Author name: Prasanna

Detailed, Step-by-Step NCERT Solutions for 12 Business Studies Chapter 6 Staffing Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Staffing NCERT Solutions for Class 12 Business Studies Chapter 6

Staffing Questions and Answers Class 12 Business Studies Chapter 6

Question 1.
Briefly enumerate the important sources of recruitment.
Answer:
Recruitment refers to those set of activities an organization uses to attract job candidates possessing the appropriate characteristics to help the organization achieve its objectives. The sources of recruitment can b. iveniently classified into internal and external sources’.

Internal Sources
These-sources include the employees already on the pay role i.e.present work force. Whenever any new vacancy arises people from within the organization will be upgraded, promoted, transferred or demoted. The process of filling job openings by selecting from among the pool of present work force can be implemented by the following methods.

• Reviewing the personnel records.
• Job posting and job bidding.
• Inside moonlighting and employee’s friends.

Review of the personnel records and skills inventory provides adequate information for the personnel director to find suitable candidates for a particular position. Under job posting and bidding system the organisation notifies its present employees of openings using bulletin boards, and company publication etc. This is more an open approach where every one gets the same right to apply for a job . and bid for the same.

If the Labour shortage is of short-term nature and great amount of additional Labur is not necessary, then organization employs inside moonlighting.’ It is a technique where organization pays bonus of various types to people not on a time pay roll.

Overtime procedures are in many organizations developed for those on time pay roll. Further more, before going outside to recruit many organization ask the present employees to encourage friends and relatives- to apply.

The internal sources of recruitment have the following merits:

• Recruitment from within can have significant positive effect on employee motivation and moral when it creates promotion opportunities or premature Layoffs.
• Internal recruitment improves the moral of employee because they are sure that they would be preferred over the outside competitor’s.
• Internal recruitment will be easy for the employer as it is easy to evaluate the employees who are currently working.
• Employees need little training as they know the major operations and functions of the organization.
• The expenditure is relatively less when compared to outside sources of recruitment.

The internal sources of recruitment are fought with the following:
Limitations
1. It is not a healthy sign for the organization in the long run as it discourages new blood from entering the organization. The organization may be deprived and benifit of the young talent and experienced employees from outside firms.

2. One disadvantage of internal recruitment has been the widely Published Perier Principle i.e. successful people are promoted until they finally reach a level in which they are unable to perform adequately.

3. The skills of internal employees may become obsolete and the organization may have to resort to outside sources?

4. When promotion is bases on experience and seniority the danger is that really capable men may not be chosen.

5. A final danger involves the inbreeding of ideas when recruiting is only from internal sources precautions must be taken to ensure “we have never done it before like that”, “we do not want to take chance,” or “we do all right without it”.

External sources

When an organization has exhausted’internal sources or when it finals internal sources to be unsuitable, external sources are used. The methods of recruitment are many – walk-ins, public employment agencies, private employment agencies, Labour unions, educational institutions, professional associations, former employees, military services etc. Let us briefly study these external sources of recruitment.

1. Employment exchange
Employment exchanges and private employment agencies represent common sources of external recruitment. Employment exchanges maintain a detailed record of job-seekers and refers the candidate with appropriate qualifications to the required employers. In India it is obligatory to notify the vacancies Act. Employment exchanges are generally used for clerical and semi-skilled employees.

The exchanges match both the demand and supply forces of Labour, Employment exchanges are instrumental in increasing the mobility, of labour, in eliminating bribery and corruption and in providing occupational guidance, in conducting occupational (Personnel) research, etc.

These days, a large number of private employment agencies have been set up in india. These agencies act as consultants and are consulted for recruiting the technical, professonal and managerial personnel. Private employment agencies, also called search firms or ‘head-hunters’ are found more frequently in big cities.

These agencies usually charge a flat fee for their services or a percentage of the salary earned by the hired employee during the first year/month of the service. Generally private agencies offer specialized recruitment service than do the public (government) employment exchanges.

Employment exchanges are falling into disfavour now a days because the records of employment exchanges’are not kept up to date and many of the candidates referred by the employment exchanges may already have sodght employment else where. Further, the candidates, quite often do not care to inform the exchanges once they secure employment on their own else where. Organization, therefore, find it more expedient to meet their requirements from other sources.

2. Advertising
Companies normally advertise and select the’cream of the crop’. One of the most widly used methods of recruitment is the help- wanted advertisement. Advertisements are commonly placed in daily newspapers, employment news magazines, trade and professional publications. People in large numbers respond to the advertisements and somethings even unqualified and unsuitable people also apply. This method, though popular is therefore time – consuming and heavy expenditures involved in recruiting employees through this method.

3. Educational institutions
Also known as campus recruitment, this method represents recruiting on college and university. These days more and more organizations are relying on-campus recruiting. Organization send the employment circulars to various professional educational institutions to display them on the notice board so that potential candidates/students come to know about the vacancies.

Some professional management and technical institutions have placement cells which act as link between the recruiting firms and prospective student candidates.

4. Employee walkins :-
Another source of recruitment is employee walk-ins. Some people send unsolicited applications to the organization enjoying goodwill and reputation, Generally, the corporate image has a significant impact on the number and quality of people applying to an organization in this manner. The corporate image is highly influenced by

• Working conditions
• Compensation policies
• Employer – employee relation, and
• Workers participation in management etc. Walk-ins are not popular source of recruitment in India when compared to the developed countries.

Question 2.
What is meant by recruitment? How is it different from selection?
Answer:
Meaning of Recruitment:-
Recruitment may be defined as the process of publicising information about job vacancies in the organization and inducing the prospective candidates to offer themselves for appointment in the organization. It is the process of searching for prospective employees and encouraging them to apply for jobs in the organization.

It is an important part of staffing and it is an ongoing process. The objective of recruitment is to procure a sufficiently large number of qualified candidates so that the most eligible employees can be selected. Therefore recruitment is called a positive process.

Recruitment brings together the job giver (employer) and the job seekers (applicants). Recruitment can be done either from inside or from outside the organization.
Thus, recruitment involves the following steps :-

(a) identifying the sources of supply of adequate number and right type of personnel required.- 128 N. D. Study Material
(b) Publicising information about job vacacies in the organization.
(c) Assessing alternative sources of manpower and choosing the best source.
(d) Contacting the chosen sources of recruitment to secure, applications, e.g. advertisement for vacancies in a newspaper so as to stimulate the prospective candidates to offer themselves for employment.

Meaning of Selection
Selection is the process of carefully screening the candidates to choose the most suitable persons for the job vacancies to be filled. Under it the qualifications, experience and background of applicants are evaluated in the light of job requirements. It is the process of dividing the candidates into two categories, namely

• those who are to be employed, and
• those who are to be rejected.

It is called a negative process because unsuitable candidates are eliminted or rejected in order to identify the suitable candidates. The number of candidates rejected are much more than those actually selected.

More over, tests, interviews and other techniques of selection are more reliable for rejection of unsatisfactory candidates than for identifying the ideal candidates. Selection is always done after recruitment. The basic purpose of selection is to choose the right type of candidates to fill various positions in the organization.

Selection is a multistep process. It involves a series of steps by which candidates are screened to identify the most suitable persons for the job. Selection is difficult process as it involves discreation and judgement. The selectors have to find out the best possible fit between the job and the candidate. The candidate who meet the job requirements in the most satisfactory manner are finally selected.

Distinction between Recruitment and selection –
Selection is different from recruitment. Selection involves welding out or eliminating unsuitable candidates. Therefore it is a negative process. On the other hand, recruitment is a positive process because it involves attracting a sufficiently large number Of candidates so that the most eligible employees can be selected.

Recruitment is the first stage whereas selection is the second stage in the procurement of employees. The distinction between Recruitment and selection is explained in the following table

Distinction between Recruitment and Selection

Question 3.
Define Training. How is it different from education?
Answer:
Meaning of Training
Training is the process of improving the job knowledge and skills of employees so as to enable them to perform well. It is an organised or systematic activity where in people acquire knowledge and skills for doing a specific job. It is a two-way process because there must be someone to learn and someone to teach.

The purpose of training is to mould the behaviour of people so that they can do their jobs in a better way. In order to achieve this purpose, a training programme is used to improve the knowledge, skills and attitudes of employees. Training is the process of imparting information and knowledge to the employees. As an organised activity, training is designed to create a change in the thinking and behaviour of people.

Training is continues
process, because there is no end to learning and a person, has to learn continuously – new technology, new patterns of behaviour and new life styles. Training is necessary for both new as well as existing employees so that they may peform their jobs property. Training also helps employees to make progress in their careers.

Several on – the – job and off – the – job methods are used for training employees. New employees need training to adopt themselves to the new environment and to perform their jobs efficiently. Old workers require in – service – training to update their knowledge and to learn new methods and techniques of doing work. Thus training is a continuous or never- ending process. There is no end to learning.

Distinction Between Training and Education:-

Traning and Education
Training should be differentiated from education though both are elements of the learnings process. Education involves improving the general knowledge and developing on over all under standing of the total environment. For example, a mechanic who repairs the car better than an engineer is only trained. He is not educated because he does not know the principles of engineering.

Therefore, the scope of education is wider than’ that of training. Secondly the purpose of education is general whereas training has a specific and immediate purpose of making a person proficient in a particular job. The aim of education is to develop the over all understanding and mental capabilities, where as the purpose of training is to improve the knowledge and skills of an individual in doing a particular job more efficiently.

Thirdly education involves formal instruction in a school or college whereas training can be given on the job itself. Fourthly education is generally theoretical whereas training is practical in nature. Lastly, the cost of education is generally paid by the Government and the student. On the other hand, the cost of training is generally borne by the employer.

Question 4.
Distinguish between training and development.
Answer:
Training should also be differentiated from Development. Training is the act of improving the knowledge and skills for doing a specific job. On the other hand, development involves growth of a person in all respects. It is the process by which managers and executives acquire not only skills and competence in their present jobs but also capabilities for future tasks of increasing difficulty and scope.

Secondly training aims at improving current job performance whereas development seeks to improve future job performance. In other words training is job centered while development is career-band. For instance, an employee may receive training to operate a computer. But he may attend a management course develop leadership skills.

Training and development programmes may be beneficial to both managers and workers but the contents of the programmes are likely to differ, managers receive instructions in developing leadership skills whereas workers are trained in technical skills.

Question 5.
Why are internal sources of recruitment considered to be more economical?
Answer:
Internal sources of recruitment considered to be more economical because
1. There are two important sources of internal recruitment transfers and promotion both are economic. As it simplifies the process of selection and placement. The candidates that are already in the working the interprise can be evaluated more accurately and economically.

2. Transfer is a toll of training the employees to prepare them for higher jobs. Also people recruited from within the organisation do not need induction training.

3. Transfer has the benefit of shifting work fore from the surplus departments to those where there is shortage of staff.

