Management Science Sessional 2 Notes

Individual ownership: if capital is prvided by single owner

Single / partnership / joint stock company / cooperative org / state or centrally owned corp

partnership: reln bw persons who have agreed to share profit of the business carried on by one or all of them acting for all. Partnerships are based on partnership agreement which is in writing. It covers all the areas of possible dispute bw the partners. It should also define the rights, duties and authorities of each partner and their liabilities.

1. active partner: involved in running the business. gets salary from profits

2. sleeping partner: not involved in working, but no salary

duties of a partner: 

1. should be just and faithful

2. cooperate and accommodate each other

3. render full info about the enterprise to each shareholder

4. respect wills of one another

types of partnership:

1. general: *a partner has full agency powers ad may bind the partnership by any act. 

* each partner may act as though he was an individual proprietor.

* Additional partners can be accommodated with the consent of senior partners

advantages:

1. large capital available to company

2. firm gets better talent, judgment and skills

3. incentive for success is high

4. losses, liabilities also divided

5. can borrow money easily from banks

disadvantages:

profit sharing, dilution of power & responsibility

for eg. law companies

2. Limited partnership: *assoc of 1 or more partners to manage business and 1 or more limited partners whose liability is ltd to the capital they have invested.

JOINT STOCK COMPANIES:

*an assoc of individuals or shareholders who join together fro profit and agree to supply capital divided into shares that are transferable for carrying on a specific business.

*as per rule, it possesses more than 20% for carrying out any business besides one business

* managing body for JSC is a board of directors elected by shareholders.

functions of board of directors:

*make policies for company

*run the company efficiently

*finance is raised by issuing shares, debentures, loans

*liabilities of members is wrt their shareholding

types of joint sock companies:

1. private limited 2. public limited

*tfr of shares restricted

*no. of members bw 2 and 50

*need not obtain registration formalities from registrar of companies

*all financial statements have to be uploaded at the annual general meeting of company, certified by official body

*company life assoc with shareholders' life

*mgrs are affectionate for company

*few legal formalities

*usually smaller

*shares not traded on stock exchange

*accounts not audited

*financial statements private

COOPERATIVE ORGANIZATION:

*A coöperative is an autonomous association of persons who voluntarily cooperate for their mutual social, economic, and cultural benefit

* Cooperatives include non-profit community organizations and businesses that are owned and managed by the people who use its services (a consumer cooperative) and/or by the people who work there (a worker cooperative) or by the people who live there (a housing cooperative).

Cooperative principles:

1. Voluntary and open membership
2. Democratic member control
3. Economic participation by members
4. Autonomy and independence
5. Education, training and information
6. Cooperation among cooperatives
7. Concern for community

Types: Housing, Utility, Agricultural, Credit Unions

eg. FC barcelona, Amul

INDUSTRIAL DISPUTES:

*Affect not only industry but nation as a whole

* Any dispute or difference bw employer and employee in an organized manner.

Effects of industrial disputes:

* workers do not get wages

*management loses its profit

*public do not get their required goods

* nation suffers due to lowering of GDP

causes of industrial disputes:

psychological causes:

*difficulty in adjusting with others

*clash of personalities

*authoritarian leadership

*demand for self respect and recognition

*very strict discipline

institutional causes:

*non recognition of labour union

*matters of collective bargaining

unfair conditions n practices

*influencing workers to join a favorable union

economic causes:

*more than permitted working hours and not being paid for the same

*working in night shifts

*promotion layoff

environmental causes:

*env conditions (too hot/cold)

*old and noisy machinery

*inadequate areas

other causes:

*undesired reduction of wages

*poor fringe benefits

*low bonus

*violation of agreements (legal)

HOW TO SOLVE INDUSTRIAL DISPUTES:

1. without state intervention ( *collective bargaining [with/without conciliation], * voluntary arbitration)

2. with state intervention (*govt appointed arbitrator, *establishment of bipartite committees, *compulsory investigation, *compulsory conciliation & mediation, *compulsory collective bargaining)

BANKING:

*customers can withdraw money at their will

*it lends money to needy people at certain interest rate

*central bank of a nation issues currency and looks into the financial health of the currency

*it accepts xchg of its own currency and foreign currency

*honours cheques issued by other banks

indigenous and modern bankers:

1. accept deposits and deal in hundis.  bills of exchange.

