ASSIGNMENTS MBA – 2nd SEM

Subject Code – MB0044 Book ID – B1133

PRODUCTION & OPERATIONS MANAGEMENT Set – 1

Q.1. Explain in brief the origins of Just in Time. Explain the different types of wastes that can

be eliminated using JIT.

Ans. Just in time were developed to minimize wastage across the organization. If a firm is

optimistic about the demand, then that firm increases their planned inventories. On the other hand if

the demand is weak when compared to the expectations, then that firm’s unplanned inventories are

high. That means companies don’t keep a lot of excess inventory, and then manufacture a product as

an order comes in. It is management philosophy of continuous and forced problem solving.

The seven types of wastes to be eliminated according to JIT are :

1. Over Production

Over production is to manufacture products before it is actually needed. If the demand for that

product decreases, the extra parts or products produced may not be useful or needed. Also over

production results in high storage costs and is also difficult to detect defects. So, over productions is

considered a waste.

2. Inventory

Excess procurement or production builds up stock of materials which are not immediately use,

this locking space and fund carrying heavy cost.

3. Waiting Time

Waste of time happen when goods are not moving or being processed. The operator, the

machine or the part will either be not working or be worked upon. The duration is can be said to be

unproductive and may create more serious consequences.

4. Movement

Any unnecessary movement is a waste of energy; it causes blockages, disrupting movements

and delaying the flow of other items creating delays.

5. Effort

The people, who work, do not make a study as to how the products on which they are making

are utilized and do not realize the purpose for which they are made. This lack of education will lead to

waste of resources. Finally, they end up in shortage of resources when needed.

6. Defective products

The defective products lead to a tremendous loss to the company. This is because they use up

the same equipments, workmen and the time that would be used to make good products. Thus

defective products use up resources and result in losses.

7. Over Processing

Some steps like unnecessary processing or production do not add value to the final output. As a

result, it is waste of all the inputs that go into the process.

Q.2. What is value engineering or value analysis ? Elucidate five companies which have

incorporate VE with brief explanation.

Ans. Value of engineering (VE) or Value Analysis is a methodology by which we try to find

substitutes for a product or an operation.

The concept of value engineering originated during the Second World War. It was developed

by the General Electric corporations (GEC). Value Engineering has gained popularity due to its

potential for gaining high Returns on investment (ROI). This methodology is widely used in business

re-engineering, government projects, construction, assembling and machining processes, health care

and environmental engineering, and many others. Value engineering process calls for a deep study of a

product and the purpose for which it is used, such as the raw materials used; the processes of

transformation; the equipment needed, and many others. It is also questions whether what is being

used is the most appropriate and economical. This applies to all aspects of the products.

1. General Electrical Corporation (GEC)

The concepts of value engineering originated in 1947 in General Electricals corporation (GEC)

When a substitute for asbestos for flooring had to be found. Specialized dealers could provide an

equally good material at a lesser price.

Initially, the practioners were the people in charge of purchasing who tried to locate substitute

material which would be equally good, if not better, at a lower price. This is the first and basic

approach to value engineering.

The concept percolated to the manufacturing departments, engineers applied the same

principles and found that, they could use alternate materials, which were cheaper giving the same

performance. It was also fund that dimensions and tolerance could be altered without affecting the

performance of the part or the product. The investigations took them on the path of eliminating some

operations. The focus was on the value of each bit materials, each operation. This approach led to the

design stage.

2. Ashok Leyland

In implementation of VA, Ashok Leyland changed gear material from phosphor bronze to a

less expensive cast iron and eliminated frequent field complaint of gear seizure in trucks.

3. TVS

T.V. Sundaram Lyenger (TVS) Limited is one of the largest automobile distribution

companies in India.

During the mid 1940 to 1960s, TVS based in Madurai was ranked as the best bus

transportation system in India. It could manage to run the fleets for about 96% of the time.

TVS used the VE approach to restore the mobility of buses that had broken down. They

stocked their garage with some critical assemblies of a bus. Whenever, a part or an assembly failed of

a bus, they replaced it immediately with a new one, thus restoring mobility within a couple of hours.

When compared to the traditional method, this approach has gained much more benefits to the

company, it helped to save time, reduce cost, efficient, quicker, and competitive.

4. MODI Xerox

Modi Xerox designed the VE-d low cost copier 1025 ST, which uses a single tray. The

advantage of new design is that it is easy to operate and the cost is also very low.

5. TITAN

Titan watches introduced new designs adopting a strategy of innovation.

Q.3. Explain different types of quantitative models. Differentiate between work study and motion study.

Ans. There are different quantitative models.

1. Linear Programming:

Linear programming technique is often used for optimizing a given objective like; profit or

revenue maximization, or cost outgo minimization. Distribution of the revenues is the critical issue,

when there are limited resources and they have to meet competing demands.

2. Transportation Model:

Transportation model is concerned with goods from manufacturing center or warehouses

which have to be supplied to depots or retails outlets. The demand and supply position of the places

where they are required or produced and the cost of transportation are considered in the model. We use

this model to economize.

3. Assignment Model:

Allocating jobs or persons to machines, awarding different projects to contractors is done so

that maximum returns occur or less expenses are incurred. Hence, calls for the use of this model.

4. Inventory Control Model:

Inventory control model considers the:

a. Frequency of placing orders.

b. Quantities per order considering the cost of placing an order.

c. Number of pieces that are to be kept in reserve.

d. Rate of consumption.

e. Lead time required for the supplier.

f. Cost involved in storage.

We have different models which give solutions to optimization depending upon the

probabilities of consumption and supply.

5. Waiting Line Models:

Queues are formed when the rate of services is at a variance with the rate of arrival. They

are formed when the rate of production is less at particular points compared to the previous one.

Sometimes we see multiple service points and a single queue are formed for feeding them. Number of

items which includes the following is studied with some special techniques.

a. People to be serviced.

b. Rate of service

c. Type of queue discipline that is intended to be followed.

d. Policy of priority

e. Tolerable amounts of waiting

f. Others.

6. Simulation Models:

Simulation models are used when we will not be able to formulate mathematical model. So,

we develop a model which resembles a real life situation. Based on this pattern, we predict and plan

our procurement, production, delivery and other actions.

7. PERT (Project Evaluation And Review Technique) And CPM (Critical Path Method)

Models:

When projects are undertaken with a number of activities, some happens in sequence, with

gaps of weeks or months and some happens simultaneously. It is important to estimate the time

required for completion of the project. A lot of coordination is needed while supplying the resources.

It is also equally important to identify the bottlenecks and smoothen resources so that time schedules

are maintained. Delayed completion may entail penalties. In this model, we adopt special methods to

make the system.

Difference between Work Study and Motion Study

Work study Motions study

1. We can say that work study is being conducted when analysis of work methods is conducted during the period when a job is done on a machine or equipment.

1. Method study is on studying the method currently being used and developing a new method of performing the task in a better way.

2. The study helps in designing the

optimum work method and standardization of the work method.

2. Operation flow charts, motion charts, flow process charts, which are the elements of the task are studied to find the purpose of each activity, the sequences in which they are done, and the effect of these on the work.

3. The study enables the methods engineer to search for better methods for higher utilization of man and machine and accomplishment of higher productivity.

3. The study may help in changing some

of them and even eliminate some of them to effect improvements.

4. The study gives an opportunity to the workmen to learn the process of study thus making them able to offer suggestions for improved methods.

4. The new method should result in saving of time, reduced motions and simpler activities.

Q.4. What is rapid prototyping ? Explain the difference between Automated flow line and

Automated assembly line with examples.

Ans. Prototyping is a process by which a new product is developed in small numbers.

Prototyping is helpful to:

Determine the suitability of the materials

Study the various methods of manufacture

Determine type of machinery required

Develop techniques to overcome problems that may be encountered when full scale

manufacturing is undertaken.

Prototypes do meet the specification of the components that enter a product and performance

can be measured on those. It helps in confirming the design and any shortcomings can be rectified at

low cost. If serious defects or problems arise during manufacturing, a thorough change in design or

even its replacement may be considered. Toa arrive at decisions and to make use of the advantageous

stated above, it is important that the prototypes are made within the shortest possible time, Rapid

prototyping facilities this.

The advanced Rapid Prototype Modeling Processes are:

1. Computer Aided Design (CAD)

2. Selective Laser Sintering (SLS)

3. Fused Deposition Modeling (FDM)

4. Lamination Object Manufacturing (LOM)

5. Electronic Beam Melting (EBM)

Different between Automated Flow lines and Assembly Flow line.

Automated Flow Lines Assembly Flow Lines

1. Several Automated machines are linked

by a transfer system.

1. All equipments are needed to in

automated Assembly line

2. Handling machine have main role to

move semi finished product to the next

stage.

2. All equipments make role of making

sub-assemblies put together and

fitted.

3. Semi-finished products are the main

core activities.

3. Here Sub-assemblies products are the

core activities.

4. Here raw materials are achieving to get

required shapes and acquire special

properties.

4. Here intermediated products are

achieving to get finished product.

5. The materials are needed to be moved,

held, rotated, fitted and positioned for

completing different operations.

5. Here All parts or sub-assemblies are

fitted to enables the product to be in

readiness to perform the function it

was designed to. This process is

called assembly.

6. Human intervention may be needed to

verify that the operations are taking

place according to standards.

6. No human intervention is needed,

methodologies are framed to achieve

the final result, basic principle is to fit

parts together and ensure linkages so

that the functions are integrated and

give out the desired output.

Q.5. Explain Break even Analysis and centre of gravity methods. Explain product layout and process layout with examples.

Ans. Break Even Analysis

Every manufacturing company will have three major contributors to cost;

1. Investments made for land, plant and machinery resulting in interest and depreciation.

2. Recurring expenses, which are not proportional to the quantity of production.

3. Variable costs, which are directly proportional to the quantity produced.

For our calculations, we combine the first two costs together and call them fixed costs. We call

those costs that depend on the quantity of production as variable costs.

We compare the total costs for different locations on estimated amounts per annum and select

whichever locations costs the least. However we will have to consider the possible variations in

production levels during the foreseeable time spans and take decision.

Centre Of Gravity Method.

Centre of gravity method is used mainly when;

Transportation costs, either for distribution of products or collection of materials from

different suppliers is the main criterion.

Production rates are high.

The volume and weights of materials that have to be moved are huge.

Time taken either to receive materials from suppliers or delivery to customers is

critical.

It is better to locate the facility at such a place, which caters to the different points most

optimally. The vital factor is the load, that is, number of items, or the weights that need to be moved

from the central location to the existing or demanding point. We use this method when, both distance

and load have to be considered for optimality in terms of costs.

PRODUCT LAYOUT

Product layout is also called as production lines or assembly lines. They are designed and laid

out in such a way that only few products are capable of being manufactured or assembled. Materials

flow through the various facilities. These use special machines to perform specific operations to

produce only one product at one time. So, companies should set different set of machines for different

products. Workers perform a narrow range of activities to complete the operations on the product as it

moves in a flow line. The operation times, the sequence of movements and routing procedures are

highly standardized to meet production requirements which are synchronized with many such products

TO THE COST

CONTRIBUTING

COMPANIES MAJOR

CONTRIBUTORS TO COST

FIXED COSTS

LAND,PLANT AND

MACHINERY

RECURRING EXPENSES

VARIABLE COSTS

PRODUCTION COST

to complete finished goods to meets demands. Using special machines and implementing

standardization in operations have many advantages which are listed below:

The skill required of the workers is low

Supervision is minimal

Training needs are small

Precautions to be taken are:

Constant check on the processes needs to be performed so that quality is assured.

Corrective measures have to be implemented to avoid rejections, since, the quantities

that get manufactured will be continuous.

Check for the behavioral of the worker. As jobs are repetitive, workers tend to be bored

and lose concentration. This may affect productivity and quality.

Example: Let us consider an example of a stainless steel manufacturing industry, in which the

operations turning, milling and drilling happen in a sequence. Testing is performed in each

process to assure the quality. The items are then sent to the assembly block. The items that

arrive for assembly are either bought out items or made item components from elsewhere in the

plant. The final product inspections are made and send to the packing dispatch.

TURNING

OPERATION

MILLING

MACHINES

DRILLING

MACHINES

PACKING

DISPATCH

INSPECTION ASSSEMBLY

PROCESS LAYOUT

Design of Process Layout:

The analysis involved in the design of production lines and assembly lines relates primarily to

timing, coordination, and balance among individual stages in the process. For process layouts, the

relative arrangement of departments and machines is the critical factor because of the large amount of

transportation and handling involved.

Procedure For Designing Process Layouts:

Process layout design determines the best relative locations of functional work centers. Work

centers that interact frequently, with movement of material or people, should be located close together,

whereas those that have little interaction can be spatially separated. One approach of designing an

efficient functional layout is described below.

1. List and describe each functional work centre.

2. Obtain a drawing and description of the facility being designed.

3. Identify and estimate the amount of material and personnel flow among work centers.

4. Use structured analytical methods to obtain a good general layout.

5. Evaluate and modify the layout, incorporating details such as machine orientation,

storage area location, and equipment access.

