership and commissions; non-financial incentives include status, organisational climate, career advancement, job enrichment and employee recognition.

Leadership styles: autocratic (leader alone decides), democratic (participation of subordinates) and laissez-faire (free-rein, subordinates decide); a democratic style typically raises morale and commitment.

Communication is the exchange of information and understanding between persons; the process has a sender, message, encoding, channel, decoding, receiver and feedback, and may be formal or informal (grapevine).

Barriers to communication are semantic (language, jargon), psychological (premature evaluation, distrust), organisational (rules, hierarchy, status) and personal (fear, poor listening); feedback and simple language reduce them.

Controlling is measuring actual performance against planned standards, identifying deviations and taking corrective action; it is both backward-looking (review) and forward-looking (improvement).

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

Critical point control means focusing on key result areas (KRAs) where deviations are most significant; management by exception means attending only to deviations that exceed acceptable limits.

Standards can be quantitative (sales volume, cost, profit, time) or qualitative (customer satisfaction, employee morale); qualitative standards are harder to measure but still guide control.

Controlling is related to planning: planning provides the standards and controlling checks them; controlling without planning is meaningless, and planning without controlling is incomplete.

Types of control: feed-forward control (before operations begin, preventive), concurrent control (during operations) and feedback control (after operations, corrective).

A budget is a quantitative statement of expected results; budgetary control compares actual performance with budgeted figures and explains variances.

Limitations of controlling: difficulty in setting qualitative standards, resistance from employees, costly and time-consuming measurement, and control may be mistaken for the end rather than the means.

Financial management deals with planning, organising, directing and controlling the financial activities of an enterprise, mainly procurement of funds and their effective utilisation.

The three financial decisions are investment (capital budgeting, choosing long-term assets), financing (debt-equity mix and cost of capital) and dividend (distribution of profit, retained earnings versus dividend payout).

Capital structure is the mix of debt and equity; debt is cheaper because interest is tax-deductible, but excessive debt raises financial risk and fixed obligations.

Financial leverage is the proportion of debt in total capital; higher leverage increases return on equity in good times but magnifies loss when earnings fall.

Factors affecting capital structure: cost of debt, risk, cash flow position, control considerations, flexibility, growth prospects, tax rate and floatation costs.

Dividend decision factors: earnings, stability of earnings, cash flow position, shareholders' preference, taxation, legal constraints, access to capital market and growth opportunities.

Working capital is the capital needed for day-to-day operations; it equals current assets minus current liabilities, and its requirement rises with a longer operating cycle.

Fixed capital is invested in long-term assets such as land, plant and machinery; its requirement depends on the nature of business, scale of operations and choice of technology.

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

Money market instruments include treasury bills, commercial paper, certificates of deposit, call money and commercial bills; the Reserve Bank of India regulates the money market.

The primary market deals in new issues of securities through public issue, rights issue, bonus issue and private placement; the company receives the funds.

The secondary market (stock exchange) trades existing securities between investors; it provides liquidity and price discovery but the issuing company receives nothing from these trades.

A stock exchange must be recognised by SEBI; National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) are major Indian exchanges, and SEBI regulates the securities market.

A depository holds securities in electronic form; a demat account enables paperless holding and transfer, while a depository participant (DP) links the investor to the depository.

Methods of raising capital in the primary market: initial public offer (IPO), follow-on public offer (FPO), rights issue to existing shareholders, private placement and employee stock option plans.

Functions of a stock exchange: providing liquidity and marketability, pricing of securities, safety of transactions, spreading equity cult and contributing to economic growth.

Marketing is the process of identifying customer needs and wants, and satisfying them profitably through the exchange of products and services; it is customer-oriented, not merely selling.

The marketing mix has four Ps: product (quality, features, branding, packaging), price (pricing objectives and methods), place (channels of distribution) and promotion (advertising, sales promotion, personal selling, publicity).

Product life cycle stages are introduction, growth, maturity and decline; pricing and promotion strategies differ by stage, for example skimming in introduction and competitive pricing in maturity.

Branding gives a product a name, sign or symbol that distinguishes it; a brand name is the verbal part, a brand mark is the symbol, and a trademark is a legally protected brand.

Channels of distribution: zero level (direct from producer to consumer), one level (retailer), two levels (wholesaler and retailer) and three levels (agent, wholesaler, retailer); choice depends on product, market and company factors.

Pricing methods include cost-plus (mark-up), marginal cost, going-rate, sealed-bid and perceived-value pricing; price skimming sets a high launch price, penetration pricing sets a low launch price to capture share.

Promotion tools: advertising (paid, impersonal mass communication), sales promotion (short-term incentives such as discounts and contests), personal selling (face-to-face) and publicity (unpaid mention in media).

Physical distribution components are transportation, warehousing, inventory control and order processing; they ensure the product reaches the consumer at the right time and place.

A consumer is a person who buys goods or hires services for consideration for personal use, and includes any user of such goods or services with the buyer's approval; it excludes purchases for resale or commercial purpose.

The Consumer Protection Act, 2019 replaced the 1986 Act and established the Central Consumer Protection Authority (CCPA) to regulate, investigate and take action against unfair trade practices.

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: check quality and price, ask for a cash memo, read labels and instructions, be aware of rights, and file a complaint when cheated rather than accepting poor quality.

Redressal machinery under the 2019 Act: District Commission (claims up to Rs 1 crore), State Commission (above Rs 1 crore up to Rs 10 crore) and National Commission (above Rs 10 crore).

A complaint must be filed within two years from the date the cause of action arises; the District Commission may condone delay on sufficient cause being shown.

Unfair trade practices include false representation, misleading advertisements, bait-and-switch selling and refusal to take back defective goods; restrictive trade practices restrict competition or consumer choice.

A consumer can claim replacement of goods, removal of defects, refund of price, compensation for loss or injury, and discontinuation of unfair practices; the Act also provides for product liability and e-commerce rules.