PROJECT REPORT ON

A STUDY ON RESOURCE ALLOCATION

UNIVERSITY OF MUMBAI

MASTER OF COMMERCE
(Accountancy)
SEMESTER I
2015-16

SUBMITTED BY
Name: VIRAJ V. BALSARA

Roll No.: 32

PROJECT GUIDE
Subject Teacher name
DR. POONAM KAKKAD
K.P.B HINDUJA COLLEGE OF COMMERCE
315, NEW CHARNI ROAD, MUMBAI-400 004

M.Com (Accountancy)
1st SEMESTER

A STUDY ON RESOURCE ALLOCATION

SUBMITTED BY
VIRAJ BALSARA
Roll No.: 32

008

Smt. P.D. Hinduja Trusts

K.P.B. HINDUJA COLLEGE OF COMMERCE

315, New Charni Road, Mumbai 400 004 Tel.: 022- 40989000 Fax: 2385 93 97. Email:

NAAC Re-Accredited A

THE BEST COLLEGE OF UNIVERSITY OF MUMBAI FOR THE ACADEMIC YEAR 2010-2
Prin. Dr. Minu Madlani (M. Com., Ph. D.)

CERTIFICATE
This is to certify that Ms. VIRAJ V. BALSARA

of

M.Com (Accountancy)

Semester 1st [2015-2016] has successfully completed the Project on A

STUDY ON RESOURCE ALLOCATION under the guidance of DR.
POONAM KAKKAD.

________________
Project Guide

________________
Co-coordinator

________________

________________

Internal Examiner

External Examiner

________________
Principal

________________
College Seal

DECLARATION
I Mr. VIRAJ V. BALSARA student of M.Com-Accountancy, 1st semester
(2015-2016), hereby declare that I have completed the project on A STUDY
ON RESOURCE ALLOCATION.

The information submitted is true and original copy to the best of our
knowledge.

(Signature)
Student

INDEX
SR. No
1

1.1
1.2
1.3

TOPIC
INTRODUCTION
DEFINTION OF RESOURCE ALLOACTION
METHODS OF RESOURCE ALLOATION

PAGES
6-9

TYPES OF RESOURCE ALLOCATION

10-15

RESOURCE ALLOCATION PROCESS &

16-17

4
5

STRATEGIES
RESOURCE ALLOCATION PATTERN
FACTORS AFFECTING RESOURCE

18-23
24-26

ALLOCATION
6
7
8

DIFFICULTIES IN RESOURCE ALLOCATION

CONCLUSION
BIBLOGRAPHY

27-30
31
32

CHAPTER 1: A STUDY ON RESOURCE ALLOCATION

1.1 INTRODUCTION:
Resource allocation is a central management activity that allows for
strategy execution. A resource allocation is plan for using available
resources, especially human resources in the near term, to achieve goals for
the future. It is the process of allocating resources among the various
projects or business units.
Resource allocation is the assignment of available resources to various
uses. In the context of an entire economy, resources can be allocated by
various

means,

management,

such

resource

as

markets or central

allocation

or resource

planning.

In project

management is

the

scheduling of activities and the resources required by those activities while

taking into consideration both the resource availability and the project
time.
Resource allocation is a major management activity that allows for strategy
execution. Organization do not use strategic management approach for
decision making, resource allocation is often based on political or personal
factors. Strategic management enables resources to be allocated according
to priorities established by annual objectives. Nothing could be more
detrimental to strategic management and to organizational success than for

resources to be allocated in ways not consistent with priorities indicated by

approved annual objectives.
All organization has at least four types of resources that can be used to
achieve desired objectives:
i.
ii.
iii.
iv.

Financial resources
Physical resources
Human resources &
Technological Resources
Allocating resources to particular divisions and departments does not mean
that strategies will be successfully implemented. A number of factors
commonly prohibit effective resource allocation, including an over
protection of resources, too great an emphasis on short run financial
criteria, organizational politics, vague strategy targets, a reluctance to take
risks, and a lack of sufficient knowledge.
The real value of any resource allocation program lies in the resulting
accomplishment of an organizations objectives. Effective resources
allocation does not guarantee successful strategy implementation because
programs, personnel, controls, and commitment must breathe life in to
resources provided. Strategic management itself sometimes referred to as a
resource allocation process.

1.2 DEIFNITION OF RESOURCE ALLOCATION:

Resource allocation is a process and strategy involving a company deciding

where scarce resources should be used in the production of goods or
services. A resource can be considered any factor of production, which is
something used to produce goods or services. Resources include such things
as labour, real estate, machinery, tools and equipment, technology, and
natural resources, as well as financial resources, such as money.