The first step in the layout process is to identify and describe each work centre. The description

should include the primary function of the work centre; drilling, new accounts, or cashier; its major

components, including equipment and number of personnel; and the space required. The description

should also include any special access needs (such as access to running water or an elevator) or

restrictions (it must be in a clean area or away from heat). For a new facility, the spatial configuration

of the work centers and the size and shape of the facility are determined simultaneously. Determining

the locations of special structures and fixtures such as elevators, loading docks, and bathrooms

becomes part of the layout process.

However, in many cases the facility and its characteristics are a given. In these situations, it is

necessary to obtain a drawing of the facility being designed, including shape and dimensions, locations

of fixed structures, and restrictions on activities, such as weight limits on certain parts of a floor or

foundation.

Relationship flow diagram

a) To minimize transport times and material-handling costs, we would like to place close together

those work centers that have the greatest flow of materials and people between them.

b) To estimate the flows between work centers, it is helpful to begin by drawing relationship

diagram as shown in Fig.

c) For manufacturing systems, material flows and transporting costs can be estimated reasonably

well using historical routings for products or through work sampling techniques applied to

workers or jobs. The flow of people, especially in a service system such as a business office or

a university administration building, may be difficult to estimate precisely, although work

sampling can be used to obtain rough estimates.

The amounts and/or costs of flows among work centers are usually presented using a

flow matrix, a flow-cost matrix, or a proximity chart.

Q.6. Explain Juran’s Quality Trilogy and Crosby’s absolutes of quality. List out the pillars of total productive maintenance.

Ans. JURAN’s Quality Triology

Juran uses his famous universal Breakthrough Sequence to implement quality

programmes. The universal break through sequences are ;

Proof of need: there should be a compelling need to make changes.

Project identification: here what is to be changed is identified. Specific projects with

time frames and the resource allocation are decided.

Top management commitment: Commitment of the top management is to assign

people and fix responsibilities to complete the project.

Diagnostic journey: Each team will determine whether the problems result from

systemic causes or are random or are deliberately caused. Root causes are ascertained

with utmost certainty.

Remedial Action: This is the stage when changes are introduced. Inspection, testing,

and validation are also included at this point.

Holding on to the gains: the above steps results in beneficiary results. Having records

or all actions and consequences will help in further improvements. The actions that

results in the benefits derived should be the norm for establishing standards.

JURAN has categorised cost of quality in to four categories:

1. Failure Costs–Internal: These are cost of rejections, repairs in terms of materials,

labour, machine time and loss of morale.

2. Failure Costs-External: These are cost of replacement, on-site rework including spare

parts and expenses of the personnel, warranty costs and loss of goodwill.

3. Appraisal Costs: These are cost inspection, including maintenance of records,

certification, segregation costs, and others.

4. Prevention costs: Prevention cost is the sequence of three sets of activities, Quality

planning, Quality control, and Quality improvement, forming the triology to achieve

TOTAL QUALITY MANAGEMENT.

JURAN’s argument says that;

Quality is the result of good planning consideration the needs of both internal and external

customers and develops processes to meet them. The processes are also planned to meet them.

Quality is built into the system of manufacture, inputs and processes that are on stream like raw

material, spare parts, labour, machine maintenance, training, warehousing, inspection

procedures, packaging, and other. All these have to follow standards and control exercises to

make sure that mistake do not occur often and that if mistakes do occur then they are corrected

at the source.

Quality improvement measures are essential to keep the quality culture alive. Newer methods

will be found, some operations can be eliminated, improved technology available. In short, as

experience is gained things can always be done better. IT is for the management to take the

initiative and encourage the employees to be on lookout for opportunities for improvement.

CROSBY’S Absolutes of Quality

Like Deming, Crosby also lays emphasis on top management commitment and responsibility

for designing the system so that defects are not inevitable. He urged that there be no restriction on

spending for achieving quality. In the long run, maintaining quality is more economical than

compromising on its achievement. His absolutes can be listed as under:

Quality is conformance to requirements, not ‘goodness’

Prevention, not appraisal, is the path to quality.

Quality is measured as the price Paid for non-conformance and as indices

Quality originates in all factors. There are no quality problems. It is the people designs and

processes that create problems.

Crosby also has given 14 points similar to those of Deming. His approach emphasizes on

measurement of quality, increasing awareness, corrective action, error cause removal and continuously

reinforcing the system, so that advantages derived are not lost over time. He opined that the quality

management regimen should improve that overall health of the organization and prescribed a vaccine.

The ingredients are.

1. Integrity: Honesty and commitment help in producing everything right first time, every

time.

2. Communication: Flow of information between departments, suppliers, customers helps

in indentifying opportunities.

3. Systems and operations: These should bring in a quality environment so that nobody is

comfortable with anything less than the best.

Total Production Maintenance (TPM)

Maintenance is a function in any operations system. Maintenance keeps the equipments in

good condition. Generally equipments deteriorate because usage wear to the parts introducing

inaccuracies on the products made on them. When the deterioration produces a component which

exceeds the permitted deviations rendering them unacceptable, maintenance is undertaken to bring

back the machine to produce acceptable components. Sometimes the failure is sudden and serious and

the equipment stops working. Disruption of production and emergency repairs works are costly and

schedules are missed causing delays in supplies and consequent losses. These breakdowns occur

because the equipment was carrying hidden defects which were not apparent. All theses are attended

to by the maintenances department. Historical records indicate the probability of failures over different

periods thus enabling us to plan to attend to them. With progress in automation, we have costly

equipments. We have flow lines and any one machine breaking down causes a series of machine to be

idle. So, we have to move towards zero breakdowns like we want to move towards zero defects by

implementing TQM Tools.

TPM puts the responsibility of maintenance where it belongs to and the operator who uses the

equipment. It is a companywide activity which involves all the people. The main thrust is eliminating

all break downs. The focus is on the operating personnel because they would know about

malfunctioning earlier and more than anybody else. They work on the machine and are aware of the

slightest variations that occur and thus should be able to plan to remove the cause before it becomes

serious. So every planned maintenance activity reduces the probability of a breakdown, Ownership of

the operation and machine increases the commitment of the workmen. Autonomy is the starting point

for learning and excellence. The worker can suggest better ways of improving quality, productivity,

and design. This help in continuous improvement, Team work and participation improves the quality

culture. The principles of 5S- the housekeeping activities which improve efficiency at workplace is

considered a measurable standard to aid the implementation at TPM even in the office rooms.

ASSIGNMENTS MBA – 2nd SEM

Subject Code – MB0045 Book ID – B1134

FINANCIAL MANAGEMENT Set – 1

Q1. What are the 4 finance decisions taken by a finance manager.

Ans. A firm performs finance functions simultaneously and continuously in the normal course of the

business. They do not necessarily occur in a sequence. Finance functions call for skilful planning,

control and execution of a firm’s activities. Let us note at the outset hat shareholders are made better

off by a financial decision that increases the value of their shares, Thus while performing the finance

function, the financial manager should strive to maximize the market value of shares. Whatever

decision does a manger takes need to result in wealth maximization of a shareholder.

1. Investment Decision

Investment decision or capital budgeting involves the decision of allocation of capital

or commitment of funds to long-term assets that would yield benefits in the future. Two important

aspects of the investment decision are:

a) The evaluation of the prospective profitability of new investments, and

b) The measurement of a cut-off rate against that the prospective return of new investments could

be compared. Future benefits of investments are difficult to measure and cannot be predicted

with certainty.

Because of the uncertain future, investment decisions involve risk. Investment proposals

should, therefore, be evaluated in terms of both expected return and risk. Besides the decision for

investment managers do see where to commit funds when an asset becomes less productive or non-

profitable.

There is a broad agreement that the correct cut-off rate is the required rate of return or the

opportunity cost of capital. However, there are problems in computing the opportunity cost of capital

in practice from the available data and information. A decision maker should be aware of capital in

practice from the available data and information. A decision maker should be aware of these problems.

2. Financing Decision

Financing decision is the second important function to be performed by the financial

manager. Broadly, her or she must decide when, where and how to acquire funds to meet the firm’s

investment needs. The central issue before him or her is to determine the proportion of equity and

debt. The mix of debt and equity is known as the firm’s capital structure. The financial manager must

strive to obtain the best financing mix or the optimum capital structure for his or her firm. The firm’s

capital structure is considered to be optimum when the market value of shares is maximized. The use

of debt affects the return and risk of shareholders; it may increase the return on equity funds but it

always increases risk. A proper balance will have to be struck between return and risk. When the

shareholders’ return is maximized with minimum risk, the market value per share will be maximized

and the firm’s capital structure would be considered optimum. Once the financial manager is able to

determine the best combination of debt and equity, he or she must raise the appropriate amount

through the best available sources. In practice, a firm considers many other factors such as control,

flexibility loan convenience, legal aspects etc. in deciding its capital structure.

3. Dividend Decision

Dividend decision is the third major financial decision. The financial manager must

decide whether the firm should distribute all profits, or retain them, or distribute a portion and retain

the balance. Like the debt policy, the dividend policy should be determined in terms of its impact on

the shareholders’ value. The optimum dividend policy is one that maximizes the market value of the

firm’s shares. Thus if shareholders are not indifferent to the firm’s dividend policy, the financial

manager must determine the optimum dividend – payout ratio. The payout ratio is equal to the

percentage of dividends to earnings available to shareholders. The financial manager should also

consider the questions of dividend stability, bonus shares and cash dividends in practice. Most

profitable companies pay cash dividends regularly. Periodically, additional shares, called bonus share

(or stock dividend), are also issued to the existing shareholders in addition to the cash dividend.

4. Liquidity Decision

Current assets management that affects a firm’s liquidity is yet another important

finances function, in addition to the management of long-term assets. Current assets should be

managed efficiently for safeguarding the firm against the dangers of illiquidity and insolvency.

Investment in current assets affects the firm’s profitability. Liquidity and risk. A conflict exists

between profitability and liquidity while managing current assets. If the firm does not invest sufficient

funds in current assets, it may become illiquid. But it would lose profitability, as idle current assets

would not earn anything. Thus, a proper trade-off must be achieved between profitability and liquidity.

In order to ensure that neither insufficient nor unnecessary funds are invested in current assets, the

financial manager should develop sound techniques of managing current assets. He or she should

estimate firm’s needs for current assets and make sure that funds would be made available when

needed. It would thus be clear that financial decisions directly concern the firm’s decision to acquire or

dispose off assets and require commitment or recommitment of funds on a continuous basis. It is in

this context that finance functions are said to influence production, marketing and other functions of

the firm. This, in consequence, finance functions may affect the size, growth, profitability and risk of

the firm, and ultimately, the value of the firm. To quote Ezra Solomon The function of financial

management is to review and control decisions to commit or recommit funds to new or ongoing uses.

Thus, in addition to raising funds, financial management is directly concerned with production,

marketing and other functions, within an enterprise whenever decisions are about the acquisition or

distribution of assets. Various financial functions are intimately connected with each other. For

instance, decision pertaining to the proportion in which fixed assets and current assets are mixed

determines the risk complexion of the firm. Costs of various methods of financing are affected by this

risk. Likewise, dividend decisions influence financing decisions and are themselves influenced by

investment decisions. In view of this, finance manager is expected to call upon the expertise of other

functional managers of the firm particularly in regard to investment of funds. Decisions pertaining to

kinds of fixed assets to be acquired for the firm, level of inventories to be kept in hand, type of

customers to be granted credit facilities, terms of credit should be made after consulting production

and marketing executives.

However, in the management of income finance manager has to act on his own. The

determination of dividend policies is almost exclusively a finance function. A finance manager has a

final say in decisions on dividends than in asset management decisions. Financial management is

looked on as cutting across functional even disciplinary boundaries. It is in such an environment that

finances manager works as a part of total management. In principle, a finance manager is held

responsible to handle all such problem: that involve money matters. But in actual practice, as noted

above, he has to call on the expertise of those in other functional areas to discharge his responsibilities

effectively.

Q.2. What are the factors that affect the financial plan of a company?

Ans. To help your organization succeed, you should develop a plan that needs to be followed. This

applies to starting the company, developing new product, creating a new department or any

undertaking that affects the company’s future. There are several factors that affect planning in an

organization. To create an efficient plan, you need to understand the factors involved in the planning

process.

Organizational planning is affected by many factors.

Priorities

In most companies, the priority is generating revenue, and this priority can sometimes interfere

with the planning process of any project. For example, if you are in the process of planning a large

expansion project and your largest customer suddenly threatens to take their business to your

competitor, then you might have to shelve the expansion planning until the customer issue is resolved.

When you start the planning process for any project, you need to assign each of the issues facing the

company a priority rating. That priority rating will determine what issues will sidetrack you from the

planning of your project, and which issues can wait until the process is complete.

Company Resources

Having an idea and developing a plan for your company can help your company to grow and

succeed, but if the company does not have the resources to make the plan come together, it can stall

progress. One of the first steps to any planning process should be an evaluation of the resources

necessary to complete the project, compared to the resources the company has available. Some of the

resources to consider are finances, personnel, space requirements, access to materials and vendor

relationships.

Forecasting

A company constantly should be forecasting to help prepare for changes in the marketplace.

Forecasting sales revenues, materials costs, personnel costs and overhead costs can help a company

plan for upcoming projects. Without accurate forecasting, it can be difficult to tell if the plan has any

chance of success, if the company has the capabilities to pull off the plan and if the plan will help to

strengthen the company’s standing within the industry. For example, if your forecasting for the cost of

goods has changed due to a sudden increase in material costs, then that can affect elements of your

product roll-out plan, including projected profit and the long-term commitment you might need to

make to a supplier to try to get the lowest price possible.

