MG 1351 Principles of Management

University Question May / June 2007

Key

PART A (10 X 2 = 20 marks)

1) Frederick Taylor is the father of scientific management.

Scientific management is a theory of management that analyzes and
synthesizes workflow processes, improving labor productivity.
2) The various functions of management are Planning, Organizing, Staffing,
Leading & Controlling
3) Planning premises represents the anticipated environment in which plans are
expected to operate. They include assumption and forecast of the future and
known condition that will affect the operation of plans.
4) Strategy is a plan, or method of approach developed by an individual, group,
or organization, in an effort to successfully achieve an overall goal or objective.
Policy refers to a definite course of action adopted by an individual, group, or
organization in an effort to promote the best practice particular to desired results.
5) The term span of control or span of management indicates the no of people
directed or managed effectively by a single executive or supervisor even though
his limit varies depending on the situation.
6) Power is the ability of individuals or groups to induce or influence the beliefs or
actions of other persons or groups.
Authority is right in a position to exercise discretion in making decisions affecting
others.
7) Creativity is the ability and power to develop new ideas. Innovation is to use
those
ideas.
8) Some of the leadership styles are Autocratic Leader, Democratic Leader, Free
Rein.
9) It is a latest technique aimed at cost reduction and optimum utilization of
resources. Every year is taken as a new year and previous year is not taken as a
base.
10) Productivity is the input-output ratio within a time period with due
consideration for quality.
PART B (5 X 16 = 80 marks)
11 a) Father of Management Henry Fayol
Henry Fayol contributed 14 principles to Mgt which is widely applied in all the
Organizations
1. Division of Work

2. Authority and Responsibility

3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of individual interest to general interest
7. Remuneration of personnel
8. Centralisation
9. Scalar Chain
10. Order
11. Equity
12. Stability of Tenure of Personnel
13. Initiative
14. Esprit-de-corps
Critical Evaluation
1.
2.
3.
4.

Too formal
Not pay adequate attention to workers
Vagueness
His principle hinted but did not elaborate that mgt can and should be
taught.

Despite these limitations, Fayol made a unique and outstanding

contribution to Mgt theory.

(or)
b) Business Organisation
An Organisation is a group of people working together to achieve a
common goal. Orgaisation exists to achieve goals that individuals can not
achieve on their own. Organisation is grouping of activities and putting under
different departments according to their functions. The Organisation brings men
and material resources together for fulfilling the goals of enterprises.
Types of Organisation
1. Sole proprietorship / Individual
2. Partnership
3. Jointstock Company Private Ltd Company & Public Ltd Company
4. Co operative Enterprises
5. Public Enterprises / State ownership
Sole proprietorship the individual entrepreneur supplies the entire capital,
employs labour and machines. Individual uses his own skill in the management
of affairs and is solely responsible for the good or bad result of its operation and
working
Merits
1. Simplest form of business
2. Least legal complication

3. Quick decision
4. Maximum Profit
5. Personal Care
6. Quality product
7. Minimum wastage
8. Flexible business
Partnership two or more persons come together and start a business with their
own funds, the parties agree to share the profits as well as bear the losses in the
agreed proportion. The formation and management of partnership organization is
governed by the Indian Partnership Act, 1932.
Merits
1. Has larger financial resources
2. greater personal contacts of the partners gives more customer base and
benefits
3. Persons of different skills and abilities can work for betterment of
Organisation
4. Less expenditure per partner is involved in forming partnership
Organisation
5. Loss will be divided among the partners
Joint Stock Company Capital is contributed by a large number of person in
the form of shares of different values.
Private Ltd Company can be established with two to fifty members. The
maximum number of membership is limited to 50. When this type of Organisation
expands beyond certain limit, it can restrict its liability by registering the firm as a
limited company. The company is registered under Indian Company act 1956.
Public Ltd Company the minimum number of members required are 7 and
there is no upper limit. Such companies offer shares to general public. Public Ltd
companies are supervised and controlled by the Government to protect the
interest of Share holder public. The company is governed by an elected body
called board of directors.
Merits
1. The shareholders bears no risk as the liability is limited
2. large scale business can be undertaken
3. take advantage of economies of scale in production because management
can employ specialized labour, can use latest machinery and thus can
achieve large scale production at low cost.
4. not affected by the retirement of any share holder hence the existence of
Organisation is permanent in nature.
5. works on democratic principles, which results in economy and efficiency.
Co-operative Enterprises Co-operation is a form of Organisation where
persons irrespective of caste, creed and religion, voluntarily associate together
as human beings. It is based on the democratic principles and functions for the

welfare of the public at large. It protects the interest of consumer as well as that
of small producers.
Features
1. Voluntary Organisation
2. Open Membership
3. Common purpose / Interest
4. Democratic Management
5. Not profit oriented
12 a) Planning
-