1.3 METHODS OF RESOURCE ALLOCATION:

1. In an economist's world, resources are optimally allocated when they are
used to produce goods and services that match consumers' needs and
wants at the lowest possible cost of production.
2. Efficiency of production means fewer resources are expended in
producing goods and services, which allows resources to be used for
other economic activities, such as further production, savings, and
investment.
3. This basically boils down to creating what customers want as cheaply and
efficiently as possible.
4. A list of eight different price mechanisms critical to an understanding of
politico-economic and socio-economic allocation. Although it is difficult
to give a clear characterization of the importance of different methods of
distribution in a modern society, the following approaches are considered
to be the major means of allocation of resources:

a. The economic market with a price system;

b. Voting procedures;
c. Bidding;
d. Bargaining;
e. Allocation by higher authority, fiat, or dictatorship;
f. Allocation by force, fraud, and deceit;
g. Allocation by custom, including gifts and inheritance; and
h. Allocation by chance.
Though simple, the list suggests different approaches used in many
politico-economic systems, including less-developed countries and
societies without democratic institutions.

CHAPTER 2: TYPES OF RESOURCE ALLOACTION:

The different types of resource allocation are:

1. ALLOCATION BY MERIT:
This can be seen as a rewards system of sorts. This view suggests that
rewards should be distributed according to productivity, effort, or
demonstrated ability.
i.

In the work place, this can be seen as salary increases, promotions,

and even layoffs.

ii.

In the college environment, this can be seen as the distribution of

grades. As not everyone can receive an A for classes, the grades need to
be distributed reflecting a students understanding of the subject.
In aspects where a necessity is involved, such as food, shelter, and water,
this system breaks down. In impoverished countries, for example, few
would argue for denying children food because they are not as
productive as adults.

2. ALLOCATION BY SOCIAL WORTH:

Allocation by social worth tends to take a practical view toward
resources, directing them toward those who appear most likely to
contribute to the common good. This view suggests that resources

should move in directions that ultimately do the greatest good for the
largest number of people. Criteria for social worth can include age,
seniority, rank, and expertise.
i.

In the work place, this can be seen as layoffs. Generally speaking, a

senior worker will not be fired over a new worker.

ii.

In the college environment, this can be seen as the distribution of money

to labs. Labs for graduate students and upperclassmen tend to be better
than freshman labs.
Allocation by social worth breaks down when the criteria for worth
ignores basic human rights. For example, wealth is sometimes used to
measure social worth, especially in countries with market economies.
This attitude can cause food, energy, education, medical attention, and
social influence to "flow uphill," thereby making severe imbalances in
essential resources even worse.

3. ALLOCATION BY NEED:
Allocation by need tends to view resources in terms of basic human
rights. This view suggests that every person has the same right to some
minimal level of a given resource. Obvious examples include food,
shelter, and clothes.

i.

In the work place, this can be seen when a company diverts funds
to a division in that company who's equipment is outdated.

ii.

In the college environment, this can be seen as scholarships given

to students who otherwise would not be able to attend college.
Allocation by need breaks down when this criterion is applied so strictly
that it removes the incentive to produce. It's usually true that people work
hardest when they believe they will enjoy the fruits of their labours. This
is also the same reason why socialism doesn't work.

4. ALLOCATION

BY

EQUAL

OR

RANDOM

ASSIGNMENT:
Allocation by equal or random assignment takes the view that no rational,
unbiased way can be found to distribute resources. This is the default
allocation method when no other allocation method works.
The most obvious example of this is a lottery. When there is no obvious
way to distribute resources, a simple lottery can prove to be the "fairest"
way.
Allocation by random assignment breaks down when each portion of a
resource is simply too small to do any good. For example, dividing

antibiotics into small doses during an epidemic could make each dose so
small that no one benefits.
No simple rules for allocation can guarantee fairness under all
circumstances. The ultimate decision depends heavily on exactly what
needs to be distributed and on the specific details of each situation.
The Candy case study is a perfect example of resource allocation.