4. Filling of jobs internally is cheaper as compared to getting candidates from external sources.

5. Employees are motivated to improve their performance. A promotional at a higher level may lead to a chain of promotion at lower levels in the organisation. This motivates the employees to improve their performance through learning and practice. Employees work their commitment and loyalty and remain satisfied within jobs. Also peace prevails in the enterprise because of promotional avenues.

Question 6.
What is the importance of staffing function in todays environment?
Answer:
The need and importance of the staffing function of management are as follows.
1. Key function
Staffing is regarded as key function because it deals with human beings. It has been recognised that human resources is one of the most valuables assets for an organisation.

2. Helps in building sound human organisation
Staffing helps in searching for qualified and competent persons, stimulating them to join the organisation.

3. Ensures maximum productivity
By placing the right man at the right job staffing ensures maximum production at minimum of time, effort and cost.

4. Provides job satisfaction
Staffing provides job satisfaction to the workers by assigning them the job most- suited to their capability and potential.
.
5. Prepares for future challenges
Through staffing, the management can foreseen and plan its future staff requirements and accordinagly train and develop its workers for assuming future responsibilities.

Long Answer Type Questions

Question 1.
Define the staffing process and the various steps involved in it?
Answer:
Staffing Process – Steps in staffing process.

The various steps in the staffing process as shown in the above figure are as follows

(i) Prior to staffing :
Before the actual function of staffing starts, a minimum preparation is required. A definite idea should be made of the person who will be responsibly for the staffing function. In formation should also be gathered about the working of the internal and external environment of the business.

(ii) Staffing Plan :
Before the actual work of recruiting and selecting employees takes place a staffing plan should be prepared by the organisation. Human Resource Planning (HRP) is the process by which managers ensure that they have the right numbers and kinds of people in the right places, and at the right times, who are capable of effectively and efficiently performing the assigned tasks. The two most important tabs of Human Resource Planning therefore are

• assessing current human resources; and
• assessing future human resources needs and developing a programme to meet those future needs.

(iii) Appropriate Qualifications :
Staffing involves matching the requirements of the job with the qualifications of the persons to be recruited. Hence job requirements are minutely studies and appropriate qualifications for the same are determined in advance.

(iv) Developing Assessment Tests :
On the basis of the qualifications assessment tests are to be developed to measure whether these qualifications are actually poessessed by the candidates. The Assessment Tests should be so devised that they do not focus on single abstract ability and should not create bias in the assessment.

(v) Locating Potential Applications :
The next step involves locating the potential candidates or determining the sources of potential candidates. Both internal as well as external sources explored may be tolocate the potential candidates for the specified jobs.

(vi) Advertising the job :
Internal sources of finding potential candidates can be used to a limited extent. For fresh talent and wider choice external sources of recruitment are greatly relied upon, for which advertising is a necessary next step.

(vii) Selection Test/Interview :
The next step in the staffing process is to screen the candidates through different methods such as selection test, interviews etc. The objective -of the selection process to find the most suitable person for – the job.

(viii) Deciding and Notifying Applicants :
A final list of candidates who are provisionally selected is prepared for further verification, like price verification character verification, reference check etc. which is necessary for contacting important in formation about them before making a decision in this regard.

(ix) Final selection and placement :
The next step is making a final selection and communicating with the candidates. The selected candidates are then placed in the job. Placement is the process of assiging a specific job to each of the selected candidates. It involves assiging a specific rank and responsibility to an individual and implies matching the requirements of a job with the qualifications of a candidate.

(x) Orientation/Induction :
Orientation is a planned introduction of employees to their jobs their co-workers and the organisation. An initial training programme is provided to all new persons touring an organisation so as to-induct them to the job. It is important to make the new persons comfortable to carry out the assigned job smoothly.

(xi) Training :
There is a continuous need for up gradation of the skills and knowledge of the employees so that they can adopt to the sort changing business environment. It is an attempt to improve the performance of the employee’s by improving their knowledge skills and attitudes.

Question 2.
Explain the procedure for selection of employees.
Answer:
Selection is a process of weeding out unsuitable candidates and finally arriving at the most suitable candidates. Thus while recruitment is considered as a positive process (or attracting job applicants), selection is a negative process (or rejecting or filtering the applicants).

The main function of the personnel department is to see how personnel are recruited and selected.-Selection is an important process because employees may remain with the firm for a long period of time. Organization spend large amounts in the selection process. There is full justification for such expenditure. The costs of recruitment and training-are considered as investment in ’Personnel’ the return for which will be in the form of contribution made by them toward the output. Selection thus involves drawing a cost-benefit analysis.

Selection procedure is like a sequence of hurdles. Actually . selection is a negative process. It is negative because more will be turned away than hired. Successful candidates leap over the hurdles and arrive at the finish line, whereas the unsuccessful candidates do not. Selection is, thus carried on by this successive hurdles technique. Some times selection is carried by the multiple – correlation technique also.

The multiple correclation technique, which is, less commonly used is based on the assumption that a deficiency in one factor can be ‘ counter balanced by an excess amount of other. That is to say when a battery of tests are conducted by the management in the selection of t employees a low score on the test can be counter balanced by the high score on the other.

Selection process reveals the following steps

1. Recruitment :
Recruitment refers to those activities of an organization used to attract job candidates possessing the appropriate characteristics to . help the organization reach its objectives. Recruitment determines the total number of applicants applying for each position in the organistion.

The recruitment efforts of an organization are continuous. A logical starting point in recruitment is to look within the organisation carefully. Employees who are satisfied with the organisation will feel like recommending their friends, relatives, neighbours etc. But normally organizations try to recruit employees from out side the organization.

There are a number of ways of recruitment of potential employees – such as private employment ” agencies, public employment agencies, school and colleges, adverting, walk-in (walk-ins mean the people who show upto the gate unsolicited) write in (write-ins means the unsolicted job-seeking letters}, applicant files, field recruitment trips, professional associations for placement of employees etc.

2. The Screening Interview :
A brief screening interview is conducted in the early selection process by a big organization. This is-of short duration and may last for about fifteen to twenty minutes. The employment specialist generally asks ‘knock out’ questions and answering these questions in a particular fashion disqualifies the applicant immediately.

For example ‘are you prepared to work overtime is a vital question if the job under consideration involves unexpected increase in the demand for product. If the applicant gets success in the screening interview he will be given a blank application form to fill it up.

3. Blank Application Form :
Another indispensable part of the selection is the job application form. The application blank is essentially a personal history questionnaire. A full-fledged application form furnishes information , about the candidate’s schooling, qualification, experience, special abilities, attitudes, tastes and preferences etc.

The prescribed application form in addition to providing biographical information,also provides some information related to success on the job. How a person complete the form also might give some clues about the person’s organizational ability and intelligence. For instance, a blank completed in a disorganised fashion (i.e. rough writing, may crosscuts, excessive writing in margins, careless hand writing etc.)

might suggest sloppy work habits of the candidate. Though it is not always true, a carefully designed and skilfully interpreted application form is a potent source of information about an individual’s attitudes, his basic motivation drives his emotional adjustment, his relation with other people and his over all ability to function satisfactorily on the job.

4. Psychological Tests :
Though the psychological tests are not the sole method of selection, they are mose frequently employed in almost all organizations. A psychological test is a systematic procedure for sampling human behaviour.

If is designd to measure alertness, achievement special aptitude and physical dexterity etc. of the candidates. The psychological tests are valuable in placing the available candidates in the most suitable jobs.’ These tests take into account such factors as verbal comprehension, numerical comprehension, pursuit, perceptual speed, visualisation inductive reasoning, word fluency, and syntactic evalution. Syntatic evaluation implies the.ability to apply principles to arrive at a unique solution.

5. Evaluation Interview :
An evalution is perhaps the most important part in the selection process. It attempts to make a careful assessment of the candidates qualifications for the particular task (job). The interview time may range from thirty to fifty minutes. The purpose of interview is to have a good overview of the candidate’s strengths and weaknesses for the position.

Selection interviews are normally conducted in the privacy of an office or a conference room so that the room is quiet and free from interruptions. To relax the candidate and establish support, it is justiciable to spend some time (at least three to five minutes) in warm- up conversation on the part of the interviewer.

An effective interviewer provides the interviewer the reinforcement and encouragement by asking such questions as demographic details (native place and address etc.) and also sports, college experience, etc. after the warm-up period the interviewer shifts to more job-related and subjective questions such as ‘why are you interested in our organization?’ why did you leave the previous job? etc.

As a follow up to these, the interviewer often probes deep into facts by digging for additional details. At the end of the interview each and every candidate (successful as well as unsuccessful) will be thanked for their interest and will be informed that they will be hearing from the organization soon. The organization sends regret letters to the unsuccessful candidates (in some cases they – keep silent about the results) and positive letters of acceptance to the successful counter parts.

6. Background Investigation
Another important part in the selection process is the verification of information obtained from the candidate’s blank application from, selection interview, and the resume he prepares at the end of interview. Normally the candidate is required to state some references (at least two) at the time of filling up the blank application form. Almost all organisation perform some background investigation either by writing or making phone call to the refrees. Background investigation acts as a reference check on the employees.

7. The physical Examination
Medical examination of all the candidates before employment is
a necessary step in the selection process. Nobody is consideted as hired until he has successfully passed every setp of recruitment and selection process. Medical examination is one such step. This step is neccessary for three vital reasons

• To assure that the applicant is fit to work in the organization (for example, a person with a multitude of hypochondriacla complaints (fits) might not be able to meet the attendance standards of the organization.)
• To asure that the candidate is physically fit forplacement in a particular job.
• To provide base against which later physical examination may be compared (this is particularly important disability’ claims that may occur during the job assignments).

8. Placement
After the physical examination is over, the candidate will be given a fitness certificate. The final step, then in the selection process is to give the employment letter to the candidate specifying the place of work gross employments, hours of work etc. It also mentions about the promotional avenues, the rate of increment over a particular time period and the saturated level of pay etc.

Question 3.
What are the advantages of training to the individual and to the organization?
Answer:
The need for training of employees arises due to the following factors
(i) Higher Productivity :
It is essential to increase productivity and reduce cost of production for meeting competition in the market. Effective training can help increase productivity of the workers by importing the required skills.

(ii) Quality Improvement :
The customers have become quality conscious and their requirements keep on changing. To satisfy the customers, quality of products must be continuously improved through training of workers.

(iii) Reduction of learning Time :
Systematic training through trained instructors is essential to reduce the learning period. If the workers learn through trail and error, they will take a longer time and even may not be able to learn right methods of doing work.

(iv) Industrial safety :
Trained workers can handle the machines safely. They also know the use of various safety devices in the factory. Thus they are less prone to industrial accidents.

(v) Reduction of Turnover and Absenteeism :
Training treat safeeling confidence in the mindsof the worker.lt gives them a security at the work place. As a result labour turnover and absenteeism rates are redueced.