2. own capital, less deposits. depend more on deposits

3. formality and delay-free operations, flexible working hours. formal manner

4. establishments are small and economical, family concern. large businesse.

5. finance to the traders, artisans, as well as the small industrialists, but give no direct loans to the agriculturists

6. no formal banking education.

7. maintain simple accounts. maintain complete, formal logs.

8. thorough knowledge of family history etc of customers.

9. keep close watch over borrower activities.

10. lend on mortgage of land, house, ornaments etc.

11. mostly in the Western and Southern parts of India.

RESERVE BANK OF INDIA:

*central bank of country

*banker to other banks

*regulates total banking system of nation

*regulates issue of bank currency

*keeps reserves of nation and banks in order to secure monetary stability

*has control over cash reserves of commercial banks

*has power to licence banking companies and NBFC (non banking finance company)

Departments:

(IF)Industrial Finance

(RS)Research and Statistics

(XC)Xchg and Control

(I)Issue

(B)Banking

(OD)Operations and Development

(L)Legal
(A)Administrative

(N)NBFC

Inspection

Accounts and Expenditure

EMPLOYEE STATE INSURANCE:

OBJECTIVES:

Workers compensation act 1952

*ESIC is an autonomous corporation under Ministry of Labour and Employment, GoI
* to provide certain benefits to employees n case of sickness, disability, injury, loss of employment, death

*1989: there was a modification to include smaller companies with even 2 permanent employees with a salary up to 10k

How is finance generated?

*financed by 3 groups of people.

*employers, employees, state govt

*inspectors are sent to employees to check

benefits of ESI for employees:

* medical benefits

*sickness benefits

*maternity leave

*disablement benefits

*funeral benefits

*unemployment benefits

MARKETING:

*means working with markets

*trying to utilize the potential exchange for the purpose of human needs and wants

*market exists, can be made, can vanish too.

Functions:

1. to give direction and purpose to mktng division as a whole

2. place present activities in right perspective

3. place tactical plans correctly in a strategic setting

4. set growth targets

5. establish organizatn and method reqd for analysis and predictn

Objectives:

1. determine when and where customer is

2. what are his needs and wants

3. what will he buy n from where

4. how will he buy

5. how much willing to pay

6. future of existing product

7. measure sales strength n potential

8. analyzes distribution, economic trends and profitability

9. determines advertisement effectiveness, cnsumer reaction and dealer reaction

10. conducts demands and price study

11. explores new markets and helps in developing new products

12. guides sales and promotion efforts.

13. safeguards interest of company against unforeseen things in mkt

14. helps business to be in touch with mkt

SALES MANAGEMENT:

process of distributing goods from producer to ultimate user

1. by area

*advertsing

*market research

*head of advertising

*export sales

2. by product

3.function wise

4. customer category

5. end user category

FUNCTIONS OF SALES MANAGEMENT:

1. analyzing market thoroughly

2. studying consumers psychologicaly and demand pattern

3. studying condtns existing in competing firms

4. studying market fluctuatuins

5. preparing mkt, sales and other business avenues

6. developing system for sales reporting and statistical analysis

7. explore newer markets in order to increase sales

8. ensuring efective contribution and coordination bw productn and distributn

9. deciding on distributn policies, methods and networks

FINANCIAL ACCOUNTING:

art and science of recording business transactions in a prescribed methodogical manner so as to show:

1. true state of affairs of business at a particular instance of time

2. deficiency or surplus which has accrued during a specific time period

3. costing (determine price of item and selling price etc)

4. COSTS : 

*classifying, recording and appropriate alloc of expendityre forr determing cost of product

*relation of cost and resale value

*find profitability

5.Costing and cost accounting: internal affairs of business as process of accounting for cost from point of expenditures incurred to establishment and their relshp with cost.

6. takes care of extrnal calculations. records all dealings like purchase, svcs, cash, credits etc

. cash receipts, payments, personal accounts: credits given and taken nominal account: expenses incurred

OBJECTIVES:

1. stock exchange reqments

2. legal reqments

3. tax req

4. safeguarding shareholders' interests

5. divident policies

SCIENTIFIC MANAGEMENT:

*Frederick Taylor, founder of sc mgmt, formulated a theory that analyzed and synthesized workflows.