Contingency Planning

To successfully plan, an organization needs to have a contingency plan in place. If the

company has decided to pursue a new product line, there needs to be a part of the plan that addresses

the possibility that the product line will fail. The reallocation of company resources, the acceptable

financial losses and the potential public relations problems that a failed product can cause all need to

be part of the organizational planning process from the beginning.

Q.3. Show the relationship between required rate of return and coupon rate on the value of a

bond.

Ans. It is important for prospective bond buyers to know how to determine the price of a bond

because it will indicate the yield received should the bond be purchased. In this section, we will run

through some bond price calculations for various types of bond instruments.

Bonds can be priced at a premium, discount, or at par. If the bond’s price is higher than its par

value, it will sell at a premium because its interest rate is higher than current prevailing rates. If the

bond’s price is lower than its par value, the bond will sell at a discount because its interest rate is lower

than current prevailing interest rates. When you calculate the price of a bond, you are calculating the

maximum price you would want to pay for the bond, given the bond’s coupon rate in comparison to

the average rate most investors are currently receiving in the bond market. Required yield or required

rate of return is the interest rate that a security needs to offer in order to encourage investors to

purchase it. Usually the required yield on a bond is equal to or greater than the current prevailing

interest rates.

Fundamentally, however, the price of a bond is the sum of the present values of all expected

coupon payments plus the present value of the par value at maturity. Calculating bond price is simple:

all we are doing is discounting the known future cash flows. Remember that to calculate present value

(PV) – which is based on the assumption that each payment is re-invested at some interest rate once it

is received–we have to know the interest rate that would earn us a known future value. For bond

pricing, this interest rate is the required yield.

Here is the formula for calculating a bond’s price, which uses the basic present value (PV)

formula:

C = coupon payment

n = number of payments

i = interest rate, or required yield

M = value at maturity, or par value

The succession of coupon payments to be received in the future is referred to as an ordinary

annuity, which is a series of fixed payments at set intervals over a fixed period of time. (Coupons on a

straight bond are paid at ordinary annuity.) The first payment of an ordinary annuity occurs one

interval from the time at which the debt security is acquired. The calculation assumes this time is the

present.

You may have guessed that the bond pricing formula shown above may be tedious to calculate,

as it requires adding the present value of each future coupon payment. Because these payments are

paid at an ordinary annuity, however, we can use the shorter PV-of-ordinary-annuity formula that is

mathematically equivalent to the summation of all the PVs of future cash flows. This PV-of-ordinary-

annuity formula replaces the need to add all the present values of the future coupon. The following

diagram illustrates how present value is calculated for an ordinary annuity:

Each full moneybag on the top right represents the fixed coupon payments (future value)

received in periods one, two and three. Notice how the present value decreases for those coupon

payments that are further into the future the present value of the second coupon payment is worth less

than the first coupon and the third coupon is worth the lowest amount today. The farther into the future

a payment is to be received, the less it is worth today – is the fundamental concept for which the PV-

of-ordinary-annuity formula accounts. It calculates the sum of the present values of all future cash

flows, but unlike the bond-pricing formula we saw earlier, it doesn’t require that we add the value of

each coupon payment.

By incorporating the annuity model into the bond pricing formula, which requires us to also

include the present value of the par value received at maturity, we arrive at the following formula:

Let’s go through a basic example to find the price of a plain vanilla bond.

Example 1: Calculate the price of a bond with a par value of $1,000 to be paid in ten years, a coupon

rate of 10%, and a required yield of 12%. In our example we’ll assume that coupon payments are

made semi-annually to bond holders and that the next coupon payment is expected in six months. Here

are the steps we have to take to calculate the price:

1. Determine the Number of Coupon Payments: Because two coupon payments will be made

each year for ten years, we will have a total of 20 coupon payments.

2. Determine the Value of Each Coupon Payment: Because the coupon payments are semi-

annual, divide the coupon rate in half. The coupon rate is the percentage off the bond’s par value. As a

result, each semi-annual coupon payment will be $50 ($1,000 x 0.05).

3. Determine the Semi-Annual Yield: Like the coupon rate, the required yield of 12% must be

divided by two because the number of periods used in the calculation has doubled. If we left the

required yield at 12%, our bond price would be very low and inaccurate. Therefore, the required semi-

annual yield is 6% (0.12/2).

4. Plug the Amounts into the Formula: From the above calculation, we have determined that

the bond is selling at a discount; the bond price is less than its par value because the required yield of

the bond is greater than the coupon rate. The bond must sell at a discount to attract investors, who

could find higher interest elsewhere in the prevailing rates. In other words, because investors can make

a larger return in the market, they need an extra incentive to invest in the bonds.

Accounting for Different Payment Frequencies

In the example above coupons were paid semi-annually, so we divided the interest rate and

coupon payments in half to represent the two payments per year. You may be now wondering whether

there is a formula that does not require steps two and three outlined above, which are required if the

coupon payments occur more than once a year. A simple modification of the above formula will allow

you to adjust interest rates and coupon payments to calculate a bond price for any payment frequency:

Notice that the only modification to the original formula is the addition of “F”, which

represents the frequency of coupon payments, or the number of times a year the coupon is paid.

Therefore, for bonds paying annual coupons, F would have a value of one. Should a bond pay

quarterly payments, F would equal four, and if the bond paid semi-annual coupons, F would be two.

Q.4. Discuss the implication of financial leverage for a firm.

Ans. The financial leverage implies the employment of source of funds, involving fixed return so as

to cause more than a proportionate change in earnings per share (EPS) due to change in operating

profits. Like the operating leverage, financial leverage can be positive when operating profits are

increasing and can be negative in the situation of decrease in such profits. In view of these, financial

leverage will affect the financial risk of the firm. An important analytical tool for financial leverage is

the indifference point at which the EPS/market price is the same for different financial plans under

consideration.

The objective of this study was to provide additional evidence on the relationship between

financial leverage and the market value of common stock. Numerous empirical studies have been done

in this area, and, concurrently, many theories have been developed to explain the relationship between

financial leverage and the market value of common stock. Because of the methodological weaknesses

of past studies, however, no conclusions can be drawn as to the validity of the theories. Theories on

financial leverage may be classified into three categories: irrelevance theorem, rising from value

indefinitely with increase in financial leverage, and optimal financial leverage. Empirical implications

of these categories along with the consequences of serious confounding effects are analyzed. The

implications are then compared with evidence from actual events involving financial leverage changes,

and distinguished from each other as finely as possible, using simple and multiple regression analyses,

normal Z-test, and a simulation technique. The evidence shows that changes in the market value of

common stock are positively related to changes in financial leverage for some firms and negatively

related for other firms. This evidence is consistent with the existence of an optimal financial leverage

for each firm, assuming that financial leverages of firms with a positive relationship are below the

optimum and those of firms with a negative relationship are above the optimum. The results of the

study do not depend upon the definition of the market portfolio, the definition of the event period, or

the choice of financial leverage measure. Betas estimated from equally weighted market portfolios

were generally higher than those estimated from value weighted market portfolios during 1981-1982.

However, the results of the study were the same for both portfolios. Abnormal returns were

computed for seven and two day event periods, and the results were the same for both periods. Seven

different definitions of financial leverage were tested, and the results were the same for all measures.

Q.5 The cash flows associated with a project are given below: Year Cash flow 0 (100,000) 1 25000 2 40000 3 50000 4 40000 5 30000

Calculate the a) payback period.

b) Benefit cost ratio for 10% cost of capital Ans. a) Payback period:

The cash flows and the cumulative cash flows of the projects is shown under in table

Table Cash flows and cumulative cash flows

Year Project

Cash flows (Rs.) Cumulative Cash flows

1 25,000 25,000 2 40,000 65,000 3 50,000 115,000 4 40,000 155,000 5 30,000 185,000

From the cumulative cash flow column the initial cash outlay of Rs. 1,00,000 lies between 2nd

year and 3rd year in respect of project.

Therefore, payback period for project is:

= 000,65

000,65000,1002

= 2.54 years

Hence Pay-back period for project B is 2.54 years.

b) Benefit cost ratio for 10% cost of capital

Table: Present Value (PV) of Cash inflows

Year Cash in flows PV factor at 15% PV of Cash in flows 1 25,000 0.909 22,725 2 40,000 0.826 33,040 3 50,000 0.751 37,550 4 40,000 0.683 27,320 5 30,000 0.621 18,630

PV of Cash inflow 139,265 Initial Cash out lay 1,00,000 NPV 39,265

PV of Cash inflow

Benefit cost ratio = ------------------------ Initial Cash outlay

1,39,265 = --------------

1,00,000

= 1.39 (Ans)

Q6. A company’s earnings and dividends are growing at the rate of 18% pa. The growth rate

is expected to continue for 4 years. After 4 years, from year 5 onwards, the growth rate

will be 6% forever. If the dividend per share last year was Rs. 2 and the investors

required rate of return is 10% pa, what is the intrinsic price per share or the worth of

one share. Ans. :

P = Intrinsic price per share

E = Earnings per share = 18%,

D = Dividend per share = 2

r = Rate of return = 10%

P = [2(1.18)/(1.10)1] + [2(1.18)2/(1.10)2] + [2(1.18)3/(1.10)3]

+ [2(1.18)4/(1.10)4] + [2(1.18)4 (1.06)/(1.10)5] + [2(1.18)4 (1.06)2/(1.10)6]

+ …………………

= 2.15 + 2.30 + 2.47 + 2.65 + 2.55 + 2.46

Intrinsic price per share = 14.58

ASSIGNMENTS MBA – 2nd SEM

Subject Code – MB0046 Book ID – B1135

MARKETING MANAGEMENT Set – 1

Q.1 What is Marketing Information System? Explain its characteristics, benefits and

information types.

Ans. A Marketing Information System can be defined as ‘a system in which marketing information is

formally gathered, stored, analysed and distributed to managers in accord with their informational

needs on a regular basis’.

Set of procedures and practices employed in analyzing and assessing marketing information,

gathered continuously from sources inside and outside of a firm. Timely marketing information

provides basis for decisions such as product development or improvement, pricing, packaging,

distribution, media selection, and promotion.

Characteristics of MIS

Philip Kotler defines MIS as “a system that consists of people, equipment and procedures to

gather, sort, analyze, evaluate and distribute needed, timely and accurate information to marketing

decision makers.

Its characteristics are as follows:

1. It is a planned system developed to facilitate smooth and continuous flow of information.

2. It provides pertinent information, collected from sources both internal and external to the

company, for use as the basis of marketing decision making.

3. It provides right information at the right time to the right person.

A well designed MIS serves as a company’s nerve centre, continuously monitoring the market

environment both inside and outside the organization. In the process, it collects lot of data and stores

in the form of a database which is maintained in an organized manner. Marketers classify and analyze

this data from the database as needed.

Benefits of MIS (Marketing Information System)

Various benefits of having a MIS and resultant flow of marketing information are given below:

1. It allows marketing managers to carry out their analysis, planning implementation and

control responsibilities more effectively.

2. It ensures effective tapping of marketing opportunities and enables the company to

develop effective safeguard against emerging marketing threats.

3. It provides marketing intelligence to the firm and helps in early spotting of changing

trends.

4. It helps the firm adapt its products and services to the needs and tastes of the customers.

5. By providing quality marketing information to the decision maker, MIS helps in

improving the quality of decision making.

Types of Marketing Informations

A Marketing Information System supplies three types of information.

1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly,

quarterly, or annual interval. This includes data such as sales, Market Share, sales call reports,

inventory levels, payables, and receivables etc. which are made available regularly. Information on

customer awareness of company’s brands, advertising campaigns and similar data on close

competitors can also be provided.

2. Monitoring Information is the data obtained from regular scanning of certain sources

such as trade journals and other publications. Here relevant data from external environment is captured

to monitor changes and trends related to marketing situation. Data about competitors can also be part

of this category. Some of these data can be purchased at a price from commercial sources such as

Market Research agencies or from Government sources.

3. Problem related or customized information is developed in response to some specific

requirement related to a marketing problem or any particular data requested by a manager. Primary

Data or Secondary Data (or both) are collected through survey Research in response to specific need.

For example, if the company has developed a new product, the marketing manager may want to find

out the opinion of the target customers before launching the product in the market. Such data is

generated by conducting a market research study with adequate sample size, and the findings obtained

are used to help decide whether the product is accepted and can be launched.

Q.2 a. Examine how a firm’s macro environment operates.

b. Mention the key points in Psychoanalytic model of consumer behaviour.

Ans. The term micro-environment denotes those elements over which the marketing firm has control

or which it can use in order to gain information that will better help it in its marketing operations. In

other words, these are elements that can be manipulated, or used to glean information, in order to

provide fuller satisfaction to the company’s customers. The objective of marketing philosophy is to

make profits through satisfying customers. This is accomplished through the manipulation of the

variables over which a company has control in such a way as to optimise this objective. The variables

are what Neil Borden has termed ‘the marketing mix’ which is a combination of all the ‘ingredients’ in

a ‘recipe’ that is designed to prove most attractive to customers. In this case the ingredients are

individual elements that marketing can manipulate into the most appropriate mix. E Jerome McCarthy

further dubbed the variables that the company can control in order to reach its target market the ‘four

Ps’. Each of these is discussed in detail in later chapters, but a brief discussion now follows upon each

of these elements of the marketing mix together with an explanation of how they fit into the overall

notion of marketing.