(vi) Technology Update :
Technology is changing at pace. The workers must learn new techniques to make use of advanced technology. Thus training should be treated as a continuous process to update the employees in the new methods and procedures.

(vii) Effective Management :
Training can be used as an effective tool of planning and control. It develops skills among workers and prepares them for handling present and future jobs. It helps in reducing the costs of super vision, wastages and industrial accidents. It also helps increase productivity and quality which are the cherished goals of any modern organisation.

Benefits of Training to the Organisation
Training is beneficial for the organisation as discussed below
(i) Economy in Operations
Trained personnel will be able to make better and economical use of materials and equipments. Wastage will be low. In addition, the rate of accidents and damage to machinery and equipment will be kept to the minimum by the well-trained employees. These will lead to less cost of production per unit.

(ii) Greater Productivity :
A well-trained employee usually shows greater productivity and higher quality of work output than an untrained employee. Training increase the skills of the employees in the performance of a particular job. An increase in the skills usually helps to increase both quantity and quality of out put.

(iii) Uniformity of Procedures :
With the help of training the best available methods of work can be standardised and made available to all employees. Standardisation will make high levels of performance rule rather than the exception.

(iv) Less supervision :
If the employees are given proper training the responsibility of supervision is lessened. Training does not-eliminate, the need for supervision, but it reduces the need for detailed and constant supervision.

(v) Systematic Imparting of Skills :
A systematic training programme helps to reduce the learning time to reach the acceptable level of performance. The employees need not learn by trial and error or by observing other and waste time if the formal training programme exists in the organisation.

(vi) Creation of Inventory of Skills :
When totally new skills are required by an organisation. It has to face great difficulties in employment. Training can be used in spotting out promising men and in removing defects in the selection process. It is better to select and train employees from within the organisation rather than seek the skilled employees from outside sources.

Question 4.
The staffing function is performed by every manager and not necessarily by a separate department. Explain. ‘
Answer:
Yes, It is a function which all managers need to performIt is a separate and specialised function and there are many aspects of human relations to be considered. It is the job of managers to fill position in their organisation and to make sure that they remain occupied with qualified people.

Staffing is closely linked to organising since after the structure and position have been decided, people are ‘ required to work in these positions subsequently, they need to be trained and motivated to work in harmony with the goals of the organisation thus staffing is seen as an important function of management.

The staffing function deals with the human element of management. Managing the human component of an organisation is the most important task because the performance of an organisation depends upon how will this function is performed. The success of ah organisation in achieving its goal in determined to,a great extent on the competence, motivation and performance of its human resources.

It is responsibility of all managers to directly deal with the select ‘ people to work for the organisation. When the manager performs the staffing function his role is slightly limited. Some of these responsibilities will include placing the right person on the right job, introducing new employees to the organisation, training employees improving their performance, developing their ability, maintaining their moral and protecting their health and physical conditions.

In small organisations, managers may perform all duties related to employees salaries welfare and working conditions.
But as organisation grow and number of persons employed increases, a separate department called the human resource department is formed which has specialists in managing people.

The management of human resources is a specialised area which requires the expertise of many people. The number of human resource specialists and size of this department gives an indication of the size of the business as well.Thus it is true that staffing is a function of every manager.

Application Type Questions Answers

Question 1.
The workers of a factory are -unable to work on new machines and always demand for help of supervisor. The Supervisor is overburdened with their frequent calls. Suggest the remedy.
Answer:
Supervisor in an organization which acts as a link between workers and management. Supervisor handles the problems of the workers and helps to avoid misunderstanding and conflict between management and workers. But in the above problem, supervisor is4 busy man not in a position for immediate solution to worker to make workable on the new machines installed in the factory.

A skilled and knowledgable supervisor can build efficient team of workers which in his/her absence performed responsibly. A supervisor with good leadership qualities can build up high morale among workers.

Question 2.
The workers of a factory remain idle because of lack of knowledge of hi-tech machines. Frequent visit of engineer is .made which causes high overhead charges. How can this problem be removed.
Answer:
In this situation, the workers should be trained in such a way that in the absence of engineer, they may handle the high-tech machines. Certain techniques of training like T-Group training, Sensitivity training, programmed instruction can enhance the skills, aptitudes and abilities of workers to perform specific jobs requiring . high-tech know-how.

Question 3.
The quality of Production is not as per standards. On investigation it was observed that most of the workers were not fully aware of the proper operation of the machinery. What could be the way to improve the accuracy?
Answer:
Staffing function must be performed efficiently. If right kind of workers are not available or unaware of the changed targets or standards as in the above situation will lead to wastage of materials, time, effort and energy, resulting in iower productivity and poor quality of products. Workers should be given adequate train ing so that wastage is minimum. Workers should be induced to show higher productivity and quality by offering them proper incentives.

Question 4.
An organisation provides security services. It requires * such candidates who are reliable and don’t leak out the secrets of their clients. What step should be incorporated in selection process?
Answer:
Selection is the process of identifying and choosing the best person out of a number of prospective candidates for a job. In the above problem, candidates should be reliable and kept the secret of the services performed by him as the nature of job required. ‘ Various steps at the time of selecting such candidates are needed such as previous experience of the job, Intelligence tests, aptitude test, trade tests and interest tests, reference and background checks etc.

Question 5.
A company is manufacturing paper plates and bowls. It produces 100000 plates and bowls each day. Due to local festival, it got an urgent order of extra 50,000 plates bowls. Advise how the company will fulfill its order and which method of recruitment would yop suggest.
Answer:
in the problem under scanning due to festival offer of enhanced output of paper plates and bowls on daily basis, the recruitment of Casual Callers can be a valuable source of recruitment. From the list of such job-seekers can be screened to fill the vacancies due to urgency of the matter as it reduces the cost of recruitment workforce. Another method of recruitment of Direct-workers with the help of notice-board be made on the spot as casual or badli workers.

Case Problem 1

1. A Company X limited is setting up a new plant in India for manufacturing auto components. India is a highly competitive and cost effective production base, in the sector. Many reputed car manufacturers source their auto components from here. X limited is planning to capture about 40% of the market share in India and also export to the tune of at least $5 million in about 2 years of its planned Operation. To achieve these targets it requires a highly trained and motivated work force. You have been retained by the company to advise it in this matter. While giving answers keep in mind the sector the company is operating.

Questions 1.
Outline the process of staffing the company should follow.
Answer:
As we know and aware, the prime concern of the staffing function in the management process is the timely fulfillment of the manpower requirement within an organisation. These requirements may arise epesodically as in case of starting a new business. The company X limited should follow the following process.

Estimating manpower requirements .
∇
Recruitment
∇
Selecting from among the applicants
∇
Placement and orientation
∇
Training and Development

Questions 2.
Which sources of recruitment the company si auld rely upon? Give reasons for your recomendations.
Answer:
The company should use ‘situation vacant’ advertisement in National news papers and it should be flashed in electronic media also.By giving their advertisement in news papers and on T. V. Company will ’be able to find best brains and talents for the work which they want. Through this source company will be able to find trained persons which will be beneficial for it.

Questions 3.
Outline the process of selection the company should follow with reasons.
Answer:
The company should follow the following :

• Training
• Education
• Development
• Market study
• On the job methods
• Off the job methods.

Questions 4.
Which methods of training and development should be company initiate? Explain.
Answer:
As company X limited is setting up a new plant in India. So it will be better for the company to adopt “off Job method”, because it includes the following which all are needed for new employees.
1. Classroom lectures/con frences
2. Films
3. Care study
4. Computer modelling
5. VestibuIetrainiñg
6. Programmed Instructions.

Case Problem 2

2. A major insurances company handled all recruiting, screening and training, processes for data entry/customer service representatives. Their competitor was attracting most of the qualified, potential employees in their market. Recruiting was made even more difficult by the strong economy and the ‘job seeker’s market.’ This resulted in the client having to choose from – candidates who had the ‘soft’ skills needed for the job, but lacked the proper ‘hard’ skills and training.

Question 1.
As an HR manager what problems do you see in the company?
Answer:
It is a case of lack of training. So correct training process- should take place.so the person who is in need of’soft’ skills should t; trained for the same.

Question 2.
How do you think it can be resolved?
Answer:
He should give training through off the job method and should be trained with the help of films and case study. As Films can provide information and explicitly demonstrate skills that are not-easily represented by other techniques. It will be very effective method in this case.

Case Problem 3

3. A Public transport corporation has hired 1000 buses for the different routes for the passengers of metropolitan city. Most of the 3000 crewmen (drivers, conductors, helpers etc.) of these buses have been found to be wanting in satisfactorily dealing with public and daily commuters. They seem to be little interested in the job and the job seem to have lost all meaning to them.

Question 1.
As manager of the public transport company what measures do you suggest to improve the working of crewman in question?
Answer:
As a manager it is suggested that the employees should give more insentives and should give a handsome increase in their salaries so that should take proper interest in their work.

Question 2.
Is it possible to modify their behaviour by planning a suitable type of training? Suggest one.
Answer:
Yes, they should give some training programmes as it is to enable the employee to do the job better. It will be better for them to give a training of job rotation.

Case Problem 4

Ms. Jayshree recently completed her Post Graduate Diploma in Human Resource Management. A few months from now a large steel manufacturing company appointed her .as its human resource manager. As of now, the company employs 800 persons and has an expansion plan in hand which may require another 200 persons for various types of additional requirements. Ms. Jayshree has been given complete charge of the company’s Human Resource Department.

Questions
1. Point out, what functions is she supposed to perform?
2. What problems do you foresee in her job?
3. What steps is she going to take to perform her job efficiently?
4. How significant is her role in the organisation?
Answer:
For students practice.

Detailed, Step-by-Step NCERT Solutions for 12 Business Studies Chapter 4 Planning Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Planning NCERT Solutions for Class 12 Business Studies Chapter 4

Planning Questions and Answers Class 12 Business Studies Chapter 4

Short Answer Type Questions 

Question 1.
What are the main points in the definition of planning?
Answer:
Planning is what managers at all levels do. It requires taking decisions since it involves making a choice from alternative courses of action. Planning, thus involves setting objectives and developing appropriate courses of action to achieve these objectives. Objectives provide direction for all managerial decisions and action. Planning provides a rational approach for achieving predetermined objectives. All members, therefore need to work towards achieving organisational goals.

Question 2.
How does planning provide direction?
Answer:
Planning provides direction by stating in advance how Work is to be done planning provides direction for action. Planning ensures that the goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken and in which direction.

If goals are will defined, employees are aware of what the organisation has to do and what they must to do achieve those goals. Departments and individuals in the organisation are able to work in coordination If there was no planning, employees would be working in different directions and the organisation would not be able to achieve its desired goals.

Question 3.
Do you think planning can work in a changing environment?
Answer:
No, planning.cannot work in a changing environment. The business environment is dynamic, nothing is constant. The environment consists of a number of dimensions, economic political, physical, legal and social dimensions. The organisation has to constantly adopt itself to change.