*he introduced a systematic approach in the mgmt of work.

*it lay emphasis on planning, standardizing and improving human efforts at the operative level in order to maximize o/p with min i/p.

* he thought that by maximizing produuctivity N of each worker, sc mgmt would also maximize earnings of employees and employers.

summarized as:

1. science,

2.  harmony,

3. cooperation,

4. no individualism

,5.  max output in place of restricted o/p,

6. devlepoment of each worker to his greatest N and prosperity

basic approaches:

1. analyze work scientifically and invest all aspects of work on scientific basis rather than thumb rule

2. provide specific guidelines for workers to perform

3. develop best way of doing specific task

4. select workers best suited to perform a specific task

5. develop more than one best way of doing job

6. teach n develop each worker in most N method of doing job

7. divide work so workmen n mgmt share almost equally in daily performance of each task

8. achieve support n cooperation from workers by arranging conditns, svcs, guidance

*knowledge transfer among workers

*transformation of craft production into mass production

* standardization of best practices;

Management Science Sessional 1 Notes

ECONOMICS is the study of human beings, as they live, move and think in the ordinary business of life. It is the study of economic problems of people living in a community.

It is the art and science which studies those activities of social, real and normal human beings, which are related to wealth.

It is basically a human study concerned with an organisation of society for the production & distribution of wealth.

It is the science which studies human behavior with an aim of meeting max objectives with limited resources.

MONEY:

Money is anything which has general acceptability, and passes freely from one end to another, as a medium of exchange, and is generelly received as a final discharge of debits. It is a form or medium of exchange eg coins, currency etc.

Functions of money:

->Link bw prod and consumption ->Medium of exchange ->Unit of accounting ->regarded as a store of value->measure of value -standard of different payments

Qualities of good money:

->general acceptability ->durability ->portability ->homogeneity ->Stability of value

Different kinds of money:

*paper *metallic *intrinsic value money *cheques *pay orders *drafts *convertible money *credit cards

Appreciation and depreciation in the value of money:

*inflation of currency *cost inflation *deflation *demand inflation *hyper inflation

WANTS: It is the desire which can be fulfilled, and is backed by the ability and willingness to fulfill.

Sources of wants:

*desire for the minimum goods necessary for existence

*Desire to maintain standard of living

*desire for distinction and excellence

*aesthetic sense

Characteristics of Wants:

*generally unlimited

*capable of being satisfied

*vary in urgency and intensity

*recurrent

*present >future important

*knowledge increases wants

*determined by social standards and tastes

Necessities, Comfort, Luxuries

DEMAND:

The desire to possess a thing, coupled with the means of purchasing it, and the willingness to use the means for a purpose. Demand schedule of an individual or market is the list of amounts of commodities they will purchase at a particular place or time.

Elasticity of Demand:

It describes the degree of responsiveness of the demand for a particular goods to fall in its price. It referes to values: EOD<=>1.

Factors that affect EOD:

*Type of goode: demand for luxuries is elastic

*Existence of substitutes

*no. of uses of a particular good

*Time element: if use can be postponed

*Price of commodity: high-elastic, low-inelastic

*taste and traditions

*demand is inelastic if expenditure on good is only a small % of income

SUPPLY: It is the commodity that is called for into the market over a particular period of time at a certain price.

UTILITY: *correlated with desire or wants

*may be defined as its value in use

*capacity of a commodity to satisfy human wants

Marginal Utility: Amt of satisfaction to be obtained from the possession of a little bit more of it

Law of diminishing utility: It is the law of life that states that, every addition to the person's stock of a commodity possesses less and less utility.

PRODUCTION:

It is any process/procedure developed to transform a set of input elements like en, materials, capital, information and energy, into a specified set of output elements, like finished goods in proper quantity and quality, thus achieving objectives of an organization.