Deciding in advance what to do, how to do, when to do and who is to

do it.
Bridges the gap between where we are to where we want to go.
Thinking before doing.
Intellectual demanding process.

Types (scope) of plans

I

Purposes or missions:
- Meaningful existence special task
- Elements are primary market, profitability, management
philosophy and corporate image
Eg. 1. Distribution of goods & services
- ITC Satisfaction
- Dupont better things through chemistry
- Hallmark The social expression business
- GEC / USH We are in energy business

II

Objectives:
- Ends towards which all activities are directed
- They are the most basic plan and all other plans are based on
the objectives
- They are multiple in nature.
- MBO
- Objectives and goals are interchangeable
- They have hierarchy.
- They are verifiable
- They form a network.
- They differ in time span. Some are long term and short term.
- Objectives may be general or specific.
- Classified into
External institutional objectives (to develop high degree of
corporate image TATA)
Internal Objectives (profit/maximum rate of return)

III
-

Strategies:
General program of action and deployment of resources to
attain
Comprehensive objectives.
SWOT analysis
Eg 1. rural marketing
2. Extension of Distribution width & Length
3. Pester power strategy, social marketing, co-branding,
co-marketing.
Contingent plan to meet the demands of a difficult situation.
Mainly the job of the top management.

ii) Steps in Planning:

1. Being aware of opportunities.
- SWOT analysis
2. Establishing objectives.
3. Developing premises
- Planning premises are forecasts, applicable basic
policies, and existing company plans.
- They are assumptions about the environment in
which plan is to be carried out.
- Forecasting is important for premising.
- Premises should be make practical what volume of
sales? What price?
4. Determining alternative courses of action
5. Evaluating alternative course of action
- Operation Research Decision tree
6. Selecting a course of action
- Decision making
7. Formulating Derivative plans
- Supporting plans for basic plan
8. Numerating plans by budgeting
- Income and expenses
Kinds of planning
1.
2.
3.
4.
5.

Short term and long term planning

Financial & non financial planning
Formal &informal planning
Specific or Routine planning
Corporate planning and strategic planning

(or)
b)
TOWS, Portfolio Matrix
Internal Strengths (S)
Eg. Strength in mgt,
operation, Finance,
Marketing, R&D
Engineering

Internal
Weaknesses(W) Eg.
Weaknesses in areas
shown in the box of
strength.

External Opportunities
(O) Consider risk also.
Eg Current and future
Economic condition,
political and social
changes, New product
services and
Technology

SO strategy Maxi
Maxi. Potentially the
most successful strategy,
utilizing the Organisation
strength to take
advantage of
opportunities

WO Strategy Mini
Maxi Eg. Developmental
strategy to overcome
weakness in order to take
advantage of
oppirtunities

External Threats (T) Eg

Lack of energy,
competition and areas
similar to those shown
in Opportunity box

ST Strategy Maxi Mini

Eg. Use of strengths to
cope with threats to avoid
threats

WT strategy Mini Mini

Eg. Retrenchment,
Liquidation , Joint
venture.

Internal Factors

External Factors

13) a) Departmentation
- As the process of grouping individual jobs in department. It involves
grouping of activities and employees into departments so as to facilitate
the accomplishment of Organisation Objectives.