A scan of the external macro-environment in which the firm operates can be expressed in terms

of the following factors:

Political

Economic

Social

Technological

The acronym PEST (or sometimes rearranged as “STEP”) is used to describe a framework for

the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental

scan as shown in the following diagram:

Environmental Scan / \

External Analysis Internal Analysis / \ Macroenvironment Microenvironment |

P.E.S.T.

Political Factors

Political factors include government regulations and legal issues and define both formal and

informal rules under which the firm must operate. Some examples include:

Tax policy

Employment laws

Environmental regulations

Trade restrictions and tariffs

Political stability

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm’s cost of

capital. The following are examples of factors in the macro economy:

Economic growth

Interest rates

Exchange rates

Inflation rate

Social Factors

Social factors include the demographic and cultural aspects of the external macro environment.

These factors affect customer needs and the size of potential markets. Some social factors include:

Health consciousness

Population growth rate

Age distribution

Career attitudes

Emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels,

and influence outsourcing decisions. Some technological factors include:

R&D activity

Automation

Technology incentives

Rate of technological change

External Opportunities and Threats

The PEST factors combined with external micro environmental factors can be classified as

opportunities and threats in a SWOT analysis.

b) The Psychoanalytical Model:

The psychoanalytical model draws from Freudian Psychology.

According to this model, the individual consumer has a complex set of deep-seated motives

which drive him towards certain buying decisions. The buyer has a private world with all his hidden

fears, suppressed desires and totally subjective longings. His buying action can be influenced by

appealing to these desires and longings. The psychoanalytical theory is attributed to the work of

eminent psychologist Sigmund Freud. Freud introduced personality as a motivating force in human

behavior.

According to this theory, the mental framework of a human being is composed of three

elements, namely,

1. The id or the instinctive, pleasure seeking element. It is the reservoir of the instinctive

impulses that a man is born with and whose processes are entirely subconscious. It

includes the aggressive, destructive and sexual impulses of man.

2. The superego or the internal filter that presents to the individual the behavioral

expectations of society. It develops out of the id, dominates the ego and represents the

inhibitions of instinct which is characteristic of man. It represents the moral and ethical

elements, the conscience.

3. The ego or the control device that maintains a balance between the id and the superego.

It is the most superficial portion of the id. It is modified by the influence of the outside

world. Its processes are entirely conscious because it is concerned with the perception

of the outside world.

The basic theme of the theory is the belief that a person is unable to satisfy all his needs within

the bounds of society. Consequently, such unsatisfied needs create tension within an individual which

have to be repressed. Such repressed tension is always said to exist in the subconscious and continues

to influence consumer behavior.

4. The Sociological Model: According to the sociological model, the individual buyer is

influenced by society or intimate groups as well as social classes. His buying decisions

are not totally governed by utility; He has a desire to emulate, follow and fit in with his

immediate environment.

5. The Nicosia Model: In recent years, some efforts have been made by marketing

scholars to build buyer behavior models totally from the marketing man’s standpoint.

The Nicosia model and the Howard and Sheth model are two important models in this

category. Both of them belong to the category called the systems model, where the

human being is analyzed as a system with stimuli as the input to the system and

behavior as the output of the system. Francesco Nicosia, an expert in consumer

motivation and behavior put forward his model of buyer behavior in 1966.

The model tries to establish the linkages between a firm and its consumer – how the activities

of the firm influence the consumer and result in his decision to buy. The messages from the firm first

influence the predisposition of the consumer towards the product. Depending on the situation, he

develops a certain attitude towards the product. It may lead to a search for the product or an evaluation

of the product. If these steps have a positive impact on him, it may result in a decision to buy. This is

the sum and substance of the ‘activity explanations’ in the Nicosia Model.

The Nicosia Model groups these activities into four basic fields. Field one has two subfields

the firm’s attributes and the consumer’s attributes. An advertising message from the firm reaches the

consumer’s attributes. Depending on the way the message is received by the consumer, a certain

attribute may develop, and this becomes the input for Field Two. Field Two is the area of search and

evaluation of the advertised product and other alternatives. If this process results in a motivation to

buy, it becomes the input for Field Three. Field Three consists of the act of purchase. And Field Four

consists of the use of the purchased item.

Q.3. Explain the key roles played and various steps involved in organizational buying.

Ans.

Point 1 – Introduction.

The need for an understanding of the organizational buying process has grown in recent years

due to the many competitive challenges presented in business-to-business markets. Since 1980 there

have been a number of key changes in this area, including the growth of outsourcing, the increasing

power enjoyed by purchasing departments and the importance given to developing partnerships with

suppliers.

Point 2 – The organizational buying behaviour process.

The organizational buying behaviour process is well documented with many models depicting

the various phases, the members involved, and the decisions made in each phase. The basic five phase

model can be extended to eight; purchase initiation; evaluations criteria formation; information search;

supplier definition for RFQ; evaluation of quotations; negotiations; suppliers choice; and choice

implementation (Matbuy, 1986).

Point 3 – The buying centre.

The buying centre consists of those people in the organizational who are involved directly or

indirectly in the buying process, i.e. the user, buyer influencer, decider and gatekeeper to who the role

of ‘initiator’ has also been added. The buyers in the process are subject to a wide variety and

complexity of buying motives and rules of selection. The Matbuy model encourages marketers to

focus their efforts on who is making what decisions based on which criteria.

Point 4 – Risk and uncertainty

The driving forces of organizational buying behaviour. This is concerned with the role of risk

or uncertainty on buying behaviour. The level of risk depends upon the characteristics of the buying

situation faced. The supplier can influence the degree of perceived uncertainty by the buyer and cause

certain desired behavioural reactions by the use of information and the implementation of certain

actions. The risks perceived by the customer can result from a combination of the characteristics of

various factors: the transaction involved the relationship with the supplier, and his position vis-a-vis

the supply market.

Point 5 – Factors influencing organizational buying behaviour.

Three key factors are shown to influence organizational buying behaviour, these are, types of

buying situations and situational factors, geographical and cultural factors and time factors.

Point 6 – Purchasing Strategy.

The purchasing function is of great importance because its actions will impact directly on the

organization’s profitability. Purchasing strategy aims to evaluate and classify the various items

purchased in order to be able to choose and manage suppliers accordingly. Classification is along two

dimensions: importance of items purchased and characteristics of the supply market. Actions can be

taken to influence the supply market. Based on the type of items purchased and on its position in the

buying matrix, a company will develop different relationships with suppliers depending upon the

number of suppliers, the supplier’s share, characteristics of selected suppliers, and the nature of

customer-supplier relationships. The degree of centralization of buying activities and the missions and

status of the buying function can help support purchasing strategy. The company will adapt its

procedures to the type of items purchased which in turn will influence relationships with suppliers.

Point 7 – The future.

Two activities which will be crucial to the future development of organizational buying behaviour will

be information technology and production technologies.

Point 8 – Conclusion.

Organizational buying behaviour is a very complex area, however, an understanding of the key factors

are fundamental to marketing strategy and thus an organization’s ability to compete effectively in the

market place.

Q.4 Explain the different marketing philosophies and its approach.

Ans. Marketing is a societal process by which individuals and groups obtain what they need and want

through creating, offering and freely exchanging products and services of value with others.

According to the American Marketing Association, “Marketing is the process of planning and

executing the conception, pricing, promotion and distribution of ideas, goods and services to create

exchanges that satisfy individual and organizational goods”

There are six competing philosophies under which organizations conduct marketing activities “the

production concept, product concept, selling concept, marketing concept, customer concept; and

societal concept.

1) The Production Concept: The production concept is one of the oldest concepts in business.

The production concept holds that consumers will prefer products that are widely available and

inexpensive. Managers of production-oriented businesses concentrate on achieving high production

efficiency, low costs and mass distribution.

They assume that consumers are primarily interested in products availability and low prices.

This philosophy makes sense in developing countries, where consumers are more interested in

obtaining the product than its features. It is also used when a company wants to expand the market.

2. The product Concept – Product concept holds that consumer will favour these products that

offer the most quality, performance and innovative features. Managers in these organizations focus on

making superior products and improving them over time. They assume that buyers admire well-made

products and can evaluate quality and performance product oriented companies often trust that their

engineers can design exceptional products. They get little or no customer input, and very often they

will not even examine competitor’s products.

3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone,

will ordinarily not buy enough of the organization’s products. The organization most, therefore,

undertakes an aggressive selling and promotion effort. This concept assumes that consumers typically

show buying inertia or resistance and must be coaxed into buying. It also assumes that the company

has a whole battery of effective selling and promotion tools to stimulate more buying. The selling

concept is epitomized by the thinking that “The purpose of marketing is to sell more stuff to more

people for more money in order to make more profit

Most firms practice the selling concept when they have over capacity. Their aim is to sell what

they make rather then make what market wants.

4. The Marketing Concept: The marketing concepts hold that the key to achieving its

organizational goals consists of the company being more effective then competitors in creating,

delivering and communicating superior customer value to its chosen target markets.

The marketing concept rests on four pillars: target market, customer needs, integrated

marketing and profitability. There is a contrast between selling and marketing concepts:

“Selling focuses on the needs of the seller; marketing on the needs of the buyer”.

Selling is preoccupied with the seller’s need to convert his product into cash; marketing with

the ideas of satisfying the needs of the customers by means of the product and the whole cluster of

things associated with creating, delivering and finally consuming it.

5. The customer Concept: Under customer concept, companies shape separate offers, services

and messages to individual customers. These companies collect information on each customer’s past

transactions, demographics, psychographics and media and distribution preferences. They hope to

achieve profitable growth through capturing a larger share of each customer’s expenditures by

building high customer loyalty and focusing on customer lifetime value.

The ability of a company to deal with customers are at a time become practical as a result of

advances in factory customization, computers, the internet and database marketing software.

6. The Societal Marketing Concept: The societal marketing concept holds that the

organization’s goal is to determine the needs, wants and interests of target markets and to deliver the

desired satisfactions more effectively and efficiently than competitors in a way that preserves or

enhances the consumer’s and the society’s well being.

The societal marketing concept calls upon marketers to build social and ethical considerations

into their marketing practices. They must balance and juggle the often-conflicting criteria of company

profits, consumer want satisfaction and public interest.

Companies see cause-related marketing as an opportunity to enhance their corporate

reputation, raise brand awareness, increase customer loyalty, build sales and increase press coverage.

They believe that consumers will increasingly look for signs of good corporate citizenship that go

beyond supplying rational and emotional benefits.

Q.5. What are the various stages involved in decision process when a consumer is buying new

product? Also, explain the adoption process.

Ans.

Stages of the Consumer Buying Process

Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual

purchasing is only one stage of the process. Not all decision processes lead to a purchase. All

consumer decisions do not always include all 6 stages, determined by the degree of

complexity…discussed next.

The 6 stages are:

1. Problem Recognition (awareness of need)–difference between the desired state and the actual

condition. Deficit in assortment of products. Hunger–Food. Hunger stimulates your need to eat.

Can be stimulated by the marketer through product information–did not know you were deficient? I.E.,

see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of

shoes.

2. Information search–

o Internal search, memory.

o External search if you need more information. Friends and relatives (word of mouth).

Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set.

Hungry, want to go out and eat, evoked set is :

o Chinese food

o Indian food

o Burger king

o Klondike kates etc

3. Evaluation of Alternatives–need to establish criteria for evaluation features the buyer wants or

does not want. Rank/weight alternatives or resume search. May decide that you want to eat something

spicy, Indian gets highest rank etc.

If not satisfied with your choice then returns to the search phase. Can you think of another

restaurant? Look in the yellow pages etc. Information from different sources may be treated

differently. Marketers try to influence by “framing” alternatives.

4. Purchase decision–Choose buying alternative, includes product, package, store, method of

purchase etc.

5. Purchase–May differ from decision, time lapse between 4 & 5, product availability.

6. Post-Purchase Evaluation–outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance,

have you made the right decision. This can be reduced by warranties, after sales communication etc.

After eating an indian meal, may think that really you wanted a Chinese meal instead.

Adoption Process

Adoption is an individual “™”s decision to become a regular user of a product. How do

potential customers learn about new products, try them, and adopt or reject them? The consumer

adoption process is later followed by the consumer loyalty process, which is the concern of the

established producer. Years ago, new product marketers used a mass market approach to launch

products. This approach had two main drawbacks: It called for heavy marketing expenditures, and it

involved many wasted exposures. These drawbacks led to a second approach, heavy user target

marketing. This approach makes sense, provided that heavy users are identifiable and are early

adopters. However, even within the heavy user group, many heavy users are loyal to existing brands

new product marketers now aim at consumers who are early adopters.

The theory of innovation diffusion and consumer adoption helps marketers identify early

adopters.

An innovation is any good, service, or idea that is perceived by someone as new. The idea may

have a long History, but it is an innovation to the person who sees it as new. Innovations take time to

spread through the social system. The Innovation diffusion process is defined as “the spread of a

new idea from its source of invention or creation to its ultimate users or adopters. The consumer

adoption process is the mental process through which an individual passes from first hearing about an

innovation to final adoption.