2.1 ALIGNING RESOURCE ALLOCATION TO STRATEGY:

1. Resource allocation deals with the procurement, commitment and
distribution of resources.
2. A major task of top managers is resource allocation. Strategy
guides manager in making decisions about resource allocation.
3. It lay down clear priorities among competing plans, programmes
and projects.
4. In course of day - to day, routine work, managers are distracted
enough to be diverted away from strategic tasks.
5. A good strategy serves the purpose of telling the managers clearly
where their priorities lie. In the absence of guidance from the
strategy, manager can easily end up misallocating resources.
6. Misallocation of resources can take place in two ways.
7. First resources might get allocated to tasks that are really not
necessary from the strategic point of view.
8. Second task that are strategically important may be starved of
resources. In both these cases, resources that are often scarce get

wasted. In other words, aligning resource allocation to strategy

means putting your money where your mouth is.
9. Another challenge before managers in resource allocation is that of
trade offs.
10. Since resources are scarce and organisational tasks that demand
resources are often too many, manger end up making difficult trade
off in the process of resource allocation.
11. The process of trade - off requires hard to be made. For example,
there may be a situation where scarcity of resources means that
money available for investment may be limited. That limited
amount of money needs to be allocated to competing projects, each
of which demands the attention of managers. In deciding which
projects to fund and which projects to postpone or abandon,
managers would naturally need to have a clear priority.
12. Another example could be of scarce human resources. There may
be a high demand for well qualified, component IT professionals to
put to work on several projects. But the number of such
professionals available with the organisation may be limited. In
such a situation there should be a clear priority set so that available
IT professionals could be put to work on strategically important
projects.
13. The basic challenge before the strategist is how to allocate scarce
resources to competitive strategic tasks that lead to the

accomplishment of organisational objectives and the realisation of

strategic intent.
14. It would be easier for strategists to allocate resources if the
strategic priorities are clear.

CHAPTER 3: RESOURCE ALLOCATION PROCESS AND

STRATEGIES:
1. STRATEGIC PLANNING:
Resource allocation begins at strategic planning when a company
formulates its

vision and goals for the future. The vision and strategic

goals are accomplished through achievement of objectives. For example, a

consumer electronics company's goal may be to become the market leader

in computer tablets. An objective towards this goal is the design and
promotion of an innovative tablet.

2. BUDGETING:
Once you have set your objective, you will need to allocate sufficient
resources to accomplish it. In practical terms, this is often a matter of
project budgeting. In our example, the company will allocate money for
market research to determine unmet consumer needs and wants for a
computer tablet, money for product design and development, funds for
production, and money for promotional activities, such as advertising.
Each department may take its budgeted funds and allocate those resources
for more specific purposes, such as hiring employees, commissioning
marketing studies, and buying raw materials and components.

3. LOGISTICAL MANAGEMENT:
Resources have to be moved to where they need to be in order to
accomplish the company's objectives that will bring it closer to its
strategic goal. Logistics is the process by which a company manages the
flow of resources coming into the company, flowing inside the company,
and flowing out of the company.

4. MONITORING AND EVALUATION:

Monitoring evaluation ensures that resources are allocated in cost
effective and efficient manner. This can be accomplished through careful
logistical management and proper accounting & auditing.

CHAPTER 4: RESOURCE ALLOCATION PATTERN:

Resource Management is a very important part of Real-time and
Embedded software design. This article discusses commonly used
Resource Allocation Patterns. The discussion is divided into two parts:
I.

Resource Allocation Algorithms

II.

I.

Distributed Resource Allocation

RESOURCE ALLOCATION ALGORITHMS:

This section covers some of the resource allocation algorithms that are
commonly encountered in Real time systems. These algorithms are:
a. Hottest First
b. Coldest First
c. Load Balancing
d. Future Resource Booking

a. HOTTEST FIRST:
In hottest first resource allocation, the resource last released is allocated
on next resource request. To implement this last in first out, LIFO type
of allocation, the list of free resources is maintained as a stack. An
allocation request is serviced by popping a free resource from the stack.
When a resource is freed, it is pushed on the free resource list.
The disadvantage of this scheme is that there will be uneven utilization
of resources. The resources at the top of the stack will be used all the
time. If the resource allocation leads to wear and tear, the frequently
allocated resources will experience a lot of wear and tear. This scheme
would be primarily used in scenarios where allocating a resource
involves considerable setup before use. With this technique, under light

load only a few resources would be getting used, so other resources

would be powered down or operated in low power mode.

b. COLDEST FIRST:
In coldest first resource allocation, the resource not allocated for
maximum time is allocated first. To implement this first in first out,
FIFO type of allocation, the resource allocating entity keeps the free
resources in a queue. A resource allocation request is serviced by
removing a resource from the head of the queue. A freed resource is
returned to the free list by adding it to the tail of the queue.
The main advantage of this scheme is that there is even utilization of
resources. Also, freed resource does not get reused for quite a while, so
inconsistencies in resource management can be easily resolved via
audits.

c. LOAD BALANCING:
In situations involving multiple resource groups, load balancing is used.
A resource group is controlled by a local resource controller. In this

technique, the resource allocator first determines the lightly loaded

resource group. Then, the resource controller of the lightly
loaded resource group performs the actual resource allocation. The main
objective of resource allocations is to distribute the load evenly amongst
resource controllers.

d. FUTURE RESOURCE BOOKING:

Each resource allocation is for a specified time. The resource allocation
is only valid till the specified time is reached. When the specified time is
reached, the resource is considered to be free. Thus the resource does
not need to be freed explicitly.
This technique is used in scenarios where a particular resource needs to
be allocated for short duration to multiple entities in the future. When an
allocation request is received, the booking status of the resource is
searched to find the earliest time in future when the resource request can
be serviced. Resource booking tables are updated with the start and end
time of each resource allocation.