Bases of Departmentation
1. Departmentation by Functional Basis Grouping of activities in
accordance with the function of an enterprise. Each major function of the
enterprise is grouped into a department.
Merits
o It is a logical and time proven method
o It follows the principles of specialization
o Authority and responsibility can be clearly defined and fixed

o Since the top managers are responsible for the end results control
shall become effective
Demerits
This type of departmentation shall develop a loyalty towards the
functions and not towards the enterprise as whole.
Co-ordination of different function shall become difficult
Only the departmental heads are held responsible for defective
work
2. Departmentation by Territorial basis A company may have separate
departments to serve the southern region, northern region etc. It has the
advantage of the intimate knowledge of local conditions.
Merits
It motivates each regional head to achieve high performance
Provides each regional head an opportunity to adapt to his
local situation and customer need with speed and accuracy.
It affords valuable top-management training and experience
to middle level executives]enables the organization to take
advantage of locational factors, such as availability of raw
materials, labour, market, etc.
Enables the Organisation to compare regional performances
and invest more resources in profitable regions and withdraw
resources from unprofitable ones.
Demerits
May give rise to duplication of various activities. Many
routine and service functions performed by all the regional
units can be performed centrally b the head office very
economically
Various regional units may become so engrossed in short
run competition among themselves that they may forget the
overall interest of the total organization.
3. Departmentation by Process basis is done on the basis of several
discrete stages in the process or technologies involved in the manufacture
of a product. A cotton textile mill have separate departments for ginning,
spinning, weaving, dyeing and printing and packing and sales.
Merits
Facilitates the use of heavy and costly equipment in an
efficient manner.
It follows the priniciple of specialization each dept is
engaged in doing a special type of work. This increases
efficiency.
It is suitable for Organisation which are engaged in the
manufacture of those product which involve a number of
processes.

Demerits
Difficult to compare the performance of different process
based departments

4. Departmentation by Product basis suited for a large organization

manufacturing a variety of products. For each major product a semiautonomous department is created and is put under the charge of a
manager who may also be made responsible for producing a profit of a
given magnitude. Product dept is the logical pattern to follow when each
product requires raw materials, manufacturing, technology and marketing
methods and that are markedly different from those used by other
products in the Organisation. Eg HLL manufacturing detergents, toiletries,
Clearasil cream and soap.
Merits
Relieves top management of operating task responsibility. It
can therefore better concentrate on such centralized
activities like finance, R& D and control
Enables the top management to compare the performance
of different products and invest more resources in profitable
products and withdraw resources from unprofitable ones.
Those who work within a department derive greater
satisfaction from identification with a recognizable goal.
Demerits
Results in duplication of staff and facilities
Employment of large number of managerial personnel is
required.
Equipment in each product department may not be fully used

5. Departmentation by Customer basis An enterprise may be divided

into a number of departments on the basis of the customers that it
services. For Eg. An educational institution may have separate
departments for day, evening and correspondence course to impart
education to full time students, locally employed students and autstation
students respectively.
Merits
It ensures full attention to major customer groups and helps
the company to earn goodwill.
Demerits
It may result in under utilization of resources and facilities in
some department.
There may be duplication of facilities
(or)
b) STEPS IN STAFFING
I.RECRUITMENT:

SOURCES OF RECRUITMENT
A.Internal Sources:
1.Transfer:
2.Promotion:
3.Present employees: (Recommendation by
existing employees)
B. External Sources
1. Advertisement:
2. Personnel Consultant:
3. Jobber and contractors:
4. Employment exchange:
5. Educational institution:
6. Field trips:
7. Unsolicited applicants:
II.SELECTION:
Selection Process:
1. Receipt and Scrutiny of Application:
2. Preliminary Interview:
3. Filling in the Blank application forms.
4. Tests:
5. Interviews:
6. Checking of references:
7. Preliminary and Final selection:
8. Medical Examination:
9. Placement:
III.TRAINING:
Kinds of training:
A. Internal or on-the job Training:
1. Orientation or induction Training:
2. Apprenticeship Training:
3. Delegation
4. Promotion and transfers:
5. Refresher training or retraining:
6. Vestibule training:
7. Job rotation:
8. Assistants to positions.
9. Committee or board membership:
B. External or off-the-job Training:
1. Management institution:
2. Lectures, Conferences, etc.
3. Case studies:
4. Role playing:
5. Management games:
6. Brainstorming:

14) a) i) CHANNELS OF COMMUNICATION

1. Formal Communication follows the route formally laid down in the
organization structure
a. Downward Communication flow of communication from
superior to subordinate
b. Upward Communication - flow of communication from
subordinate to superior
c. Horizontal Communication transmission of information among
the positions at the same level of he Organization.
2. Informal Communication or Grapevine Communication among people
through informal contacts or relations.
MEDIA OR METHODS OF COMMUNICATION
1. Oral Communication
2. Written Communication
3. Gestural Communication
ORAL COMMUNICATION
Oral Communication involves exchange of messages through spoken words. It
may take place. i) by face- to face contacts ii) through mechanical devices like
telephone.
Merits
Oral or Verbal communication offers the following advantages:
1. Economical
2. Personal touch
3. Speed
4. Flexibility
5. Quick response
Demerits
Oral Communication suffers from the following weaknesses1. Lack of record
2. Time Consuming
3. Lengthy message
4. Physical distance
5. Misunderstanding
WRITTEN COMMUNICATION
Written Communication is transmitted through written words in the form of letter,
circular, memos, bulletins, instruction cards, manuals, handbooks, reports,
returns,
Merits
1. Effectiveness

2.
3.
4.
5.
6.

Lengthy messages
Economical
Repetition
Permanent record
Better response

Demerits
1. Time Consuming
2. Expensive
3. Inflexibility
4. Little secrecy
5. Lack of personal touch
6. Misunderstanding
COMMUNICATION NETWORKS
1. Circle Network
2. Chain Network
3. Wheel Network
4. All Channel Network
ii) Telecommunication, Teleconferencing
iii) BARRIERS TO COMMUNICATION
a. Organisational Barriers
1. Ambiguous policies, rules and procedures
2. Status patterns
3. Long chain of Command
4. Inadequate Facilities
b.Mechanical Barriers
1. Overloading
2. Semantic barriers
3. Noise
c.Personal Barriers
1. Lack of attention or interest
2. Failure to Communicate
3. Hasty Conclusion
4. Distrust of communicator
5. Improper state of mind.
(or)
b) i) Refer to Nov/Dec 06
ii) Abraham H. Maslow, an eminent American psychologist, developed a general
theory of motivation, known as the Need hierarchy theory.
Self-Actualization

Self-Esteem
Social needs
Security needs
Pschycological needs
1. Physiological needs:
These are biological needs required to preserve human life.
Therefore, these needs are also known as survival needs.
They include needs for food, drink, clothing, sleep, etc.
These needs must be satisfied first of all and, therefore, they
are a powerful motivating force when thwarted. Man lives by
bread alone when there is no bread.
2. Safety Needs:
Once physiological needs are reasonably satisfied, a person
wants protection from physical dangers and economic security.
Safety needs are thus concerned with protection from danger,
deprivation and threat. These needs are finite but they may server
as motivators in case of arbitrary and unpredictable management
actions. Such actions create uncertainty and people seek job
security. Organisations can influence these needs through
supervision, communication system, work group, etc.
3. Social Needs:
Man is a social animal as he seeks affiliation (association) with
other. Social needs refer to need for belonging, need for
acceptance, need for love and affection, etc. Such needs are
infinite as they are considered as secondary needs because they
are not essential to preserve human life. They represent needs of
the mind and spirit rather than of the physical body. Organisations
can influence these needs through supervision, communication
system, work
groups, etc.
4. Esteem Needs:
Esteem needs are of two types self esteem and esteem of
others, self esteem needs include self respect, self
confidence, competence, achievement, knowledge and
independence. Esteem of others includes reputation, status, and
recognition. These needs are infinite and thwarting them results in
feelings of inferiority, weakness and helplessness.
5. Self actualization Needs:
These are the needs for realizing ones full potential, for continued
self development, for being creative. It is the desire of becoming
what one is capable of becoming. It is an infinite and growth need.
It is psychological in nature and very few persons satisfy it. The
conditions of modern industrial life provide limited opportunity for
the satisfaction of self actualization.
15) a) i) Refer to Nov/Dec 06
(or)

b) i) JAPANESE & US MANAGEMENT APPROACHES

S. No
Japanese Mgt Planning
US Management Planning
1
Long term Orientation
Primarily short term Orientation
2
Collective decision making
Individual decision making
with concerns
3
Involvement of many people
Involvement of a few people in
in preparing and making the
making and selling the decision
decision
to person with divergent values
4
Decision flow from bottom to
Decisions initiated at the top,
top and back
flowing down
5
Slow decision making, fast
Fast decision making . Slow
implementation of the
implementation requiring
decision
compromise often resulting in
sub optimal decisions.