*Changing situation of a goods

*changing possession

*provision of services

4 factors: land, labour, capital, organization

LAND: Material and forces which nature gives freely, for human beings' aid. It includes surface and ground (soil and subsoil), oceans and rivers, minerals, air, heat, light, climate etc.

characteristics:

*Land is gift of nature, cannot be produced in required quantity

*its value is determined by location

*fixed, cannot be increased

*itself does not act in production process

*passive factor. acted upon by man and machine

*no production possible without land

LABOUR: Human efforts employed in production-

*skilled and unskilled

*mental and manual

*supply of labour

Characteristics of labour:

*indispensable

*differs from land and capital, since it is supplied by humans

*perishable

*money can be invested in labour for acquisition of skills

*cannot be transferred easily from one skill to another

CAPITAL: Wealth used for purpose of producing further wealth.

Characteristics:

*Result of savings

*Wears out with passage of time

Functions:

Makes the workers produce, by providing them wages

*Provides tools, raw material, land

*Keeps production going, buy providing seed money/running expenses

*efficiency

ORGANIZATION: Brings land, labour and capital into most effective coordination, in order to achieve desired objective.

Goals:

*Capacity to manage production with greatest economy and highest profit, sound technical knowledge, foresight, to estimate future trends, select the right kind of labour.

*Creation of healthy competition among workers

*Localization of industry

QUALITY: It is a term explained wrt the end use of the product. A component is said to be of good quality, if it works well for the equipment for which it is designed.

CONTROL: It is a system of measuring and checking a phenomenon. It suggests when, how often, and how much to inspect. It incorporates a feedback mechanism, which explores the cause of poor quality and takes corrective action.

A QCS performs inspection, testing and analysis to conclude whether the quality of each product is as per laid quality standards or not.

It is called Statistical QC when stats techniques are used to control or solve QC issues. SQC makes inspection more reliable, and at the same time, less costly. It also analyzes and collects data in accessing and controlling product quality. It is based on the theory of probability.

Components made on the same machine and of the same batch vary due to  machine characteristics.

SQC uses 3 scientific techniques:

*Sampling inspection, analysis of data, control charting

WAGE PAYMENT PLAN:

Wage is defined as the payment for the use of labour. It includes both monetary and non monetary payments.

Fair pay is a wage paid to a worker, which is fair wrt the work accomplished by him, and which is sufficient to fulfill the basics of life, based on his standard of living in the particular society to which the worker belongs.

Time wages, Real wages.

A good wage is one that satisfies the worker, and brings profit to the management. Wage plans are of  2 types:

*Non-incentive (partially)

*Incentive (only)

TYPES OF INCENTIVES:

*Direct: Given to person who has performed

*Group: Given in a group

*Financial: Bonus, profit sharing, Employer Stock Option Program

*Non financial: promotion, job security, good working conditions, job satisfaction, respect and recognition, training and other employee improvement pgms, housing, medical, recreational, educational opportunities.

OBJECTIVES OF A WAGE PLAN:

*should be profitable to workers and mgmt

*should help in increasing production

*should reward workers proportional to their contribution

*an incentive scheme should provide recognition to a worker for good contribution

*incentive scheme shuold improve and aid utilization of equipments, materials and services

*any wage scheme should improve relations bw employees and employers

DRAWBACKS OF WAGE PLANS:

*incurs extra cost for org

*any wage scheme will lead to disputes/heartburns

PROCESS OF PRODUCTION:

Products are manufactured by  transformation of raw materials into finished goods. Productn, planning and control systems are based on many fns:

*forecasting

*order writing

*product design

*process, planning and routing

*materials control

*tool control

*loading

*scheduling

*work dispatching

*progress reporting

*stock of goods

3 most important internal factors for scheduling:

*materials, equipment, manpower

PRODUCTIVITY: Ratio of output and input. analogous to efficiency.

WHY SHOULD PRODUCTIVITY BE INCREASED:

Management:

*to produce profit

*to clear loans, debts

*to sell more

Workers:

*Higher wages

*Better working conditions

*Higher standard of living

*Job security

*Satisfaction

Customers:

*Lower price of products

FACTORS AFFECTING PRODUCTIVITY:

Human resource: Govt can help by putting more emphasis in production related areas. Motivating employees to get educateed, safe working conditions. Labour unions and mgmt may be adversaries in productivity.

Technology & capital investment, Government regulations, Product design, Machinery & Equipment, Production volume