It becomes difficult to accurately assess future trends in the environment if economic policies are modified or political conditions in the country are not stable or there is a natural calamity. Competition in the market can also upset financial plans, sales targets may have to be revised and accordingly.

Cash budgets alsoneed to be modified since they are based on sales figures. Planning cannot foresee everything and thus, there may be obstacles to effective planning.

Question 4.
If planning involves working out details for the future, why does it not ensure success?
Answer:
Yes, only planning does not guarantee success. The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action or becomes meaningless. Managers have a tendency to rely on previously tried and tasted successful plans.

It is not always true that just because a plan has worked before it will work again. Besides there are so many other unknown factors to be considered. This kind of complacency and false sense of security may actually lead to failure instead of success.

However, despite its limitations, planning is not a useless exercise. It is a tool to be used with caution. It provides a base for analysing future courses of action. But, it is not a solution to all problems.

Question 5.
Why are rules considered to be plans?
Answer:
A rule is a guide to action. It specifies what is to be done and what is not to be done and thus leaving the concerned person with no direction. Rules are specific statements that inform what is to be done.

They do not allow for any flexibility or discretion. It reflects a managerial decision that a certain action must or must not be, taken they are usually the simplest type of plans because there is no compromise or change unless a policy decision is taken. These are important for an organisation because

• It is a code of conduct governing human behaviour.
• It is used to maintain discipline and command.
• Rules are authoritative in nature.
• It is the result of managerial values and thinking.

Question 6.
What kind of strategic decisions are taken by business organisations?
Answer:
A strategy provides the broad contours of an organisation’s business. It will also refer to future decisions defining the organisations direction and scope in the long run. Thus, we can say a strategy is a comprehensive plan for complishing an organisation objectives.

Whenever a strategy is formulated the business environment needs to be taken into consideration. The changes in the economic, policital, social, legal and technological environment will affect an organisations strategy. Strategies usually take the course of forming the organisations identity in the business environment.

Major strategic decisions will include decision like whether the organisation will continue to be in the same line of business or combine new lines of activity with the existing business or seek to acquire a dominant position in the same market.

Long Answer Type Questions

Question 1.
Why is it that organisations are not always able to accomplish all their objectives?
Answer:
Planning is essential for business organisation. It is difficult to manage operations without formal planning. It is important for an organisation to move towards achieving goals. But in our daily lives also we have seen that things do not always go according to plan.

Unforeseen events and changes, rise in costs and prices, environmental changes, government intervention, All affect our business plans thus organisations are not always able to accomplish all their objectives as they have certain limitations such as :

1. Planning leads to rigidity
In an organisation a well-defined plan is drawn up with specific goals to be achieved within a specific timeframe. But rigidity in plans may create difficulty. Managers need to be given some flexibility.

2. Planning may not work in a dynamic environment
The business environment is dynamic, nothing is constant. It consists of a number of demensions, economic, political, legal and social dimensions competition may also upset financial plans.

3. Planning reduces creativity
Planning is an activity which is done by the top management. Usually the rest of the members just implement these plans. As a result, middle management and others decision makers are neither allowed to deviate from plans nor are they permitted to act on their own. thus must of the initiative inherent in them also gets lost or reduced.

4. Planning involves huge costs
When plans are drawn up huge costs are involved in their formulation. These may be in terms of time and money. Like expencison boards room meeting, discussions with professional experts to find out the viability of the plan.

5. Planning is a time consuming process Some time, plans to be drawn up take so much of time that there is not much time left for their implementation.

6. Planning does not guarantee success
The success of an enterprise is possible only when plans are properly drawn up and implemented any plan needs to be translated into action or becomes meaningless. Besides, there are so many other factors to be considered. This kind of complacency may actually lead to failure instead of success.

Question 2.
What are the main features to be considered by the management while planning?
Answer:
Features of planning
The planning function of the management has certain special features. These features throw light on its nature and scope.
1. Planning focuses on achieving objectives
Organisations are set up with a general purpose in view. Specific goals are set out in the plans along with the activities to be undertaken to achieve the goals.

2. Planning is a primary function of management
Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn and planning provides the basis of all other functions.

3. Planning is pervasive
Planning is required at all levels of management as well as in all departments of the organisation, it is not only for top management but it differs at different,levels and among different departments.

4. Planning is continuous
Plans are prepared for a specific period of time, may be for a month, a quarter or a year. At the end of that period there is need for a new plans to be drawn on the basis of new requirements and future conditions. Hence it is q continuous process.

5. Planning is futuristic
Planning essentially involves looking ahead and preparing for the future the purpose of planning is to meet future events effectively to the best advantage of an organisation. Therefore it is regarded as a forward looking function based on forecasting.

6. Planning involves decision making
It essentially involves choice from among various alternatives and activities. If there is only one possible goal there is no need for planning because there is no choice.

7. Planning is a mental exercise
Planning requires Application Of the mind involving foresight, intelligent imagination and sound judgement. It is basically an intellectual activity of thinking rather than doing in other words thinking for planning must be orderly and based on the analysis of facts and forecasts.

Question 3.
What are the steps taken by management in the planning process ?
Answer:
Planning Process
Plannirig is deciding in advance what to do and how to do. It is a process of decision making. Since it is an activity there are certain logical steps for every manager to follow.

1. Setting objectives
The first and formost step is setting objectives every organisation must’have certain objectives. Objectives may be set for the entire organisation and each department within the organisation.

2. Developing premises
Planning is concerned with the future which is uncertain and every planner is using conjucture about what might happen in future. Therefore the manager is required to make certain assumption about the future. These assumptions are called premises. They must be some for all anci there should be total agreement on them.

3. Identifying alternative courses of action
Once objectives are set assumptions are made. Then the next step would be to act upon them. There may be many ways to act and achieve objectives.

4. Evaluating alternative courses
The next step is to weight the pros and cons of each alternative. Each course will have many variables which have to be weighed against each other, the positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved.

5. Selecting an alternative
This is the real point of decision making. The best plan has to be adopted and implemented. The ideal plan of course would be the most feasible profitable and with least negative consequences.

6. Implement the plan
This is the step where other managerial function also come into the Picture. The step is concerned with putting the plan into action i.e. doing what is required.

7. Follow-up action
I’m see whether plans are being implemented and activities are performed according to schedule is that part of planning process.

Question 4.
Is planning actually worth the huge costs involved? Explain.
Answer:
Planning is certainly important as it tells us where to go, it provides direction and reduces the risk of uncertainity by preparing forecasts. The major benefits are as follows :

1. Planning provides direction
By stating in advance how work is to be done planning provides direction for action. It ensures that the goals or objectives are clearly stated so that they act as a guide for deciding about actions.

2. Planning reduces the risks of uncertainity
Planning an activity which enables a manager to look ahead and anticipate changes. By deciding in .advance the tasks to be performed planning shows the way to deal with changes and uncertain events.

3. Planning reduces overlapping
It serves as basis of coordinating the activities and efforts of different divisions and individuals. It helps in avoiding confusion and misunderstanding.

4. Planning promotes innovative ideas
Since it is the first function of management new ideas can take the shape of concrete plAnswer:It is the most challenging activity for the management.

5. Planning facilitates decision making
Planning helps the manager to look into the future and made a choice from amongest various alternative courses of action.

6. Planning establishes standards for controlling
Planning involves setting of goals. The entire managerial process is concerned with accomplishing predetermined goals through planning, organising, staffing, directing and controlling. Therefore we can say that planning is a prerequisite for controlling it is not a costly affair.

Case Problem

An auto company C Ltd. is facing a problem of declining market share due to increased competition from other new and existing players in the market. Its competitors are introducing lower priced models for mass consumers who are price sensitive. For quality conscious consumers, the company is introducing new models with added features and new technological advancements.

Question 1.
Prepare a model business plan for C Ltd. to meet the exsiting challenge. You need not be very specific about quantitative parameters. You may specify which type of plan you are preparing.
Answer:
New Plans of ‘C Ltd.’
‘C’ Ltd which has had a monopoly in the auto world is set to see some tough competitions fn the coming days. Many new companies are now in the market with new models and lower prices, the new chairman shares his thoughts on how he plans to take the company ahead.

Main priorities
Now the companies priority is to meet the challenge with new technology and low prices. So the consumer 9an easily get the car. Thus C Ltd. should adopt the planning which is based on future.

Question 2.
Identify the limitations of such plans.
Answer:
The limitations of this plan are these, that, they might be a costly affair and even than success is not assure

Question 3.
How will you seek to remove these limitations?
Answer:
Before entering and adopting new technology the company should arrange proper funds so that success can be achieved without any problem.

Detailed, Step-by-Step NCERT Solutions for 12 Business Studies Chapter 3 Business Environment Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Business Environment NCERT Solutions for Class 12 Business Studies Chapter 3

Business Environment Questions and Answers Class 12 Business Studies Chapter 3

Multiple Choice Questions

Question 1.
Which of the following does not characterise the business environment?
(a) Uncertainty
(b) Employees
(c) Relativity
(d) Complexity
Answer:
(b) Employees.

Question 2.
Which of the following best indicates the importance of business environment?
(a) Identification
(b) Improvement in performance
(c) Coping with rapid changes
(d) AI1 of them
Answer:
(d) All of them.

Question 3.
Which of the following is an example of social environment?
(a) Money supply in the economy
(b) Consumer protection Act
(c) The constitution of the country
(d) Composition of family
Answer:
(d) Composition of family.

Question 4.
Liberalisation means ………….
(a) Integration among economies
(b) Reduced government controls and restrictions
(c) Policy of planned disinvestments
(d) none of them
Answer:
(b) Reduced government controls and restrictions.

Question 5.
Which of the following does not explain the impact of government policy changes on business and industry?
(a) More demanding customers
(b) Increasing Competition
(c) Change in agricultural prices
(d) Market Orientation
Answer:
(c) Change in agricultural prices.

Short Answer Type Questions

Question 1.
What do you understand by business environment?
Answer:
Definition and Meaning of Business Environment According to Arthur M. Weimer, “Business environment encompasses the ’Climate’ or set of conditions, economic, social, political or institutional in which business operations are conducted.”

The business environment is the collection of all conditions and forces surrounding the business enterprise. It is required of every manager to take steps to Understand, face and control all these conditions of the environment and bring about a change in the enterprise accordingly, otherwise it cannot survive and grow. Different components of business environment can be shown by means of the following diagram

Question 2.
Why it is important for business enterprises to understand their environment? Explain briefly.
Answer:
Importance or Benefits of study of Business Environment
Business environment is highly dynamic and uncontrollable. It keeps the entire business active and prudent. It is necessary that there should be congenial and harmonious social, economic and political environment around the business environment. Thus business environment has following benefits.

(1) Helpful in Formulating Future Strategies
A study of changing business environment is helpful in formulating future strategies. .