II.

DISTRIBUTED RESOURCE ALLOCATION:

Most Real time systems are distributed across multiple processors.

Different techniques are used to manage resource allocation in such
distributed systems. Some of these techniques are discussed below. They
are:
i.

Centralized Resource Allocation

ii.

Hierarchical Resource Allocation

iii.

Bi-Directional Resource Allocation

iv.

Random Access

i. CENTRALIZED RESOURCE ALLOCATION:

In this technique, a centralized allocator keeps track of all the available
resources. All entities send messages requesting resources and the allocator
respond with the allocated resources. The main advantage of this scheme is
simplicity. However, the disadvantage is that as the system size increases,
the centralized allocator gets heavily loaded and becomes a bottleneck.

ii. HIERARCHICAL RESOURCE ALLOCATION:

In this technique, the resource allocation is done in multiple steps. First, the
centralized

allocator takes the high level resource allocation decision.

Then, it passes on the allocation request to the secondary allocator which

takes the detailed resource allocation decision.

The advantage of this scheme is that the centralized allocator is not

burdened with the detailed resource allocation decisions. This technique
could be implemented in multiple levels of hierarchical resource allocations.

iii. BI- DIRECTIONAL RESOURCE ALLOCATION:

This scheme allows two independent allocators to allocate the same set of
resources. It is used in situations like bi-directional trunk groups. The switch
at each end of the trunk group allocates the trunks from one specific end.
This logic avoids both ends allocating the same resource under light and
medium load. However, under heavy load, there is a possibility of both ends
allocating the same resource. This situation is resolved by a fixed arbitration
algorithm leading to one of the switches withdrawing its claim on the
resource.

iv. RANDOM ACCESS:

Whenever a resource needs to be shared between multiple entities which
cannot synchronize to each other and they do not have access to a
centralized allocator, designers have to resort to random access to the
resource. Here all the entities needing the resource just assume that they
have the resource and use it. If two or more entities use the resource at the
same time, none of them gets service and all the entities retry again after a
random back off timer.

The main disadvantage of this technique is that the random access channel
works well only when the overall contention for the random access channel
is very small. As contention increases, hardly any resource requests are
serviced.

CHAPTER 5: FACTORS AFECTING RESOURCE

ALLOCATION:
The factors that affect resource allocation are:
i.
ii.
iii.
iv.

The objectives of the organisation

Preference of dominant strategists
Internal politics
External influences

i. OBJECTIVES OF THE ORGANISATION:

Objective setting is a complex process. There are number of objectives,
some are official (or explicit) while others are operative (or implicit).
Employees of any organisation tend to judge the importance given by
strategist to tasks on the basis of amount of resources allocated to them. If
the chairperson of a company, while resenting the annual report, makes a
recording of persuasive in speaking or writing on the virtues of human
resources but the actual resource allocation does not reflect the importance
given to these resources, then the human resource development is certainly
not a priority strategic task. Operative objectives tend to affect the pattern
of resource allocation to the maximum extent.

ii.

PREFERNCE OF DOMINANT STRATEGISTS:

The dominant strategists most often the chief executive officer tends to
affect the process of resource allocation. Their preferences are reflected in
the way how resources get allocated. Perceptive strategic business units,
divisional, and departmental heads know that such preferences matter and
try to present their demands in line with them or attempt creating interest
in the dominant strategists for their demands so that resources can be
attracted easily.

iii.

INTERNAL POLITICES:
The ownership of resources is often misconstrued as possession of power.
Those departmental units which are able to attract more resources are
perceived as being more powerful. Executives who are in a position to
affect the process of resource allocation in their favour are received to be
more effective. These perceptions make resource allocation a rational
political process. Internal politics within the organisation, therefore affects
the process of resource allocation.

iv.