Adopters of new products have been observed to move through five stages:

1. Awareness : The consumer becomes aware of the innovation but lacks information

about it.

2. Interest : The consumer is stimulated to seek information about the innovation.

3. Evaluation: The consumer considers whether to try the innovation

4. Trial: The consumer tries the innovation to improve his or her estimate of its value.

5. Adoption : The consumer decides to make full and regular use of the innovation.

Q.6. Explain briefly the marketing mix elements for an automobile company giving sufficient

examples.

Ans. Marketing mix is the combination of elements that you will use to market your product. There

are four elements: Product, Place, Price and Promotion. They are called the four Ps of the marketing

mix.

The objectives of this lesson about marketing mix are to give you:

The tools you need for establishing your detailed marketing plan and forecasting your sales.

1. Challenge

2. Product

3. Place

4. Price

5. Promotion

6. Sales strategy

7. Do it yourself

8. Coaching

1. CHALLENGE

You have gotten a rough idea about the market situation and the possible positioning

of your product. Of course, it’s far to be sufficient. Now, you must write your detailed planning. It

means that brainstorming is ended and that you have to go to the specifics in examining and checking

the entire hypothesis you had made in the preceding chapters. You will use the marketing mix.

Some people think that the four Ps are old fashionable and propose a new paradigm: The four

Cs! Product becomes customer needs; Place becomes convenience, price is replaced by cost to the

user, promotion becomes communication. It looks like a joke but the Cs is more customer-oriented.

2. PRODUCT

A good product makes its marketing by itself because it gives benefits to the customer.

We can expect that you have right now a clear idea about the benefits your product can offer. Suppose

now that the competitors products offer the same benefits, same quality, same price. You have then to

differentiate your product with design, features, packaging, services, warranties, return and so on. In

general, differentiation is mainly related to:

a) The design: it can be a decisive advantage but it changes with fads. For example, a fun

board must offer a good and fashionable design adapted to young people.

b) The packaging: It must provide a better appearance and a convenient use. In food

business, products often differ only by packaging.

c) The safety: It does not concern fun board but it matters very much for products used

by kids.

d) The “green”: A friendly product to environment gets an advantage among some

segments.

In business to business and for expensive items, the best mean of differentiation are

warranties, return policy, maintenance service, time payments and financial and insurance

services linked to the product.

3. PLACE-DISTRIBUTION

A crucial decision in any marketing mix is to correctly identify the distribution channels.

The question “how to reach the customer” must always be in your mind.

Definition: The place is where you can expect to find your customer and consequently,

where the sale is realized. Knowing this place, you have to look for a distribution channel in order

to reach your customer.

In fact, instead of “place” it would be better to use the word “distribution” but the MBA lingo

uses “place” to memorize the 4 Ps of the marketing mix!

4. PRICE

Price means the pricing strategy you will use. You have already fixed, as an hypothesis a

customer price fitted to your customer profile but you will have now to bargain it with the wholesalers

and retailers. Do not be foolish: They know better the market than you and you have to listen their

advices.

5. PROMOTION

Advertising, public relations and so on are included in promotion and consequently in the

4Ps. Sometimes, packaging becomes a fifth P. As promotion is closely linked to the sales, I will

mention here the most common features about the sale strategy.

Definition: The function of promotion is to affect the customer behavior in order to close

a sale.

Of course, it must be consistent with the buying process described in the consumer

analysis.Promotion includes mainly three topics: advertisement, public relations, and sales promotions.

a) Advertisement:

It takes many forms: TV, radio, internet, newspapers, yellow pages, and so on. You have

to take notice about three important notions:

i) Reach is the percentage of the target market which is affected by your advertisement.

For example, if you advertise on radio you must know how many people belonging to your segment

can be affected.

ii) Frequency is the number of time a person is exposed to your message. It is said that a

person must be exposed seven times to the message before to be aware of it. Reach & frequency gives

the gross rating point. You have to evaluate it before any advertisement campaign.

iii) Message: Sometimes, it is called a creative. Anyway, the message must: get attraction,

capture interest, create desire and finally require action that is to say close the sale.

b) Public relations:

Public relations are more subtle and rely mainly on your own personality. For example,

you can deliver public speeches on subjects such as economics, geo-economics, futurology to several

organizations (civic groups, political groups, fraternal organizations, professional associations)

6. SALES STRATEGY

Sales bring in the money. Salesmen are directly exposed to the pressure of finding

prospects, making deals, beating competition and bringing money.

ASSIGNMENTS MBA – 2nd SEM

Subject Code – MB0047 Book ID – B1136

MANAGEMENT INFORMATION SYSTEMS Set – 1

Q.1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS?

Give some Disadvantage of MIS?

Ans.: MIS systems are extensively used in generating statistical report of any organization which can

be used to study management by behavior. They set objectives to their employees using ratio analysis.

Management also uses MIS for decision making from the low level management to top level

management. In order to perform task using Information systems use of technical support is required.

So it is the combination of 3 components i.e. organization, technology and management.

MIS characteristics

It supports transaction handling and record keeping.

It is also called as integrated database Management System which supports in major functional

areas.

It provides operational, tactical, and strategic level managers with east access to timely

It supports decision –making function which is a vital role of MIS.

It is flexible which is needed to adapt to the changing needs of the organization.

It promotes security system by providing only access to authorized users.

MIS not only provides statistical and data analysis but also works on the basis on MBO

(management by objectives). MIS is successfully used for measuring performance and making

necessary change in the organizational plans and procedures. It helps to build relevant and

measurable objectives, monitor results, and send alerts.

Function of MIS

The main functions of MIS are:

Data Processing: Gathering, storage, transmission, processing and getting output of the data.

Making the data into information is a major task.

Prediction: Prediction is based on the historical data by applying the prior knowledge

methodology by using modern mathematics, statistics or simulation. Prior knowledge varies on

the application and with different departments.

Planning: Planning reports are produced based on the enterprise restriction on the companies

and helps in planning each functional department to work reasonably.

Control: MIS helps in monitoring the operations and inspects the plans. It consists of

differences between operation and plan with respect to data belonging to different functional

department. It controls the timely action of the plans and analyzes the reasons for the

differences between the operations and plan. Thereby helps managers to accomplish their

decision making task successfully.

Assistance: It stores the related problems and frequently used information to apply them for

relative economic benefits. Through this it can derive instant answers of the related problem.

Disadvantages of MIS

The following are some of the disadvantages of MIS:

MIS is highly sensitive: MIS is very helpful in maintaining logging information of an

authorized user. This needs to monitor constantly.

Quality of outputs is governed by quality of inputs.

MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing the

actual cost needs to have an accrual system having true costs of outputs which is extremely

difficult. It has been difficult to establish definite findings.

MIS is not flexible to update itself for the changes.

The changes in the decision of top level management decrease its effectiveness.

Information accountability is based on the qualitative factors and the factors like morality,

confidence or attitude will not have any base.

Q.2. Explain Knowledge based system? Explain DSS and OLAP with example?

Ans.:

Knowledge Based System (KBS) :

KBS are the systems based on knowledge base. Knowledge base is the database maintained for

knowledge management which provides the means of data collections, organization and retrieval of

knowledge. The knowledge management manages the domain where it creates and enables

organization for adoption of insights and experiences.

There are two types of knowledge bases.

a) Machine Readable Knowledge Bases: The knowledge base helps the computer to process

through. It makes the data in the computer readable code which makes the operator to perform

easier. Such informations are used by semantic web. Semantic web is a web that will make a

description of the system that a system can understand.

b) Human Readable Knowledge Bases: They are designed to help people to retrieve knowledge.

The information need to be processed by the reader. The reader can access the information and

synthesize their own.

Online Analytical Processing (OLAP)

OLAP refers to a system in which there are predefined multiple instances of various modules

used in business applications. Any input to such a system results in verification of the facts with

respect to the available instances. A nearest match is found analytically and the results displayed form

the database. The output is sent only after thorough verification of the input facts fed to the system.

The system goes through a series of multiple checks of the various parameters used in business

decision making. OLAP is also referred to as a multi dimensional analytical model. Many big

companies use OLAP to get good returns in business.

The querying process of the OLAP is very strong. It helps the management take decisions like which

month would be appropriate to launch a product in the market, what should be the production quantity

to maximize the returns, what should be the stocking policy in order to minimize the wastage etc.

A model of OLAP may be well represented in the form of a 3D box. There are six faces of the box.

Each adjoining faces with common vertex may be considered to represent the various parameter of the

business situation under consideration. E.g.: Region, Sales & demand, Product etc.

Decision Support Systems (DSS)

DSS is an interactive computer based system designed to help the decision makers to use all l

the resources available and make use in the decision making. In management many a time problems

arise out of situations for which simple solution may not be possible. To solve such problems you may

have to use complex theories. The models that would be required to solve such problems may have to

be identified. DSS requires a lot of managerial abilities and managers judgment.

You may gather and present the following information by using decision support application:

Accessing all of your current information assets, including legacy and relational data sources,

cubes, data warehouses, and data marts

Comparative sales figures between one week and the next

Projected revenue figures based on new product sales assumptions

The consequences of different decision alternatives, given past experience in a context that is

described.

Q.3. What are Value Chain Analysis & describe its significance in MIS? Explain what is

meant by BPR? What is its significance? How Data warehousing & Data Mining is useful

in terms of MIS?

Ans.:

BPR

The existing system in the organization is totally reexamined and radically modified for

incorporating the latest technology. This process of change for the betterment of the organization is

called as Business process re-engineering. This process is mainly used to modernize and make the

organizations efficient. BPR directly affects the performance. It is used to gain an understanding the

process of business and to understand the process to make it better and re-designing and thereby

improving the system.

BPR is mainly used for change in the work process. Latest software is used and accordingly the

business procedures are modified, so that documents are worked upon more easily and efficiently.

This is known as workflow management.

Signification of BPR

Business process are a group of activities performed by various departments, various

organizations or between individuals that is mainly used for transactions in business. There may be

people who do this transaction or tools. We all do them at one point or another either as a supplier or

customer. You will really appreciate the need of process improvement or change in the organizations

conduct with business if you have ever waited in the queue for a longer time to purchase 1 kilo of rice

from a Public Distribution Shop (PDS-ration shop). The process is called the check-out process. It is

called process because uniform standard system has been maintained to undertake such a task. The

system starts with forming a queue, receiving the needed item form the shop, getting it billed, payment

which involves billing, paying amount and receiving the receipt of purchase and the process ends up

with the exit from the store. It is the transaction between customer and supplier.

Data Warehousing – Data Warehouse is defined as collection of database which is referred as

relational database for the purpose of querying and analysis rather than just transaction processing.

Data warehouse is usually maintained to store heuristic data for future use. Data warehousing is

usually used to generate reports. Integration and separation of data are the two basic features need to

be kept in mind while creating a data warehousing. The main output from data warehouse systems are;

either tabular listings (queries) with minimal formatting or highly formatted "formal" reports on

business activities. This becomes a convenient way to handle the information being generated by

various processes. Data warehouse is an archive of information collected from wide multiple sources,

stored under a unified scheme, at a single site. This data is stored for a long time permitting the user an

access to archived data for years. The data stored and the subsequent report generated out of a

querying process enables decision making quickly. This concept is useful for big companies having

plenty of data on their business processes. Big companies have bigger problems and complex

problems. Decision makers require access to information from all sources. Setting up queries on

individual processes may be tedious and inefficient.

Data Mining – Data mining is primarily used as a part of information system today, by companies

with a strong consumer focus - retail, financial, communication, and marketing organizations. It

enables these companies to determine relationships among "internal" factors such as price, product

positioning, or staff skills, and "external" factors such as economic indicators, competition, and

customer demographics. And, it enables them to determine the impact on sales, customer satisfaction,

and corporate profits. Finally, it enables them to "drill down" into summary information to view detail

transactional data. With data mining, a retailer could use point-of-sale records of customer purchases

to send targeted promotions based on an individual's purchase history. By mining demographic data

from comment or warranty cards, the retailer could develop products and promotions to appeal to

specific customer segments.

Q.4. Explain DFD & Data Dictionary? Explain in detail how the information requirement is

determined for an organization?

Ans.: Data flow diagrams represent the logical flow of data within the system. DFD do not explain

how the processes convert the input data into output. They do not explain how the processing takes

place.

DFD uses few symbols like circles and rectangles connected by arrows to represent data flows.

DFD can easily illustrate relationships among data, flows, external entities an stores. DFD can also be

drawn in increasing levels of detail, starting with a summary high level view and proceeding more

detailed lower level views.

Rounded rectangles represent processes that transform flow of data or work to be done.

Rectangle represents external agents- the boundary of the system. It is source or destination of data.

The open-ended boxes represent data stores, sometimes called files or databases. These data stores

correspond to all instances of a single entity in a data model.

Arrow represents data flows, inputs and outputs to end from the processes.

A number of guideline should be used in DFD

Choose meaningful names for the symbols on the diagram.

Number the processes consistently. The numbers do not imply the sequence.

Avoid over complex DFD.