(2) Helpful in Adapting to Environment
A study of environment reveals various internal and external environment factors affecting the enterprise. Effect of each such factor can be separately identified and changes can.be made in the enterprise accordingly. . .

(3) Helpful in-Recognising Opportunities
A study of business environment helps us to ascertain whether the change in environment will provide some good opportunities for business or not.

(4) Helpful in Recognising Threats, Hostilities and Dangers
A study-of business environment helps to recognise the threats, challenges, risks and dangers likely to.be faced by at) enterprise. By getting a prior knowledge it can prepare itself to overcome the same.

(5) Helpful in Providing Infomation Relating to Strong Points and Weak Points
A study of business environment reveals the strong points weak – points of the business to face the business environment. Management ( can then identify the areas which need immediate attention.

(6) Helpful in Estimating the Expectations of Various Groups:-
Many groups both within and outside the enterprise, Contribute to the well-being of the enterprise. As such, they have various expectations also from the enterprise. These groups may be employees, customers, suppliers, financiers, shareholders, government and the society in general. A study of business environment helps to know the expectations of these groups so that they may be reasonably fulfilled.

Question 3
Mention the various dimensions of business environment.
Answer:

Dimensions of Business Environment

(i) Economic Environment
Economic environment is of great significance to the business. It consists of macro-level factor related to the means of production and distributution of wealth. It includes all such forces of economic development which effect the marketing scope of the enterprise. The important constituents of the economic environment are

(a) Economic Conditions Economic Conditions are those conditions which are related to the possibilities of the economic development of a country.

(b) Economic PoliciesThe economic policies are laid down to provide direction to the economic activities.

(c) Economic Systems Knowledge of economic system helps in understanding the economic environment of the country. Economic system is of three types.

• Capitalistic System
• Socialistic System
• Mixed System

(ii) Socio-Culture Environment The social environment of business includes social institutions, social groups population and its composition, social beliefs and customs, education system, literacy level, cultural heritage etc.

(iii) political Environment Every business operates within the laws and regulations determined by the political system. The political system provides the framework within which the business functions.

(iv) Legal Environment Legal environment consists of the framework of laws, regulations and court decisions which guide and control business activities.

(v) Technological Environment Science and technology exercise a direct influence on business. New techniques of production and distribution have implications on operating casts and capital investment.

Question 4.
Briefly explain the following’.
(a) Liberalisation
(b) Privatisation
(c) Globlisation
Answer:
Liberalisation
The economic reforms that were introduced were aimed at liberating the Indian business and industry from all unnecessary controls and restrictions. Liberalisation of the Indian industry has taken place with respect to :

• Abolishing licensing requirement in most of the industries except a short list.
• Freedom in deciding the scale of business activities i.e. no restrictions on expansions or contraction of business activities.
• Removal of restrictions on the movement of goods and services.
• Freedom in fixing the prices of goods an services.
• Reduction in tax rates and lifting of unnecessary controls over the economy.
• Simplifying procedures for imports and experts, and
• Making it easier to attract-foreign capital and technology to India.

Privatisation :
The new set of economic reforms aimed at giving greater role to the private sector in the nation building process and a reduced role to the public sector. This was a reversal of the development strategy pursued so far by the Indian planners.

To achieve this, the government redefined the role of public sector in the New Industrial Policy of 1991, adopted the policy of planned disinvestments of the public sector and decided to refer the loss making and sick enterprises to the board of Industrial and financial Reconstraction.

The term disinvestments used here means transfer in the public sector enterprises to the private sector. It results in dilution of Government in the public enterprise. If there is dilution of Government Ownership beyond 51 percent, it would resection transfer of ownership and management of the enterprise to the private sector.

GlobalisationGlobalisation means the integration of the various economies of the world leading towards the emergence of a cohesive global economy. Till 1991 the government of India had followed a policy of strictly regulating imports in value and volume terms. These regulations were with respect to

• licensing of imports
• tariff restrictions and
• quantitative restrictions.

The new economic reforms : aimed at trade liberalisation were directed towards import liberalisation, export promotion through rationalisation of the tariff structure and reforms with respect to foreign exchange so that the country does not remain isolated from the rest of the work’. Globalisation involves an increased level of interaction and interdependence among the various nations of the global economies.

Physical geographical gap or political boundaries no longer remain barriers for a business enterprise to serve a customer in a distant geographical market. This has been made possible by the rapid . advancement in technology and liberal trade policies by government. Through the policy of 1991, the government of India moved the country to this globalisation pattern.

Question 5.
Briefly discuss the impact of Government policy changes on business and industry.
Answer:
Impact of Government Policy changes On Business and Industry
The government policy ofTiberalisation, privatisation and globalisation has made a definite impact on the working of enterprises in business and industry. Indian corporate sector has come face-to- face with.several challeges due to government policy changes. These challanges can be explained as follows :

• Increasing competition
• More demanding customers
• Rapidly changing technological environment
• Necessity for change
• Need for developing human resource
• Market Orientation

(i) Loss of budgetary support to the public sector .On the whole, the impact of Government policy changes particularly in respect of liberalisation, privatisation and globalisation has been positive as the Indian business and industry has shown great resilience in dealing with one new economic order. Indian enterprises have developed strategies and adopted business processes and procedures to meet the challenge of competition.

Long Answer Type Questions

Question 1.
How would you characterise Business Environment? Explain, with examples, the difference between general and specific environment.
Answer:
Characteristics of Business Environment
(a) Totality of External forces The term business environment
is the sum total of all things external to business firms and, as such, is aggregative in nature.

(b) Specific and general forces Business environment includes
both specific and general forces. Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly and immediately in their day-to-day working. General forces (such as social, political, legal and technological conditions) have impact on all business enterprises and thus may effect an individual firm only indirectly. ‘

(c) Inter-relatedness Different elements or parts of business environment are closely inter-related. For example increased life expectancy of people and increased awareness for health care have increased the demand of many health products and services like diet coke, fat-free, cooking oil, and health resorts New health products and services have, in turn, changed peoples life style.

(d) Dynamic Nature Business environment is dynamic in’ nature that it keeps on changing whether in terms of technological improvements, shifts in consumer preferences or entry of new competitions in the market.

(e) Uncertainity Business environment is largely uncertain as it is very difficult to predict the future happenings, especially when environment changes are taking place too frequently as in the case of informtion technology or fashion industries.

(f) Complexity Since business environment consists of numerous interrelated and dynamic conditions on force which arise from different sources,’ it becomes difficult to comprehend at once what exactly constitutes a given environment. In other words, environment is a complex phenomenon that is relatively easier to understand in parts but difficult to graspin its totality. For example, it may be difficult to know the extent of the relative impact of the social, economic, political technological or legal factors an change in demand of a product in the market.

(g) Relativity Business environment is a relative concept since it differs from country to country and even region to region. Political conditions in U.S. A, for instance differ from those in China or Pakistan. Similarly demand for sarees may be fairly high in India whereas it may be almost nonexistent in France.

Question 2.
How would you argue that the sucess of a business enterprise is significantly,influenced by its environment?
Answer:
Importance of Business Environment Just like human beings, business enterprises do not exist in isolation. Each business firms is not an island into itself; it exists, survises and grows within the context of the element and forces of its environment.

While the individuals firms may be able to do little or nothing to change or control these forces it has no alternative to responding on adapting according to them. A good understanding of environment by business managers enables them not only to identify and evaluate, but also to react to the forces external to their firms.

(i) Enabling the identification of opportunities and getting the first mover advantage Opportunities refer to the positive external trends or changes.that will help a firm to improve its performance. Environment provides numerous opportunities for business success. Early identification of oppotunities helps an enterprise to be the first to exploit them instead of losing them to competitors.

(ii) Helping in the identification of threats and early warning signals. Threats refer to the external environment trends and changes that will hinder the firms performance. Besides opportunities environment happens to be the source of many threats. Environmental awareness can help manager to identify various threats on time and serve as an early warning signal.

(iii) Tapping Useful Resources Environment is a source of various resources for running a business. To engage in any type of activity, a business enterprise assembles various resources called inputs like finance, machines, raw materials, power and water, labour etc; from its including financer, government and suppliers decide to provide these resources with their own expectation to get something in return from the enterprise.

The business enterprise supplies the environment with its outputs such as goods and survices for customers, payment of taxes to government, return on financial investment to investors and so on.

(iv) Coping with Rapid changes Today’s business environment is getting increasingly dynamic where changes are taking place at a fast pace. It is not the fact of change itself that is so important as the pace of change. Turbulent market conditions, less brand loyality, divisions and sub-divisions (fragmentation) of markets, more demanding customers, rapid changes in technology and intense global competition are just a few of the imges used to describe today’s business environment.

(v) Assisting In Planning And Policy Since environment is a source of both opportunities and threats for a business enterprise, its understanding and analysis can be the basis for deciding the future course of action (planning) or guidelines for decisions making (policy).

Question 3.
Explain with examples, the various dimensions of business environment?
Answer:
Dimensions of, or the factors constituting the business environment include economic, social, technological, political and legal conditions which are considered relevant for decision making and improving the performance of an erlterprise. In contrast to the specific environment these factors explain the general environment which mostly influence many enterprises at the same time.

However, management of every enterprise can benefit from being aware of these dimensions instead of being disinterested in them. For instance, scientific research has discovered a technology that makes it possible to produce an energy efficient light bulb that lasts at least twenty, times as long as a standard bulb. A brief discussion of the various factors constituting the general environment of business is given below:

(a) Economic Environment Interest rates, inflation rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors in the general environment that can affect management practices in a business enterprise.

Short and long term interest rates significantly affect the demand for product and services. For example, in case of construction companies and automobile manufacturers low longer-term rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money.

(b) Social Environment Included in the social environment are social forces like traditions, values, social trends society’s expectations of business, and so on. Traditions define social practices that have lasted for decades or even centuries. For example, the celebration of Diwali, ID, Christmas and Guru Parv in India provides significant financial opportunities for Card companies, sweets or confectionary shops, tailoring, outlets and many other related business.

(c) Technological EnvironmentTechnological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.

For example recent technological, advances in computers and electronics have modified the ways in which companies advertise their products. From propeller airplanes to jets, and from typewriters to computer-based word processors, have all been responsible and creating new business.

(d) Political Environment
Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representative hold towards business. The significance of political conditions in business sucess lies in the Predictability of business activities under stable political conditions.

On the other hand, these may be uncertainly of business activities due to political unrest and threats to law and order. Political stability, thus, builds up confidence among business people to invest in the long term projects for the growth of the economy.

(e) Legal EnvironmentLegal Environment includes various legislations passed by the government administrative orders issued by government authorities, court, judgements as well as the decisions rendered by various commissions and agencies at every level of the government-centre state or local.