EXTERNAL INFLUENCES:
Apart from internal politics external influences also affects resource
allocation. These influences arise due to government policy and
stipulations, the demand of external shareholders, financial institution,
community, and others. For instance, conditions imposed by legal

requirements on companies may require additional investments in labour

welfare and security, pollution control and safety equipment, or energy
conservation. The shareholders may expect a higher dividend or bonus
shares and resources may have to be diverted to them. Financial
institutions may impose restrictions or require companies to invest in
technology upgradation. The discharging of social responsibilities such as
contribution to community services may require allocation of funds. Thus
external influences affect the process of resource allocation considerably.
If we look back to the factors described previously, it is easy to recognise
that in the absence of clear strategic priorities, the process of resource
allocation could be distorted to a great extent. If strategies are made
explicit at different levels, objectives are clearly laid down, and strategic
priorities are defined unambiguously then balanced of allocation of
resources is more likely.

CHAPTER 6: DIFFICULTIES IN RESOURCE

ALLOCATION:
Peter Drucker put forward the idea that the job of an effective manager has
three components:
i.

Analysing available opportunities to produce results and developing an

ii.
iii.

understanding of their costs

Committing resources to pursue the most promising opportunities and
When some activities lead to results and others do not, deciding which
should receive more resources and which should be abandoned altogether.
Drucker described the third component as the most painful step. In this
subsection, it deals with that painful step makes the process of resource
allocation so difficult.
The previous subsection described the factors that affect the process of
resource allocation. These factors, combined with the fact that the resource
allocation process is highly complex, create serval difficult for the
a.
b.
c.
d.

strategists. The four major difficulties are:

Scarcity of resources
Restriction on generating resources
Overstatement of needs and
Tendency to imitate competitors

a. SCARCITY OF RESOURCES:
The major difficulty arises due to scarcity of resources. Financial,
physical, and human resources are hard to find. Firms will usually face
difficulties in procuring finance. Even if finance is available, the cost of
capital is a constraint. Those firms that enjoy investor confidence and

high creditworthiness process a competitive advantage as it increases

their resource generation capability. Physical resources would consist of
assets such as land, machinery, and equipment. In developing countries
like India, many capital goods have to be imported, the government may
no longer impose many conditions but it does place a burden on the
firms finances and this places a restriction on firms wishing to procure
physical resources.
Human resources are seemingly in abundance in India but the problem
arises due to non availability of skills that are specially required. Highly
specialised IT and compute professional, advertising personnel, and
telecom, power, and insurance experts are scare in India. This places
severe restrictions on firms wishing to attract and retain personnel. The
availability of scarce resources is very real problem faced in resource
allocation.

b. RESTICITIONS ON GENERATING RSORCES:

Within the organisation there are several difficulties encountered in
resource allocation. The usual budgeting for existing strategic business
units, divisions, departments places restrictions on generating resources
for newer units and those with a greater potential for growth. This is often
seen in the case of bureaucracies such as government departments. Here
the usual way of resource allocation is fixed percentage of increase over
the previous years budget allocation irrespective of the needs of the

departments or the projects that they handle. The results are restriction on
generating resources for allocating to new departments and the projects
that might be in greater and more in urgent need of resources.

c. OVERSTATEMENT OF NEEDS:
Another frequent problem, especially in a bottom up approach to
resource allocation is of overstatement of the needs for resources. The
budgeting and corporate planning departments may have to face their
executives who do not get resources according to their expectation. Such
negative reactions may hamper the process of strategic planning itself.
When strategic budgeting is used for resource allocation, powerful units
may be divested of resources for reallocation to potential units. Budget
battle may ensure if resource allocation affects vested interest.

d: TENDENCY TO IMITATE COMPETITORS:

It is interesting to observe that companies in an industry tend to intimate
their competitors in terms of resource allocation. No wonder companies
are industries are often so alike internally. There might have been strong
reasons in the beginning to do so when the competitive strategies might
have been similar. But as companies move from one strategy to the next,
often the resource allocation patterns fail to respond to the strategic
changes. Different companies following different strategies may have

similar resource allocation process and identical resource configurations.

This does not really make sense and tends to hurt the capability to
develop competitive advantage especially when differentiation strategies
might be followed.

CHAPTER 7: CONCLUSION:
i.

The chief executive officer has a major role to play in managing the

ii.

process of resource allocation.

Strategic management is based on a participative mode and the
communication of the strategic plan to all executives creates a congenial
environment where resource allocation decisions may be taken amicably.

CHAPTER 8: BIBLOGRAPHY:
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2. http://www.slideshare.net/bogdangavan/resource-allocation?
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ml
5. http://www.strategy-implementation.24xls.com/en211
6. https://www.eventhelix.com/RealtimeMantra/Patterns/ResourceAlloc
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7. http://www.brighthubpm.com/resource-management/11638-resourceallocation-do-you-overwork-your-resources/
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