Make sure the diagrams are balanced

Data Dictionary

The data dictionary is used to create and store definitions of data, location, format for storage

and other characteristics. The data dictionary can be used to retrieve the definition of data that has

already been used in an application. The data dictionary also stores some of the description of data

structures, such as entities, attributes and relationships. It can also have software to update itself and to

produce reports on its contents and to answer some of the queries.

Q.5. What is ERP? Explain its existence before and its future after? What are the advantages &

Disadvantages of ERP? What is Artificial Intelligence? How is it different from Neural

Networks?

Ans.: Manufacturing management systems have evolved in stages over the few decades from a simple

means of calculating materials requirements to the automation of an entire enterprise. Around 1980,

over-frequent changes in sales forecasts, entailing continual readjustments in production, as well as the

unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to

evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic

concept Enterprise Resource Planning (ERP).

Enterprise Resource Planning (ERP) Before and After

Before

Prior to the concept of ERP systems, departments within an organization (for example, the

human resources (HR)) department, the payroll department, and the financial department) would have

their own computer systems. The HR computer system (often called HRMS or HRIS) would typically

contain information on the department, reporting structure, and personal details of employees. The

payroll department would typically calculate and store paycheck information. The financial

department would typically store financial transactions for the organization. Each system would have

to rely on a set of common data to communicate with each other. For the HRIS to send salary

information to the payroll system, an employee number would need to be assigned and remain static

between the two systems to accurately identify an employee. The financial system was not interested

in the employee-level data, but only in the payouts made by the payroll systems, such as the tax

payments to various authorities, payments for employee benefits to providers, and so on. This

provided complications. For instance, a person could not be paid in the payroll system without an

employee number.

After

ERP software, among other things, combined the data of formerly separate applications. This

made the worry of keeping numbers in synchronization across multiple systems disappears. It

standardized and reduced the number of software specialties required within larger organizations.

Advantages and Disadvantages

Advantages – In the absence of an ERP system, a large manufacturer may find itself with many

software applications that do not talk to each other and do not effectively interface. Tasks that need to

interface with one another may involve:

A totally integrated system

The ability to streamline different processes and workflows

The ability to easily share data across various departments in an organization

Improved efficiency and productivity levels

Better tracking and forecasting

Lower costs

Improved customer service

Disadvantages – Many problems organizations have with ERP systems are due to inadequate

investment in ongoing training for involved personnel, including those implementing and testing

changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems

and how it is used.

While advantages usually outweigh disadvantages for most organizations implementing an ERP

system, here are some of the most common obstacles experienced:

Usually many obstacles can be prevented if adequate investment is made and adequate training is

involved, however, success does depend on skills and the experience of the workforce to quickly adapt

to the new system.

Customization in many situations is limited

The need to reengineer business processes

ERP systems can be cost prohibitive to install and run

Technical support can be shoddy

ERP's may be too rigid for specific organizations that are either new or want to move in a new

direction in the near future.

Artificial Intelligence

Artificial Intelligence is the science and technology based on various functions to develop a

system that can think and work like a human being. It can reason, analyze, learn, conclude and solve

problems. The systems which use this type of intelligence are known as artificial intelligent systems

and their intelligence is referred to as artificial intelligence. It was said that the computer don’t have

common sense. Here in AI, the main idea is to make the computer think like human beings, so that it

can be then said that computers also have common sense. More precisely the aim is to obtain a

knowledge based computer system that will help managers to take quick decisions in business.

Artificial Intelligence and Neural Networks

Artificial intelligence is a field of science and technology based on disciplines such as

computer science, biology, psychology, linguistics, mathematics and engineering. The goal of AI is to

develop computers that can simulate the ability to think, see, hear, walk, talk and feel. In other words,

simulation of computer functions normally associated with human intelligence, such as reasoning,

learning and problem solving.

AI can be grouped under three major areas: cognitive science, robotics and natural interfaces.

Cognitive science focuses on researching on how the human brain works and how humans think and

learn. Applications in the cognitive science area of AI include the development of expert systems and

other knowledge-based systems that add a knowledge base and some reasoning capability to

information systems. Also included are adaptive learning systems that can modify their behavior based

on information they acquire as they operate. Chess-playing systems are some examples of such

systems.

Fussy logic systems can process data that are incomplete or ambiguous. Thus, they can solve

semi-structured problems with incomplete knowledge by developing approximate inferences and

answers, as humans do.

Neural network software can learn by processing sample problems and their solutions. As

neural nets start to recognize patterns, they can begin to program themselves to solve such problems

on their own.

Neural networks are computing systems modeled after the human brain’s mesh like network of

interconnected processing elements, called neurons. The human brain is estimated to have over 100

billion neuron brain cells. The neural networks are lot simpler in architecture. Like the brain, the

interconnected processors in a neural network operate in parallel and interact dynamically with each

other.

This enables the network to operate and learn from the data it processes, similar to the human

brain. That is, it learns to recognize patterns and relationships in the data. The more data examples it

receives as input, the better it can learn to duplicate the results of the examples it processes. Thus, the

neural networks will change the strengths of the interconnections between the processing elements in

response to changing patterns in the data it receives and results that occur

Q.6. Distinguish between closed decision making system & open decision making system? What

is ‘what – if‘analysis? Why is more time spend in problem analysis & problem definition

as compared to the time spends on decision analysis?

Ans.: If the manager operates in an environment not known to him, then the decision-making system

is termed as an open decision-making system. The conditions of this system in contrast closed

decision-making system are:

a) The manager does not know all the decision alternatives.

b) The outcome of the decision is also not known fully. The knowledge of the outcome may be a

probabilistic one.

c) No method, rule or model is available to study and finalize one decision among the set of

decision alternatives.

What- if analysis

Decisions are made using a model of the problem for developing various solution alternatives

and testing them for best choice. The model is built with some variables and relationship between

variables considered values of variables or relationship in the model may not hold well and therefore

solution needs to be tested for an outcome, if the considered values of variables or relationship change.

This method of analysis is called 'what if analysis.'

Decision Analysis by Analytical Modeling

Based on the methods discussed, a decision is made but such decision needs to be analysed for

conditions and assumptions considered in the decision model. The process is executed through

analytical modelling of problem and solution. The model is analyzed in four ways.

What if analysis

Goal Seeking Analysis

Sensitivity analysis and

Goal Achieving analysis

ASSIGNMENTS MBA – 2nd SEM

Subject Code – MB0048 Book ID – B1137

OPERATION RESEARCH Set – 1

Q1. a. Explain how and why Operation Research methods have been valuable in aiding

executive decisions.

b. Discuss the usefulness of Operation Research in decision making process and the role

of computers in this field.

Ans. a)

Churchman, Aackoff and Aruoff defined Operations Research as: “the application of scientific

methods, techniques and tools to operation of a system with optimum solutions to the problems”,

where ‘optimum’ refers to the best possible alternative.

The objective of Operations Research is to provide a scientific basis to the decision-makers for

solving problems involving interaction of various components of the organisation. You can achieve

this by employing a team of scientists from different disciplines, to work together for finding the best

possible solution in the interest of the organisation as a whole. The solution thus obtained is known as

an optimal decision.

You can also define Operations Research as “The use of scientific methods to provide criteria

for decisions regarding man, machine, and systems involving repetitive operations”. OR “Operation

Techniques is a bunch of mathematical techniques.”

“Operation Research is an aid for the executive in making his decisions based on scientific

methods analysis”.

b)

Discussion:-

Any problem, simple or complicated, can use OR techniques to find the best possible solution.

This section will explain the scope of OR by seeing its application in various fields of everyday life.

i) In Defense Operations: In modern warfare, the defense operations are carried out by three

major independent components namely Air Force, Army and Navy. The activities in each of these

components can be further divided in four sub-components namely: administration, intelligence,

operations and training and supply. The applications of modern warfare techniques in each of the

components of military organisations require expertise knowledge in respective fields. Furthermore,

each component works to drive maximum gains from its operations and there is always a possibility

that the strategy beneficial to one component may be unfeasible for another component. Thus in

defense operations, there is a requirement to co-ordinate the activities of various components, which

gives maximum benefit to the organisation as a whole, having maximum use of the individual

components. A team of scientists from various disciplines come together to study the strategies of

different components. After appropriate analysis of the various courses of actions, the team selects the

best course of action, known as the ‘optimum strategy’.

ii) In Industry: The system of modern industries is so complex that the optimum point of

operation in its various components cannot be intuitively judged by an individual. The business

environment is always changing and any decision useful at one time may not be so good some time

later. There is always a need to check the validity of decisions continuously against the situations. The

industrial revolution with increased division of labour and introduction of management responsibilities

has made each component an independent unit having their own goals. For example: production

department minimises the cost of production but maximise output. Marketing department maximises

the output, but minimises cost of unit sales. Finance department tries to optimise the capital investment

and personnel department appoints good people at minimum cost. Thus each department plans its own

objectives and all these objectives of various department or components come to conflict with one

another and may not agree to the overall objectives of the organisation. The application of OR

techniques helps in overcoming this difficulty by integrating the diversified activities of various

components to serve the interest of the organisation as a whole efficiently. OR methods in industry can

be applied in the fields of production, inventory controls and marketing, purchasing, transportation and

competitive strategies.

iii) Planning: In modern times, it has become necessary for every government to have careful

planning, for economic development of the country. OR techniques can be fruitfully applied to

maximise the per capita income, with minimum sacrifice and time. A government can thus use OR for

framing future economic and social policies.

iv) Agriculture: With increase in population, there is a need to increase agriculture output. But

this cannot be done arbitrarily. There are several restrictions. Hence the need to determine a course of

action serving the best under the given restrictions. You can solve this problem by applying OR

techniques.

v) In Hospitals: OR methods can solve waiting problems in out-patient department of big

hospitals and administrative problems of the hospital organisations.

vi) In Transport: You can apply different OR methods to regulate the arrival of trains and

processing times minimise the passengers waiting time and reduce congestion, formulate suitable

transportation policy, thereby reducing the costs and time of trans-shipment.

vii) Research and Development: You can apply OR methodologies in the field of R&D for

several purposes, such as to control and plan product introductions.

Q2. Explain how the linear programming technique can be helpful in decision-making in the

areas of Marketing and Finance.

Ans.

Linear programming problems are a special class of mathematical programming problems for

which the objective function and all constraints are linear. A classic example of the application of

linear programming is the maximization of profits given various production or cost constraints.

Linear programming can be applied to a variety of business problems, such as marketing mix

determination, financial decision making, production scheduling, workforce assignment, and resource

blending. Such problems are generally solved using the “simplex method.”

Media Selection Problem.

The local Chamber of Commerce periodically sponsors public service seminars and programs.

Promotional plans are under way for this year’s program. Advertising alternatives include television,

radio, and newspaper. Audience estimates, costs, and maximum media usage limitations are shown in

Exhibit 1.

If the promotional budget is limited to $18,200, how many commercial messages should be run

on each medium to maximize total audience contact? Linear programming can find the answer.

Q3. a. How do you recognise optimality in the simplex method?

b. Write the role of pivot element in simplex table?

Ans. Simplex method is used for solving linear programming problem especially when more than two

variables are involved.

SIMPLEX METHOD

1. Set up the problem.

That is, write the objective function and the constraints.

2. Convert the inequalities into equations.

This is done by adding one slack variable for each inequality.

3. Construct the initial simplex tableau.

Write the objective function as the bottom row.

4. The most negative entry in the bottom row identifies a column.

5. Calculate the quotients. The smallest quotient identifies a row. The element in the

intersection of the column identified in step 4 and the row identified in this step is identified as the

pivot element. The quotients are computed by dividing the far right column by the identified column in

step 4. A quotient that is a zero, or a negative number, or that has a zero in the denominator, is

ignored.

6. Perform pivoting to make all other entries in this column zero.

This is done the same way as we did with the Gauss-Jordan method.

7. When there are no more negative entries in the bottom row, we are finished; otherwise,

we start again from step 4.

8. Read off your answers.

Get the variables using the columns with 1 and 0s. All other variables are zero. The

maximum value you are looking for appears in the bottom right hand corner.

Example

Niki holds two part-time jobs, Job I and Job II. She never wants to work more than a total of

12 hours a week. She has determined that for every hour she works at Job I, she needs 2 hours of

preparation time, and for every hour she works at Job II, she needs one hour of preparation time, and

she cannot spend more than 16 hours for preparation. If she makes $40 an hour at Job I, and $30 an

hour at Job II, how many hours should she work per week at each job to maximize her income?

Solution: In solving this problem, we will follow the algorithm listed above.

1.Set up the problem. That is, write the objective function and the constraints.

Since the simplex method is used for problems that consist of many variables, it is not practical to use

the variables x, y, z etc. We use the symbols x1, x2, x3, and so on.

Let x1 = The number of hours per week Niki will work at Job I.

and x2 = The number of hours per week Niki will work at Job II.

It is customary to choose the variable that is to be maximized as Z.

The problem is formulated the same way as we did in the last chapter.

Maximize Z = 40×1 + 30×2

Subject to: x1 + x2 ≤ 12

2×1 + x2 ≤ 16

x1 ≥ 0; x2 ≥ 0

2. Convert the inequalities into equations. This is done by adding one slack variable for each

inequality.