In India, a working knowledge of Companies Act 1956; Industries (Development & Regulations) Act 1951; Foreign Exchange Management Act and the Imports and Export act (Control Act) 1947; Factories Act 1948; Industrial Disputes Act 1947; Trade Union Act 1926; Workmen’s Compensation Act 1923; Consumer Protection Act 1986; Competition Act 2002 and host of such other legal enactments as amended from time to time by parliament, is important for doing business Impact of legal environment can be illustrated with the help of government regulations to protect consumers interests.

Question 4.
What economic changes were initiated by the Government under the Industrial Policy, 1991? What impact have these changes made on business and industry?
Answer:
Economic Environment In India The economic environment in India consists of various macro level factors related to the means of production and distribution of wealth which have imform on the business and industry. These include:
(a) Stage of economic development of the country.
(b) The economic structure in the form of mixed economy which recognises the role of both public and private sectors.
(c) Economic policies of the Government including industrial monetary and fiscal policies.
(d) Economic planning including five year plans, annual budgets and so on.
(e) Economic indices like national income, distribution of income, rate and growth of GNP, per capita income, disposal personal income, rate of savings and investments, value of exports and imports, balances of payment and so on.
(f) Infrastructural factors, such as, financial institutions, banks – modes of transportation,communication facilities, and so on. As a part of economic reforms, the Government of India announced a new industrial policy in July 1991.

The broad features of this policy are as follows :

• The Government reduced the number of industries under compulsory licensing to six.
• Many of the industries reserved for the public sector under the earlier policy, were dereserved. The role of public sector was limited only to four industries of strategic importance.
• Disinvestments was carried out in case of many public sector industrial enterprises.
• Policy towards foreign capital was liberalized. The share of foreign equity participation was increased and in many activities 100 percent foreign direct investment (FDI) was permitted.
• Automatic permission was now granted for technology agreements with foreign companies.
• Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.

Question 5.
What are the essential features of
(i) Liberalisation
(ii) Privatisation
(iii) Globalisation.
Answer:
(i) Economic Liberalisation: The process of economic liberalization began in India in July 1991 . when a package of economic reforms has been introduced for market mechanism like deregulation, greater autonomy of private investment, less restrictions on the convertability of the, rupee etc. The purpose of economic liberalization is to unlock the economic potential of the country by encouraging private sector and mutinational corporations to invest and expend. Economic liberalization comprises both privatization and Globalization.

(ii) Privatization : Privatization aims at disinvestment of equity of public sector understandings and to subject there udertakings of competition. Privatization is the process of reducing the role of public sector in economic activities of a country. It involves induction of private ownership, private management and control in public sector enterprises. It includes de-nationalization and Transfer of control and management of public sector undertakings to private sector. It also covers dilution of government equity in public enterprises.

Management of concerned enterprise should be taken in confidence at the time of disinvestment. The interests of workers and consumers should be legitimately protected.

(iii) Globalization :
Globalization means “to make Global” havings the entire world as one market. It is a process of increasing economic integration and growing economic inter-dependence between countries in the world economy. It involves not only cross-border movement of goods and services, capital, technology, Information and personal, but also an organisation of economic activities which crosses national boundaries. Globalization is essential due to following reasons:-

• Technological restrictions
• Growing similarities of countries in terms of basic infrastructure, distribution channels and marketing approaches.
• Restructing the ‘production and trade’ pattern in favour of labour intensive goods and technologies.
• International competition between the firms takes place due to globalization.
• It increase the inflow of foreign capital and technology and stimulate exports.
• Employment opportunities will also be increased in the long run due to opening of foreign banks and financial institutions.

Case problem

1. Lately many companies have planned for significant investment in organised retailing in India. Several factors have prompted their decisions in this regard.Customer income is rising. People have developed a taste for better quality products even though they may have to pay more. The aspiration levels have increased. The government has also liberalised its economic policies in this regard and permitted even cent percent foreign direct investment in some sectors of retailing.

Question 1.
Identify changes in business environment under different heads – economic, social, technological, political and legal that have facilitated the companies decisions to plan significant investments in organised retailing.
Answer:
Economic Environment :
The business enterprises in India do realise the importance of economic environment so company has decided to invest and organised retailing.

Social Environment :
As it includes social forces like social trends. The aspiration level of customers have also increased so the company realised the importance and has planed to invest in retailing.

Technological Environment :
It relates to scientific improvements which provide new ways of producing so foreigners have planed invest in retailing.

Political and legal Environment : Now general stability and peace is there in India and various legislations passed by the government administrative orders issued by government so the foreigners have decided to do trade with India and invest inretailing.

Question 2.
What has been the impact of these changes with regard to globalisation and privatisation?
Answer:
Impact of globalisation and Privatisation . The new set of economic reforms aimed at giving greater role to the private sector in the nation building process. On the other hand till 1991 the government of India had followed a policy of strictly regulating imports in value and volume terms, these regulations are with respect to licensing, tariff restrictions etc.

The new economic reforms aimed at trade liberalisation and gave export promotion. This has been made possible by the liberal trade policy by the government so the foreign trade with India and to invest in retailing has a great impact on Indian economy.

Detailed, Step-by-Step NCERT Solutions for 12 Business Studies Chapter 2 Principles of Management Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Principles of Management NCERT Solutions for Class 12 Business Studies Chapter 2

Principles of Management Questions and Answers Class 12 Business Studies Chapter 2

Multiple Choice Questions 

Question 1.
Principles of Management are NOT
(a) Universal
(b) Flexible
(c) Absolute
(d) Behavioural
Answer:
(c) Absolute.

Question 2.
How are principles of Management formed ?
(a) In a loboratory
(b) By experiences of Managers
(c) By experiences of customers
(d) By propagation of social scientists.
Answer:
(b) By experiences of Managers.

Question 3.
The principles of management are significant because of’
(a) Increase in efficiency
(b) Initiative
(c) Optimum utilisation of resources
(d) Adaptation to changing technology
Answer:
(a) Increase in efficiency.

Question 4.
Henri Fayol was a
(a) Social scientist
(b) Mining Engineer
(c) Accountant
(d) Production Engineer
Answer:
(b) Mining Engineer.

Question 5.
Which of the following statement best describes the principle of ‘Division of Work’
(a) Work should be divided into small tasks
(b) Labour should be divided
(c) Resources should be divided among jobs
(d) It leads to specialisation
Answer:
(a) Work should be divided into small tasks.

Question 6.
‘She/he keeps machines, materials, tools etc. ready for operations by concerned workers.’ Whose work is described by this sentence under functional foremanship
(a) Instruction card clerk
(b) Repair Boss
(c) Gang Boss
(d) Route clerk
Answer:
(c) Gang Boss.

Question 7.
Which of the following is NOT a Principle of management given by Taylor?
(a) Science, not rule of the Thumb
(b) Functional foremanship
(c) Maximum not restricted output
(d) Harmony not discord
Answer:
(b) Functional Foremanship.

Question 8.
Management should find ‘one best way’ to perform a task. Which technique of Scientific management is defined in this sentence
(a) Time Study
(b) Motion Study
(c) Fatigue Study
(d) Method Study
Answer:
(d) Method study.

Question 9.
Which of the following statements best describes ‘Mental Revolution’?
(a) It implies change of attitude.
(b) The Management and workers should not play the game of one upmanship
(c) Both management and workers require each other.
(d) Workers should be paid more wages.
Answer:
(a) It implies change of attitude.

Question 10.
Which of the following statement is FALSE about Taylor and Fayol
(a) Fayol was a mining engineer whereas Taylor was a mechanical engineer
(b) Fayol’s principles are applicable in specialised situations whereas Taylor’s principles have universal application
(c) Fayol’s principles were formed through personal experience whereas Taylor’s principles were formed through experimentation
(d) Fayol’s principles are applicable at the top level of management whereas Taylor’s principles are applicable at the shop floor.
Answer:
(b) Fayol’s principles are applicable in specialised situations whereas Taylor’s principles have universal application.

Short Answer Type Questions 

Question 1.
How is the principle of ‘Unity of command’ useful to management? Explain briefly.
Answer:
Unity of Command:-
According to this principle, every employee should get orders and directions only from one superior and he should be accountable to that superior alone. It is essential to avoid duality of command. If a subordinate gets orders from two superiors, in such a situation he would not be able to decide which superior’s orders should be carried out first.

The superiod whose orders are not carried out might become annoyed or develop a feeling of jealousy and bitterness towards the other superior. According to Fayol.” as soon as two superiors yield their authority over the same person or department, uneasiness makes itself felt.”

Fayol further writes that if there are two or more superiors as regards any employee, it will only undermine authority, put discipline in jeopordy, disturb order and threaten stability of organisation.

Question 2.
Define scientific management. State any three of its principles.
Answer:
Scientific Management
The Scientific Management school stimulated by F.W. Taylor and carried on by others through the years, suggested a totally revolutionary way of thinking about the problems of work and organizations. The Major theme of scientific Management was that work could be studied scientifically.

Taylor retentlessly pursued the idea that efficiency at work could be improved through careful ‘scientific’ analysis. He advocated an inductive, empirical, detailed study of each job to determine the ‘one best way’ to organize work. The primary emphasis was on the application of scientific methods to the solutions of managerial and organizational problems. Tosi and Corroll summarized the principles of scientific management thus

(i) Current Management practice was inefficient. Most scientific management writers believed that the way Management was practiced in their time was inefficient.

(ii) Management must adopt the scientific methods in industry. The scientific methods involves solving problems by research rather than relying or experience or intuition. It demands evalution of alternatives by making systematic and objective comparisons among them to see which is best. Taylor and his colleagues believed there is ‘one best way’ to organize work and this could be ascertained through scientific method.

(iii) Specialization should be practiced. Taylor advocated the division of the entire work of an organization into managerial and non-managerial categories. He favoured a complete separation of planning function from doing function. He proposed using specialization experts, called as functional foremen, each of whom was to be responsible for some specific portion of the worker’s job like inspection of work, ascertaining the machine speed etc. He firmly believed that vertical specialization would improve job performance.

(iv) Planning and scheduling were essential. In scientific management everything was to be done according to a plan. To improve performance, plans for a whole organization were to be broken down into plans for smaller units, and even further to individuals. Writers like Gantt developed charts (Gantt chart) which helped a Manager to make optimum use of his resources by carefully schedulingjobs among available equipment and resources.

Question 3.
If an organisation does not provide the right place for physical and human resources in an organisation, which principle is violated? What are the consequences of it?
Answer:
When the organisation does not provide the right place for physical and human resources it violate the principles of division of work propounded by Henri Fayol. The Principle of division of work may be explained in brief as follows.

Division of work

This principle tells us that as far as possible the whole work should be divided into parts and each employee should be assigned only one part of the work according to his ability and attitude.

When that employee performs that part of the work repeatedly, he will become specialised in doing that particular part of the work, consequently, the benefits of the specialisations will be achieved. According to Fayol, the principles of division of work is applicable to all kinds of work – technical as well as Managerial.