S. No
1
2
3
4

S. No
1

2
3
4
5
6
7

Japanese Mgt Organizing

Collective responsibility and
accountability
Ambiguity of decision
responsibility
Informal Organization
Structure
Well known common
organization culture and
philosophy, competitive spirit
towards other enterprises

US Mgt Organizing
Individual responsibility and
accountability
Clear and specific decision
responsibility
Formal, bureaucratic
Organization structure.
Lack of common organization
culture, identification with
professing rather than with
company.

Japanese Mgt Staffing

Young people hired out of
school; hardly any mobility of
people among companies
Slow promotion through the
ranks
Loyalty to the company
Very infrequent performance
evaluation for new employee
Appraisal of long term
performance
Promotion based on multiple
criteria
Training & Development
considered a long term
investment
Life time Employment
common in large companies

US Mgt Staffing
People hired out of school and
fro others companies; frequent
company changes
Rapid advancement desired
and demanded
Loyalty to the Profession
Frequent performance
evaluation for new employees
Appraisal of short term results
Promotion based primarily on
individual performance
Training & Development
undertaken with hesitation
Changes common

S.No
1
2
3

S.No
1
2
3
4

Japanese Mgt Leading

Leader acting as a social
facilitator and group member
Paternalistic style
Common values facilitating
co-operation
Avoidance of confrontation,
sometimes leading to
ambiguities emphasis on
harmony
Bottom-up communication

Japanese Mgt Controlling

Control by peers
Control focus on group
performance
Saving face
Extensive use of quality
control circles

US Management Leading
Leader acting as decision
maker and head of the group
Directive style
Often divergent values,
individualism; sometimes
hindered co-operation
Face-to-face confrontation
common emphasis on clarity

Communication primarily top down

US Mgt Controlling
Control by superior
Control focus on individual
performance
Fixing blame
Limited use of quality control
circles.

ii) The main trends in the field of international management are as follows:
1. Transfer of Management Know-how:- Studies have revealed
that management philosophies in different nations are not exactly
similar. This implies that the managerial techniques of one country
cannot be fully transferred or applied to other countries. Even the attempts
are being made to segregate and classify those management
concepts and approaches that can be transferred from one country
to another. It is possible that management practitioners and
academicians may succeed in the near future in isolating the managerial
approaches or elements of home nation which will be acceptable in
the work environment of host countries and may therefore, be
transferable.
2. Comparative Analysis:- Comparative analysis is being
increasingly used to evaluate the degree of similarity as well as
diversity in the management practices of different nations. The
comparison may involve some quantitative and qualitative
measurements. Quantitative analysis is objective and involves statistical
tests while qualitative comparison is subjective and involves cultural
variables. Whatever measurements may be used, the yardstick of
measurement must be realistic.
3. Duality of Structure:- Multinationals may play an important role in the
economic growth of developing countries. But local corporate units will

continue to remain as the backbone of the national economy in a host

country. This duality of corporate structure requires that the relative
functions of these two types of units may be competitive in some
areas and complementary in others. For example, the local units
may act as ancillaries to the foreign assembling firms. The foreignbased firms may attract the best managerial talent due to the better
salary levels they offer. As a result local firms may face shortage of talent.
A proper balance will have to be maintained between the marketing
of these units to maximize the benefits to the host countries.
4. Time Overlap:- Companies in the developing countries often
combine traditionalism with modernism. They follow traditional values
and administrative values and employ modern techniques of
management. Their managerial philosophy is time static but their
operations are time dynamic. This time overlap must be recognized by the
international managers. There also exist time overlapping at different
levels of management within an organization. In India, for example, top
managerial positions in family controlled firms are filled on the basis of
the kinship with the owner. As a result traditional value system
prevails at top management level. But middle and junior
management positions are filled with people having expertise in
modern techniques. Therefore, the international manager will have to
incorporate these different time Jones into the system and to
integrate these into the total managerial philosophy.
5. Cross National Management:- Traditionally studies in international
management have been conducted within the framework of territories.
For example, different managerial practices have been tested in India
and Japan even though the two countries have several cultural
similarities. In future, focus will have to be on cultural homogeneity rather
than geographical boundaries. In other words, a cross-national system
of management will have to be developed. It is possible that the same
managerial practices may not be effective in a single country due to
separate cultures prevailing in different parts of the country, e.g., South
and North India.