For example to convert the inequality x1 + x2 ≤ 12 into an equation, we add a non-negative variable

y1, and we get

x1 + x2 + y1 = 12

Here the variable y1 picks up the slack, and it represents the amount by which x1 + x2 falls short of

12. In this problem, if Niki works fewer that 12 hours, say 10, then y1 is 2. Later when we read off

the final solution from the simplex table, the values of the slack variables will identify the unused

amounts.

We can even rewrite the objective function Z = 40×1 + 30×2 as – 40×1 – 30×2 + Z = 0.

After adding the slack variables, our problem reads

Objective function: – 40×1 – 30×2 + Z = 0

Subject to constraints: x1 + x2 + y1 = 12

2×1 + x2 + y2 = 16

x1 ≥ 0; x2 ≥ 0

3. Construct the initial simplex tableau. Write the objective function as the bottom row.

Now that the inequalities are converted into equations, we can represent the problem into an

augmented matrix called the initial simplex tableau as follows.

x1 x2 y1 y2 Z C

1 1 1 0 0 12

2 1 0 1 0 16

–

40

–

30

0 0 1 0

Here the vertical line separates the left hand side of the equations from the right side. The horizontal

line separates the constraints from the objective function. The right side of the equation is represented

by the column C.

The reader needs to observe that the last four columns of this matrix look like the final matrix for the

solution of a system of equations. If we arbitrarily choose x1 = 0 and x2 = 0, we get

Which reads

y1 = 12

y2 = 16

Z = 0

The solution obtained by arbitrarily assigning values to some variables and then solving for the

remaining variables is called the basic solution associated with the tableau. So the above solution is

the basic solution associated with the initial simplex tableau. We can label the basic solution variable

in the right of the last column as shown in the table below.

x1 x2 y1 y2 Z

1 1 1 0 0 12 y1

2 1 0 1 0 16 y2

–

40

–

30

0 0 1 0 Z

4. The most negative entry in the bottom row identifies a column.

The most negative entry in the bottom row is –40, therefore the column 1 is

identified.

x1 x2 y1 y2 Z

1 1 1 0 0 12 y1

2 1 0 1 0 16 y2

–

40

–

30

0 0 1 0 Z

Q4. What is the significance of duality theory of linear programming? Describe the general rules

for writing the dual of a linear programming problem.

Ans. Linear programming (LP) is a mathematical method for determining a way to achieve the best

outcome (such as maximum profit or lowest cost) in a given mathematical model for some list of

requirements represented as linear relationships. Linear programming is a specific case of

mathematical programming.

More formally, linear programming is a technique for the optimization of a linear objective

function, subject to linear equality and linear inequality constraints. Given a polytope and a real-

valued affine function defined on this polytope, a linear programming method will find a point on the

polytope where this function has the smallest (or largest) value if such point exists, by searching

through the polytope vertices.

Linear programs are problems that can be expressed in canonical form: where x represents the

vector of variables (to be determined), c and b are vectors of (known) coefficients and A is a (known)

matrix of coefficients. The expression to be maximized or minimized is called the objective function

(cTx in this case). The equations Ax ≤ b are the constraints which specify a convex polytope over

which the objective function is to be optimized. (In this context, two vectors are comparable when

every entry in one is less-than or equal-to the corresponding entry in the other. Otherwise, they are

incomparable.)

Linear programming can be applied to various fields of study. It is used most extensively in

business and economics, but can also be utilized for some engineering problems. Industries that use

linear programming models include transportation, energy, telecommunications, and manufacturing. It

has proved useful in modeling diverse types of problems in planning, routing, scheduling, assignment,

and design.

Duality: Every linear programming problem, referred to as a primal problem, can be converted into a

dual problem, which provides an upper bound to the optimal value of the primal problem. In matrix

form, we can express the primal problem as:

Maximize cTx subject to Ax ≤ b, x ≥ 0;

with the corresponding symmetric dual problem,

Minimize bTy subject to ATy ≥ c, y ≥ 0.

An alternative primal formulation is:

Maximize cTx subject to Ax ≤ b;

with the corresponding asymmetric dual problem,

Minimize bTy subject to ATy = c, y ≥ 0.

There are two ideas fundamental to duality theory. One is the fact that (for the symmetric dual)

the dual of a dual linear program is the original primal linear program. Additionally, every feasible

solution for a linear program gives a bound on the optimal value of the objective function of its dual.

The weak duality theorem states that the objective function value of the dual at any feasible solution is

always greater than or equal to the objective function value of the primal at any feasible solution. The

strong duality theorem states that if the primal has an optimal solution, x*, then the dual also has an

optimal solution, y*, such that cTx*=bTy*.

A linear program can also be unbounded or infeasible. Duality theory tells us that if the primal

is unbounded then the dual is infeasible by the weak duality theorem. Likewise, if the dual is

unbounded, then the primal must be infeasible. However, it is possible for both the dual and the primal

to be infeasible

Q.5. Use Two-Phase simplex method to solve:

Minimize 321 xxxz

Subject to constraints: x1 - 3 x2 + 4x3 = 5

x1 - 2 x2 ≤ 3

2x2 - 3 x3 ≥ 4

321 0,0 xandxx is unrestricted.

Ans. :- Minimization

Z = x1 + x2 + x3

Subject to constraints x1 - 3 x2 + 4x3 = 5

x1 - 2 x2 ≤ 3

2x2 - 3 x3 ≥ 4

321 0,0 xandxx is integers.

In standard form

Minimization 2211321 OSMAOSMAxxxz

4202

543

2222

121

1321

ASxxSxx

Axxx

Simplex Table

Cj 1 1 1 -M 0 M 0 C.B B.V. x1 x2 x3 A1 S1 A2 S2 - M A1 1 - 3 4 1 0 0 0 5

0 S1 1 - 2 0 0 1 0 0 0 - M A2 0 2 1 0 0 1 - 1 4

Z j – Cj - M – 1 M – 1 - 5M – 1

- 2M 0 -2 M M

,`000200,00000

200,1510411203,1100

77

6655

4433

2211

MMczMMMczcz

MMMczMMMczMMMczMMcz

Operation: - l1 = l3 , l1 = l3 - 41l

L1 = l1, l3 = l1 – l2

1 1 1 -M 0 M 0 x1 x2 x3 A1 S1 A2 S2 A1 - M - 1/4 5/4 0 - ¼ 0 1 -1 11/4 S1 0 1 - 2 0 0 1 0 0 0 x3 1 0 2 1 0 0 1 - 1 4 Z j – Cj

1 1 1 - M 0 - M 0 x1 x2 x3 A1 S1 A2 S2 A1 - M - 1/4 5/4 0 - ¼ 0 1 -1 11/4 S1 0 1 - 2 0 0 1 0 0 0 x3 1 0 2 1 0 0 1 - 1 4 Z j – Cj 1

4

M 14

5

M 0 43M 0 - 2M + 1 - M – 1

1 1 1 - M 0 - M 0 x1 x2 x3 A1 S1 A2 S2

- M A1 - 1/4 5/4 0 - ¼ 0 1 -1 11/4 0 S1 1 - 2 0 0 1 0 0 0 1 x3 1 / 4 3 / 4 1 1 / 4 0 0 0 5/4

Z j – Cj 43M 4

5M

0

431 M 0 0 M

32312211

4433

2211

43*

38,

58,

54

431

410

4,0

4151

430

45,

431

410

4

llllllll

MMMczcz

MMczMMcz

All true value of zj – cj is positive so z = 9/20 Q.6. Use Branch and Bound method to solve the following L.P.P:

Maximize z = 7x1 + 9x2 Subject to constraints:

7,0357

63

21

21

21

xxxx

xx

x1, x2 ≥ 0 and are integers.

Ans. Maximize z = 7x1 + 9x2 …………………… (i) Subject to constraints

7357

63

2

21

21

xxx

xx

0, 21 xx and all integers

1 1 1 - M 0 - M 0 x1 x2 x3 A1 S1 A2 S2 1 x2 1/5 1 0 1/5 0 4/5 4/5 1/5 0 S1 4/5 0 0 4/5 1 8/5 8/5 22/5 1 x3 11/12 0 1 ¼ 1 0 0 5/4

Z j – Cj + 1/5 0 0 M209 0 M

54 4/5 9/20

Mode Situation Additional Types of Solution

x1 x2 Zx

1 9/2 7/2 63 No integer

2 5 0 35 51 x Integer

3 4 10/4 58 41 x . Non-integer. 4 - - - 4,4 21 xx Non-solution

5 4 3 55 3,4 21 xx Integer (optional)

41 x

51 x

Node (i)

Node (iii) Node (ii)

Node (iv)

42 x

32 x

213,

214

27,

29

63

21

21

*

xx

xx

z

310,4

310,4

58

21

21

*

xx

xx

z

0,5

35

21

*

xxz

3,455

21

*

xxz

Optional solution

No solution

Node (v)

ASSIGNMENTS MBA – 2nd SEM

Subject Code – MB0049 Book ID – B1138

PROJECT MANAGEMENT Set – 1

Q.1. Describe in detail the various phases of Project management life cycle.

Ans. Projects too have to chore through their life-cycles adhering to a system. Every project

irrespective of its size, scope has to adapt a system. A system in the project management refers to the

existence of interrelationship of activities in a project. The absence of a system makes a project die.

No matter what project it is that you’re preparing for, the project management life cycle can assist you

in narrowing your focus, keeping your objectives in order and finishing said project on time, on budget

and with a minimum of headaches. Every project management life cycle contains five steps: Initiation,

Planning, Execution, Monitoring/Control and Closure. No one step is more important than the other

and each step plays a crucial role in getting your project off the ground, through the race, down the

stretch and across the finish line.

Phases of Project management life cycle

1) Initiation

In this first step you provide an over-view of the project in addition to the strategy you plan on

using in order to achieve the desired results. During the Initiation phase you’ll appoint a project

manager who in turn will -- based on their experience and skills -- select his team members. And lest

you think you need to be a Bill Gates or Donald Trump in order to see your project take on a life of it’s

own, fear not: there are some great technological tools available to get you through the Initiation phase

of the project management life cycle.

2) Planning

The all-important second step of any successful project management life cycle is planning and

should include a detailed breakdown and assignment of each task of your project from beginning to

end. The Planning Phase will also include a risk assessment in addition to defining the criteria needed

for the successful completion of each task. In short, the working process is defined, stake holders are

identified and reporting frequency and channels explained.

3 & 4) Execution and Control

Steps Three and Four take you into deeper water. When it comes to the project management

cycle, execution and control just may be the most important of the five steps in that it ensures project

activities are properly executed and controlled. During the Execution and Control phases, the planned

solution is implemented to solve the problem specified in the project's requirements. In product and

system development, a design resulting in a specific set of product requirements is created. This

convergence is measured by prototypes, testing, and reviews. As the Execution and Control phases

progress, groups across the organization become more deeply involved in planning for the final

testing, production, and support.

5) Closure

By the time you reach Step Five -- Closure -- the project manager should be tweaking the little

things to ensure that the project is brought to its proper conclusion. The Closure phase is typically

highlighted by a written formal project review report which contains the following elements: a formal

acceptance of the final product (by the client), Weighted Critical Measurements (a match between the

initial requirements laid out by the client against the final delivered product), lessons learned, project

resources, and a formal project closure notification to higher management.

The Project Management Cycle saves time and keeps everyone on the team focused.

Fortunately, modern technology provides a variety of templates that will take you from A-to-Z (or in

this case from Start-to-Finish) making the Project Management Cycle user friendly no matter what

your level of management experience!

Q.23. List and explain the various aspects of programme management.

Ans.

Project Management

Project management is the planning, organizing, directing, and controlling of company

resources.

It is clear from this definition that project management is concerned with the dynamic

allocation, utilization, and direction of resources (both human and technical), with time -- in relation to

both individual efforts and product delivery schedule -- and with costs, relating to both the acquisition

and consumption of funding. As a corollary, it is safe to say that without the direction project

management provides, work would have to proceed via a series of negotiations, and/or it would not

align with the goals, value proposition, or needs of the enterprise.

Within a program, these same responsibilities (i.e., allocation, utilization, and direction) are

assigned to people at three levels in the management hierarchy; the higher the level, the more general

the responsibilities. For example, at the bottom of the management hierarchy, project managers are

assigned to the various projects within the overall program. Each manager carries out the management

responsibilities we described above.

At the middle of the hierarchy is the program manager/director, whose major responsibility is

to ensure that the work effort achieves the outcome specified in the business and IT strategies. This

involves setting and reviewing objectives, coordinating activities across projects, and overseeing the

integration and reuse of interim work products and results. This person spends more time and effort on

integration activities, negotiating changes in plans, and communicating than on the other project

management activities we described (e.g., allocating resources, ensuring adherence to schedule,

budget, etc.).

At the top of the program management hierarchy are the program sponsor(s) and the program

steering committee. Their major responsibility is to own and oversee the implementation of the

program's underlying business and IT strategies, and to define the program's connection to the

enterprise's overall business plan(s) and direction. Their management activities include providing and

interpreting policy, creating an environment that fosters sustainable momentum for the program (i.e.,

removing barriers both inside and outside the enterprise), and periodically reviewing program progress

and interim results to ensure alignment with the overall strategic vision.

These individuals receive periodic summary reports and briefings on funding consumption,

resources and their utilization, and delivery of interim work products and results. Typically, they will

focus on these reports only if there is significant deviation from the plan.

So, let's return to the questions we posed at the start of this section: What is program management? Is

it really management at all?