Question 4.
Explain any four points regarding significance of Principles of management?
Answer:
Need and Importance of principles of Management : A principal is a fundamental statement of truth that provides a guide to thought and action. The technique and nature of Management may be based on the defined principles. By abiding the principles of Management a manager may escape from committing errors. The need and importance of Management principles may be highlighted in the following ways

(i) To Increase the Managerial Efficiency :
The principles of Management have been developed on the basis of experiences of professional Managers. These principles instruct a Manager as to how to act in various situations so that the mistakes committed by the previous Manager are not repeated. Application of Management principles avoid the need for trial and error-method. They ‘ can make decisions on the basis of predetermind principles and thereby increase the Managerial efficiency.

(ii) Helpful in Managerial Training :
The principles of Management present a detailed schedule of training for the new managers. By acquiring the knowledge as to which principle is to be used in a particular situation they can learn the art of Management quickly.

(iii) To Improve Research :
The principles of Management provide new ideas, new thoughts and new vision to managers and researchers. Since the principles are flexible in nature they motivate the managers to do further research in the field of Management and thus they are helpful in increasing the horizons of knowledge.

(iv) Helpful in understanding the Nature of Management :
The principles of management explain the nature and functions of Management. Thus, they are helpful in understanding the nature and functions of Management.

(v) To Allain Social Goals
The standard of living of the people in a society depends on the quality of Management. Only the development of Managerial principles enables more efficient utilisation of human and material resources. Thus, Management principles are helpful in the attainment of social and cultural goal such as better quality products at resonable rates, more employment opportunities, increase in wages etc.

Question 5.
Explain the principle of ‘Scalar Chain’ and gang plank.
Answer:
Scalar chain According to the principle, there is a scalar chain of authority in the organisation which moves in a straight line from the highest authority to the lowest level subordinates. According.to Fayol each communication from top to lower level and vice versa should flow through each executive along the scalar chain. Fayol has explained this scalar chain with the help of the following diagram :

Above diagram depicts that A is the seniormost executive and BCDEFG and LMNOPQ are his subordinates. Normally, each communication from top to lower level will flow from A to B, B to C, C to D and will trickle down from F to G. Similarly, every communication from lower level to top will flow G to F, F to E, E to D and will finally reach A from B. If suppose F wants to communicative with P then according to scalar chain such a message will first reach A through E,D,C,B and then it will reach P through L,M,N,0.

According to Fayol the process of scalar chain results in unnecessary delay and if it is essential to communiate immediately, a gangplank may be created between F and P without breaking the scalar chain. This gangplank allows the two employees to communicate directly with each other, but for this it is necessary for F to take prior permission from his immediate superior E and similarly P has to take prior permission from his imediate superior Q, and each must provide the details of their conversations to these superiors.

Long Answer Type Questions 

Question 1.
Explain the principles of scientific Management given by Taylor?
Answer:
Taylor’s Scientific Management :
It refers to an important stream of one of the earlier schools of thought of management referred to as the classical school. Taylor thought that by scientifically analysing work.it would be possible to find ‘one best way’ to do it. He believed that contemporary management was amateurish and should be studied as a discipline.

He is known for coinage of the term scientific management’ In the words of Taylor, scientific management means “knowing exactly what you want men to do and seeing that they do it in the best and cheapest way” thus the principles are

1. Science not Rule of Thumb
Taylor pioneered the introduction of the method of scientific inquiry into a domain of management practice. He believed that there was only one best method to maximise efficiency.

This method can be developed through study and analysis. According to Taylor even a small production activity like loading pigs of iron into boxcars can be scientifically planned and managed. It will save time and energy both.

2. Harmony, Not Discord
Factory system of production implied that managers served as a link between the owners and the workers. Taylor recognised that this conflict helped none the workers, the managers or factory owners. He emphasised that there should be complete harmony between the management and workers.

To achieve this state Taylor called for complete mental revolution on the past of both. According to Taylor, “Scientific management has for its foundation the firm conviction that the true interests of the two are one and the same.”

3. Co-operation, Not Individualism
There should be complete cooperation between the labour and the management instead of individualism. This principle is an extension of principle of “Harmony not discord”. According to Taylor, ‘there should be an almost equal division of work and responsibility between workers and management.

4. Development of Each and Every person to his or her greatest efficiency and prosperity Industrial efficiency depends to large extent on personnel competencies. As such scientific management also stood for workers development workers training was essential also to learn the “best method” developed the scientific approach. Thus each person should be scientifically selected, they should be given required training. Thus we can say that Taylor was an ardent supporter of use of scientific method in business.

Question 2.
Explain the following Principles of management given by Fayol with examples
(a) Unity of direction
(b) Equity
(c) Espirit de corps
(d) Order
(e) Centralisation and decentralisation
(f) Initiative
Answer:
(a) Unity of Direction
According to this principles, each group of activities having the same objective must have one head and one plan. Observance of this principles provides great help to the management in maintaining co-ordination among various functions of an organisations. Unity of direction is essential for achiveving unity of action. To ensure success in any group effort, it is necessary that authority for directing the group action is concentrated in just one person and above all, the entire group has the same plan to act upon, otherwise there would be duplication of activities and uncessary wastage of resources.

(b) Equity
Equity implies that employees should be treated with justice and kindness. Managers should be fair and impartial in their dealings with subordinates. They should adopt a sympathetic and unbaised attitude towards employees. Equity helps to create cordial relations between management and employees and the employees become loyal to the organisation whereas partiality breeds frustrations which adversely affects their efficiency.

(c) Espirit De corps or Team spirit
It is a French word which means that there should be team spirit in the organisation. In other words, all the persons working in the organisation should have harmony and mutual understanding. Union is strength, unity in the staff is the foundation of success in any organisation. Management should not follow the policy of’divide and rule’ rather it should strive to maintain team-spirit and co-operation among employees so that they can work together as a team. According to Fayol only those organisations succeed where all the persons work unitedly as a group.

(d) Order
According to Fayol these are two aspects to an order namely material order and social order. Material order means, there should be a proper place for everything and everything should be in its proper place. Social order means, there should be proper place for everyone and everyone should be in his or her proper place. By following these two orders every person would know the exact place of his work and would know the place from where he would get the things needed by him.

(e) Centralisation and decentralisation
Everything which increases the importance of subordinates role is decentralisation and everything that reduce the importance of subordinates role is centralisation. According to him there should be optimum degree of centralisation and decentralisation must be determined separately for each organisation according to its circumstances.

Small firms for example, are likely to have absolute centralisation, because in this case the managers order are directly transmitted to subordinates. However, in the case of a large firm, there is lesser degree of centralisation because the manager’s order have to pass through a number of intermediaries to reach the subordinates. Management must, therefore, strike out a balance between centralisation and decentralisation.

(f) Initiative
According to Fayol, each employee has natural capability of thinking out a plan, decision making and implementation of that plan, this is called initiative. Managers should utilise the initiative of their subordinate to the maximum extent. Employees at all levels should be given the opportunity to take initiative and exercise judgement in the formulation and execution of plAnswer:It develops the attitude of employees towards the plans.

Question 3.
Explain the technique of ‘Functional Foremanship’ and the concept of ‘Mental Revolution’ as enunciated by Taylor.
Answer:
Functional Organisation
This form of organisational structure was originated by F.W. Taylor, to bring about specialization in management. According to Taylor, “The functional organistion consists of so dividing the management that each man, down from the assistant suprentendent, shall have as few functions as possible to perform. If practicable, the work of each man in the management should be confined to the performance of single leading function”.

Taylor believes that a foreman is not a specialist in all the fields. He can be made only to execute the work. Thus functional organistion is based on the concept of F.W. Taylor’s “Functional Foremanship” under which instead of foreman, the whole work in the factory is controlled and guided by eights-specialists : four concerned with planning of work at the office level and four with its execution at the factory level.

Mental Revolution
Taylor described, “The really great problem” involved the change “consists of the complete revolution in the mental attitude and habits of all those engaged in the management, as well of workmen.

Mental revolution involves a change in the attitude of the workers and management towards one another from completion to cooperation. Both should realise that they require one another. Both should aim to increase the size of surplus. This would eliminate the need for any agitation.

Management should share the part of surplus-with workers. Workers should also contribute their might, so that company makes profits. This attitude will be good for both of them and also for the company. In the long run only worker well-being will ensure prosperioty of the business.

Question 4.
Discuss the following techniques of Scientific Work Study
(a) Time Study
(b) Motion Study
(c) Fatigue Study
(d) Method Study
(e) Simplification and standardisation of work
Answer:
(a) Time Study
It determines the standard time taken to perform a well-defined job. Time measuring devices are used for each element of task. The standard time is fixed for the whole of the task by taking several readings. The methods of time study will depend upon volume and frequency of the task, the cycle time of the operation and time measurements costs.

The objectives of time study is to determine the number of workers to be employed, frame suitable incentives schemes and determine labour costs. For example on the basis of several observation it is determined that standard time taken by the worker to make one cardboard box is 20 minutes. So in one hour she/he will make 3 boxes.

Assuming that a worker has to put in 8 hours of work in a shift and deducting one hour rest and lunch it is determined that in 7 hours a worker makes 21 boxes @ 3 boxes per hour. Now this is the standard task a worker has to do. Wages can be decided accordingly.

(b) Motion study
Motion study refers to the study of movements like lifting, putting objects, sitting and changing positions etc. which are undertaken while doing typical job. Unnecessary movements are sought tp be eliminated so that it takes less time to complete the job efficiently For example Taylor and his associate Frank Gail Berth were able to reduce motions in brick layering from 18 to just 5.Taylor demonstrated that productivity increased to about 4 times by this process.

On close examination of body motions for example it is possible to find out

• Motions which are productive
• Motions which are incidental (e.g. going to stores)
• Which is unproductive.

(c) Fatigue study
A person is bound to feel tired physically and mentally if she/he does not rest while working. The rest intervals will help he to regain stamina and work again with the same capacity. This will result in increased productivity. Fatique study seeks to determine the Amount  and frequency of rest intervals in completing a task.

For examples, normally in a plant, work takes place in three shifting of 8 hours each. Even in single shift a worker has to be given some rest interval to take her/his lunch etq. If the work 8 involves heavy manual labour then small pauses have to be frequently given to the worker so that she/he can recharge energy her/his energy level for optimum contribution.

(d) Method study
The objective of method study is to find put one best way of doing the job. There are various methods of doing the job. To determine the best way there are several parameters. Right from procurement of raw materials till when the final product is delivered to the customer is part of method study. Taylor devised the concept of assembly line by using method study. Ford Motor company used this concept very 5* successfully, Even now auto companies are using it.

The objective of the whole exercise is to minimise cost of production and maximise the quality and satisfaction of the customer. For this purpqse many techniques like process chart and operations research etc. are used.

(e) Simplification and Standardisation of work Taylor was an ardent supporter of standardisation. According to . him, scientific method should be used to analyse methods of production prevalent under rule of thumb. The best practice can be kept and further refined to develop a standard, which should be followed throughout the organisation. This can be done through work-study techniques, which include time study, Motion study, Fatigue study and Method study.