If you think of management activities strictly as those we defined for project management, then

the answer to the second question is "No," or maybe "Partly." At the project level, managers do still

perform these activities, but the program manager/director addresses a different set of program goals

or needs, which requires a different "bag of tricks" as well as a different view of what is happening and

what needs to get done. And at the top of the hierarchy, the executive leaders who set goals and

oversee the program certainly do not perform the same detailed activities as project managers

Q.3 Write a short note on the following:

a. Project progress control tools and mechanisms

b. Process in bringing about a change in project management.

Ans. a) Project progress control tools and mechanism

Project monitoring and control also provides information to support status reporting, progress

measurement, forecasting and updating current cost and schedule information. During this process, it

is also important to ensure that implementation of approved changes are monitored when and as they

occur.

As for tools and techniques used in facilitating project monitoring and control, automated

project management information systems and Earned Value are among the most commonly used. Both

are also used to update information. Earned Value also provides a means for forecasting future

performance based upon past performance.

Status reports are used for communicating project progress and status. Variance Analysis

reports are typically used to identify variances and the information often used as a basis for

determining corrective actions.

The ideal suite of project management tools would provide fully integrated functionality such that:

Tools share the same communication medium to the team (eg Web, Intranet, Exchange server,

EMail, Client/Server)

Information can be automatically transferred to other tools, or, better still, be held only once

(eg team names, task lists, EMail addresses, distribution lists)

Efficiency and effectiveness is supported by automatic messaging and workflow control - the

applications will always prompt those responsible for action.

The tools that are used in project planning are

1. Project organization

Process Skills and activities

Initiation Prepare an outline project justification, plan and project budget

Selection and briefing of the project team, assigning roles and organization

Feasibility study- risk and key success factors

Planning Project definition and project plan

Communicate to the team

Execution Allocating and monitoring the work and cost

Ensuring work and team cohesion

Reporting progress

Control Monitoring progress and managing changes

Helping the team to solve project problems

Close Satisfactory delivery

Compiling lessons from project experience

2. Project structure

Development plan, project tracking and oversight.

3. Project Key personnel

Identify those business areas that are within the scope or directly interface with the

scope boundary and list them in the “Business area” column of the project assignment worksheet

Identify the key personnel for each area and list them in the “Person” column of the project

assignment worksheet.

4. Project management team

It is a senior management team, which will be accountable for the project.

Identify project sponsor, client representative and technical representative.

Stage managers- who will plan and manage the project on a day-to-day basis for this stage

Project coordinators- client coordinator and technical coordinator

Clearly define these coordination, control activities and identify the brief suitable personnel to

carry them out

5. Key stakeholders

Identify management level personnel who are critical to the success of the project.

Document the responsibilities of stakeholders

6. Stage teams

Identify appropriate personnel required for the stage, define the team structure and

appoint team leaders. Document the time commitment and responsibilities to be performed by the

team members.

7. Key resources

Individuals assigned to a key resource role may work towards gathering “Business key

resources” and “Technical key resources”. They are project coordinators and team invitees.

8. Work Breakdown Structure (WBS)

The entire process of a project may be considered to be made up on number of sub

process placed in different stage called the Work Breakdown Structure (WBS).

A typical example of a work breakdown structure of a recruitment process is indicated

below :

This is the technique to analyze the content of work and cost by breaking it down into

its component parts.

Project key stages form the highest level of the WBS, which is then used to show the

details at the lower levels of the project. Each key stage comprises many tasks

identified at the start of planning and later this list will have to be validated.

WBS is produced by Identifying the key elements, breaking each element down into

component parts and continuing to breakdown until manageable work packages have

been identified. These can then be allocated to the appropriate person. The WBS does

not show dependencies other than a grouping under the key stages. It is not time based-

there is no timescale o the drawing.

9. Task duration

Identifying lead and lag times helps in working out task duration.

Lead time: An amount of time, which a successor task can overlap with its predecessor

task, i.e. the time before the completion of the predecessor at which the successor can start.

Lag time: An amount of time, between a predecessor and a successor task, i.e. the time

after the completion of the predecessor that the start of the successor is delayed

Q.4. Describe in brief the various phases of the quality control process.

Ans. The definition of the ISO 8204 for quality:

“Totality of characteristics of an entity that bears on its ability to satisfy stated and implied needs.”

This means that the Software product conforms to requirements defined.

Description of Phases:

Software Quality Management (SQM) describes the processes that ensure that the Software

Project would reach its goals i.e. meet the client’s expectations.

Any phase of SDLC has its own independent stages of planning, execution, monitoring, control

& reporting. Likewise Software Quality Management has the following three categories or key phases:

1. Quality Planning

2. Quality Assurance

3. Quality Control

1. Quality Planning:

Quality Planning is one of the most important parts of Software Quality Management.

It is the start activity of SQM. Through proper planning we can ensure that the processes that make a

product are audited correctly to meet the overall project objective. The staring of Quality Planning

process is followed differently by different Organization. It has been described in different Quality

Policy and Documentation across various Organizations. Other industry standards related to the

Software Project can be referred to Planning phases when needed.

These act as Standard inputs for some specific projects. The Planning stage is having following

inputs:-

1. Quality Policy of a Company

2. Organization Standards

3. Referencing Industry Standards

4. Regulatory compliances

5. Statement Of Work

6. Project specific Requirements

Quality planning process can ensure that standards are as per client’s expectations. The

outcomes of Quality Planning process are as follows:-

a) Standards defined for the project

b) Quality Plan

Various tools and techniques are used to create the quality plan. Few of these tools and

techniques are briefly described in this article. Here are some over views:-

Benchmark: Deciding on the present product standards by comparing with the performances of

similar products which is already exist in the market.

Cost of Quality: The total cost of quality is a summation of prevention, appraisal and failure costs.

Design of Experiments: Statistical data can be used to determine the factors influencing the Quality

of the product.

Other tools: There are various tools used in the Planning process such as Cost Benefit Analysis,

Cause and Effect Diagrams, System Flow Charectistics.

All of the above key points aids in the formation of a Quality Management Plan for a particular

project.

2. Quality Assurance:

Quality Plan which is created during planning is the input to Quality Assurance

Process. The Assurance stage is having the following inputs:

1. Quality Audits

2. Various Techniques used to evaluate performance of project

Quality Assurance Process helps us to ensure that the Project is following the Quality

Management Plan. The tools and techniques which are used in Planning Process such as System Flow

Charectistics, Design of Experiments, Cause and Effect Diagrams can be implemented here too, as per

requirements.

3. Quality Control:

The next step to Quality Assurance Process is Quality Control. The Control stage is

having following inputs:

1. Quality Management Plan.

2. Quality Standards for the Project.

3. Actual Observations and Measurements of the work done or work in Progress.

The Quality Control Processes use various tools to Observe and Measure if the work done or

not. If the Work done and it is found that the deliverable is not satisfactory then it can be sent back to

the development team for fixes.

If the work done meets the requirements as defined then it is accepted and released to the

clients.

Q.5 Write short note on the following Project Management tools:

a. Quality Certification

b. Strategic inflection point

c. Force field analysis

d. Information risk management

Ans.

Quality Certification

Quality certification has become extremely important in competitive markets and especially in

gaining foothold in exports. To avail the certification of ISO-9000, a unit has to undertake significant

costs; the small scale industries have been found wanting mainly on account of resource crunch to

implement quality systems to obtain this certification. However, as a paradigm shift, SSI must make

'Quality' a way of life.

It has been decided to push the quality upgradation programme in the SSI Sector in a big way.

A scheme has been launched to give financial incentive to those SSI units who acquire ISO-9000

certification, by reimbursing 75% of their costs of obtaining certification, subject to a maximum of Rs.

0.75 lacs per unit.

In order to promote modernisation and technology upgradation in SSI, the units are assisted in

improving the quality of their products.

A new scheme has been launched to assist SSI units in obtaining ISO-9000 or an equivalent

international quality standard. Subject to an upper ceiling of Rs. 075 lacs, each unit is given financial

assistance equal to 75% of the costs incurred in acquiring the quality standard.

The SSI units are also encouraged to participate in quality awareness and learning programmes

organised specially for their benefit.

Strategic inflection point

Point at which a corporation facing a new situation must alter the path it is on and adapt, or fall

into decline. The term was coined by Hungarian-born US computer entrepreneur Andy Grove,

chairman of microprocessor company Intel. Grove believes strategic inflection points occur when a

company's competitive position goes through a transition. The idea concerns how companies

recognize and adapt to paradigm changes. At a strategic inflection point the way a business operates,

and the concept of it as a business, undergoes a change.

Force field analysis

Force field analysis is an influential development in the field of social science. It provides a

framework for looking at the factors (forces) that influence a situation, originally social situations. It

looks at forces that are either driving movement toward a goal (helping forces) or blocking movement

toward a goal (hindering forces). The principle, developed by Kurt Lewin, is a significant contribution

to the fields of social science, psychology, social psychology, organizational development, process

management, and change management.

Lewin, a social psychologist, believed the "field" to be a Gestalt psychological environment

existing in an individual's (or in the collective group) mind at a certain point in time that can be

mathematically described in a topological constellation of constructs. The "field" is very dynamic,

changing with time and experience. When fully constructed, an individual's "field" (Lewin used the

term "life space") describes that person's motives, values, needs, moods, goals, anxieties, and ideals.

Lewin believed that changes of an individual's "life space" depend upon that individual's

internalization of external stimuli (from the physical and social world) into the "life space." Although

Lewin did not use the word "experiential," (see experiential learning) he nonetheless believed that

interaction (experience) of the "life space" with "external stimuli" (at what he calls the "boundary

zone") were important for development (or regression). For Lewin, development (or regression) of an

individual occurs when their "life space" has a "boundary zone" experience with external stimuli.

Note, it is not merely the experience that causes change in the "life space," but the acceptance

(internalization) of external stimuli.

Lewin took these same principles and applied them to the analysis of group conflict, learning,

adolescence, hatred, morale, German society, etc. This approach allowed him to break down common

misconceptions of these social phenomena, and to determine their basic elemental constructs. He used

theory, mathematics, and common sense to define a force field, and hence to determine the causes of

human and group behavior.

Information risk management

Information Risk Management follows information as it is created, distributed, stored, copied,

transformed and interacted with throughout its lifecycle.

Three Pillars to an Information Risk Strategy

1) Information-centric approach: Begin by understanding what information is critical to key

business initiatives, such as growth through acquisitions or expanding partnerships. Then diligently

‘follow the data’ to gain a more holistic view of all the places where it exists across the organization,

where the points of vulnerability are, and what events could put your business at risk.”

2) Risk/Reward analysis: Security investments should be prioritized, based on the amount of

risk a given activity entails relative to the potential business reward, and in keeping with the

organization’s appetite for risk.

3) Ensuring repeatability: Once enterprise information has been located and a risk assessment

performed, the next step is to implement controls — including policies, technologies, and tools — to

mitigate that risk. Here, organizations often turn to frameworks like ISO 27002 and the PCI Data

Security Standard.

Q.6 List and describe in brief the various types of review used for improving performance of a

project.

Ans. Performance Measurement

Most of us have heard some version of the standard performance measurement cliches: “what

gets measured gets done,” “ if you don’t measure results, you can’t tell success from failure and thus

you can’t claim or reward success or avoid unintentionally rewarding failure,” “ if you can’t recognize

success, you can’t learn from it; if you can’t recognize failure, you can’t correct it,” “if you can’t

measure it, you can neither manage it nor improve it," but what eludes many of us is the easy path to

identifying truly strategic measurements without falling back on things that are easier to measure such

as input, project or operational process measurements.

Performance Measurement is addressed in detail in Step Five of the Nine Steps to Success®

methodology. In this step, Performance Measures are developed for each of the Strategic Objectives.

Leading and lagging measures are identified, expected targets and thresholds are established, and

baseline and benchmarking data is developed. The focus on Strategic Objectives, which should

articulate exactly what the organization is trying to accomplish, is the key to identifying truly strategic

measurements.

Strategic performance measures monitor the implementation and effectiveness of an

organization's strategies, determine the gap between actual and targeted performance and determine

organization effectiveness and operational efficiency.

Good Performance Measurement

Focus employees' attention on what matters most to success

Allow measurement of accomplishments, not just of the work that is performed

Provide a common language for communication

Are explicitly defined in terms of owner, unit of measure, collection frequency, data quality,

expected value(targets), and thresholds

Are valid, to ensure measurement of the right things

Are verifiable, to ensure data collection accuracy

Problems in Performance Appraisals:

discourages teamwork

evaluators are inconsistent or use different criteria and standards

only valuable for very good or poor employees

encourages employees to achieve short term goals

managers has complete power over the employees

too subjective

produces emotional anguish

Solutions

Make collaboration a criterion on which employees will be evaluated

Provide training for managers; have the HR department look for patterns on appraisals that

suggest bias or over or under evaluation

Rate selectively (introduce different or various criteria and disclose better performance and

coach for worst performer without disclosing the weakness of the candidate) or increase in

frequency of performance evaluation.

Include long term and short term goals in appraisal process

Introduce M.B.O.(Management By Objectives)

Make criteria specific and test selectivelyEvaluate specific behaviors or results

Focus on behaviors; do not criticize employees; conduct appraisal on time.