Standardisation refers to process of setting standard for every business activity, it can be standardisation of process, raw material, time product, machinery, methods and working conditions. These standards are the benchmarks, which must be adhered to during production. The objectives of standardisation are

• To reduce a given line or product to fixed types, sizes and characteristics.
• To establish interchange ability of manufactured parts and products.
• To establish standards of excellence and quality in materials.
• To establish standards of performance of men and machines.

It is important to have a re-look at the-techniques of scientific
management as comprising a unified while of Taylorian prescription of efficiency. Search for efficiency requires the search for one best method, the chosen method must lead to the determination of the fair day’s work, therefore, the sum and substance of Taylorism lies not in the disjointed description of principles and techniques of scientific . Management.

Question 5.
Discuss the differences between the contributions of Taylor and Fayol.
Answer:
Fayol versus Taylor – A comparison
Both of them have contributed immensely to the knowledge of Management, which has formed a basis for further practice by managers.

Question 6.
Discuss the relevance of Taylor and Fayol’s contribution in the contemporary business environment
Answer:
Contribution of Taylor and Fayol :
Taylor thought that by scientifically analysis work it would be possible to find “One best way” to do it. He is most remembered for his time and motion studies. He would break ajob into its component parts and measure each to the second.

Taylor believed that contemporary management was amateurish and should be studied, as a discipline. He also wanted that workers should cooperate with management and thus there would be no need of trade unions. The best results would come from the partnership between a trained and qualified management and a cooperative and innovating work force. Each side needed the other.

On the other hand in the development of classical school, of management thought Fayol’s administrative theory provides an important link. While Taylor succeeded in revolutioniring the working of factory shop floor in terms of devising the best method, face day’s work.

Fayol explaired what amount to a manager work and what principles should be followed in doing this work. Fayol’s theories concerning scientific organisation of labour were widely influential in the beginning of twentieth century.

His theories deal with organisation of production in the context of a competitive enterprice that has to controlists”production costs. Fayol was the first to identify four functions of management, Planning, Organising, Directing and Controlling. For his contribution he is also known as the “Father of General Management”. He has given the 14 principles of management.

These are as follows
1. Division of work
2. Authority and Responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of Individual interest to general interest
7. Remuneration of employees
8. Centralisation and Decentralisation
9. Scalar chain
10. Order
11. Equality
12. Slubility of personnel
13. Initiative
14. Espirit-De-Corps.

Project work

Question 1.
From business magazines annual reports, newspapers or internet find out what changes ar£ taking place in companies relating to corporate governance, production practices etc. Prepare a scrapbook. Discuss these cases with your teacher and friends. Prepare a report of the same.
Answer:
Guidelines to Project work
Topic :  Annual Reports of companies
Introduction : To find out the records of the companies with the help of different magazines and newspapers.

Case Problem
Problem I
‘F’ limited was engaged in the business of food processing and selling its products under a popular brand. Lately the business was expanding due to good quality and reasonable prices. Also with more people working in the market for processed food was increasing. New players were also coming to cash in on the new trend. In order to keep its market share in the short run the company directed its existing workforce to work overtime.

But this resulted in many problems. Due to increased pressure of work the efficiency of the workers declined. Sometimes the ‘ subordinates had to work for more than one superior resulting in declining efficiency. The divisions that were previously working on one product were also made to work on two or more products. This- resulted in a lot of overlapping and Wastage.

The workers were becoming undisciplined. The spirit of teamwork, which had characterised the company, previously was beginning to wane. Workers were feeling cheated and initiative was declining. The quality of the products was beginning to decline and market share i was on the verge of decrease. ‘ Actually the company had implemented changes without creating the required infrastructure.

Question 1.
Identify the Principles of Management (out of 14 given by Henry Fayol) that were being violated by the company.
Answer:
The principles of Management that were being violated by the company are as, follows.

• Division of work
• Unity of Command
• Discipline
• Espirit De Corps
• Remuneration.

Question 2.
Explain these principles in brief.
Answer:
(a) Division of work
This is the principle of specialisation which applies to all kinds of work. The more people specialise the more efficiently they can perform their work. Specialisation increases output by making employees more efficient.

(b) Unity of Command
Every employee should receive orders and instructions from only one superior. Dual command is a perpeetual source of conflict. Dual command, as propagate by Taylor in his principle of functional foremanship, undermines authority and puts discipline in jeopordy. If a person receives orders from more than one superior, it would lead to confusion from more than one superior, it would lead to confusion and chaos.

(c) Discipline
The essence of discipline is obedience to agreements reached between parties in the organisation. Employees need to obey and respect the rules that govern the organisation. Good discipline is the result of effective leadership.

(d) Espirit De Corps
This principle states that “Union is Strength” Fayol defined Espirit de Corps as unity of effort through harmony of interest. Promoting team spirit will give the organisation a serve of unity.

(e) Remuneration
Workers should be paid fair wage for their services. The method of wage payment should provide maximum possible satisfaction to both employee and employer.

Question 3.
What steps should the company management take in relation to the above principles to restore the company to its past glory?
Answer:
The company now realised its folly. In order to rectify the situation ‘F’ limited recommended the following changes.
The company should introduce scientific management with regard to production. In order to separate planning from operational management functional foremanship should be introduced. Work study should be undertaken to optimise the use of resources to motivate the workers ‘Differential piece Rate system’ should be implemented.

Problem II (Related to case problem – I)

The management of Company ‘F’ Limited now realised its folly. In order to rectify the situation it appointed a management consultant .’M’ consultants to recommend a restructure plan to bring the company back on the rails. M’ Consultants undertook a study of the production process at the plant of the company ‘F’ limited and recommended the following changes
1. The company should introduce scientific management with regard to production.
2. Production Planning including routing, scheduling dispatching and feedback should be implemented.
3. In order to separate planning from operational management ‘Functional foremanship’ should be introduced.
4. ‘Word study’ should be undertaken to optimise the use of resources.
5. ‘Standardisation’ of all activities should be implemented to increase efficiency and accountability.
6. To motivate the workers ‘Differential Piece Rate System’
should be implemented.
7. The above changes should, be introduced apart from the steps recommended in case problem-1 (as an answer to question no 3 of that case problem). It was expected that the changes will bring about a radical transformation in the working of the company and it will regain its pristine glory.

Question 1.
Do you think that introduction of scientific management as recommended by M consultants will result in intended outcome?
Answer:
Yes, to some extent the changes can be brought.

Question 2.
What precautions Should the company undertake to implement the changes?
Answer:
The company can undertake the following changes

• Production planning
• Routing
• Scheduling
• Dispatching
• Feedback
• Optimise the use of resources.

Detailed, Step-by-Step NCERT Solutions for 11 Business Studies Chapter 9 Small Business and Entrepreneurship Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.

Small Business and Entrepreneurship NCERT Solutions for Class 11 Business Studies Chapter 9

Small Business and Entrepreneurship Questions and Answers Class 11 Business Studies Chapter 9

Question 1.
What are the different parameters used to measure the size of the business?
Answer:
Several parameters can be used to measure the size of business units. These include the number of persons employed in business, capital invested in the business, the volume of output or value of the output of the business, and power consumed for business activities, appropriate parameters may be used depending on the need and advantages or limitations of various measures.

Question 2.
What is the definition used by the Government of India for Small Scale Industries?
Answer:
The definition used by the Government of India to describe small industries is based on the investment in plant and machinery. This measure seeks to keep in view the socio-economic environment in India where capital is scarce and labour is abundant.

One more point to note is that a definition exists only for small and tiny units but not for large and medium units. Medium and large-sized enterprises are not defined. Anything that does not fall under the definition of small can be large or medium. Taking capital invested as the basis, the small business unit in India can be one of the following categories :

(1) A small-scale industrial undertaking is defined as one in which the investment in fixed assets of plant and machinery does not exceed rupees one crore. However, in case of small industries in the field of export promotion and modemalization, investment limits in plant and machinery is fixed as rupees five crores.

Question 3.
How would you differentiate between an ancillary unit and a tiny unit?
Answer:
Ancillary Unit:

1. An ancillary unit is a unit which supplies not less than 50% of its production to the parent unit.
2. Investment limit in such a unit is one crore.
3. Parent unit assists the ancillary unit by providing technical and financial help.

Tiny Unit:

1. A tiny unit is a business enterprise whose investment in plant and machinery is not more than Rs.25 lakh.
2. The investment limit is Rs.25 lakh in this type of unit.
3. No such assistance is there.

Question 4.
State the features of cottage industries.
Answer:
Cottage industries are also known as rural industries or traditional industries. They are not defined by capital investment criteria as in the case of other small scale industries. However, cottage industries are characterised by certain features as follows :

• These are organised by individuals, with private resources.
• It normally use family labour and locally available talent.
• The equipment used is simple.
• Capital investment is small.
• It produce simple products, normally in their own premises.
• It produce the goods using indigenous technology.

Long Answer Questions

Question 1.
How do small scale industries contribute to the socio economic development of India?
Answer:
Small scale industries in India enjoy a distinct position in view of their contribution to the soc io-economic development ‘of the country. The following points highlight their contribution.
(i) Small industries in India account for 35 percent of the industrial value added and 45 percent of the total exports (direct and indirect exports) from India.

(ii) Small industries are the second largest employers of human resources, after agriculture. They generate more number of employment opportunities per unit of capital invested compared to large industries. They are, therefore, considered to be more labour intensive and less capital intensive. This is a boon for a labour surplus country like India.

(iii) Small industries in our country supply an enormous variety of products which include mass consumption goods, readymade garments. hosiery\goods, stationery items, soaps and detergents, domestic, utensils, leather, plastic and rubber goods processed foods and vegetables, wood and steel furniture, paints, varnishes, safety matches, etc.

Among the sophisticated items manufactured are electric and electronic goods like televisions, calculators, electro-medical equipment, electronic teaching aids like overhead projectors, air conditioning equipment, drugs and pharmaceuticals, agricultural tools and equipment and several other engineering products. A special mention should be made of hand looms, handicrafts and other products from traditional village industries in view of their export value.

(iv) The contribution of small industries to the balanced regional development of our country is noteworthy. Small industries with produce simple products using simple technologies and depend on locally available resources both material and labour can be set up anywhere in the country.

Since they can be widely spread without any locational constraints, the benefits of industrialisation can be reaped by every region. They thus, contribute significantly to the balanced development of the country.

(v) Small industries provide ample opportunity for enterpreneurship, The latent skills and talents of people can be channelled into business ideas which can be converted into reality with little capital investment and almost nil formalities to start a small business.

(vi) Small industries also enjoy the advantage of low cost of production. Locally available resources are less expensive. Establishment and running costs of industries are on the lower side because of law overhead expenses. Infect; the low cost of production which small industries enjoy is their competitive strength.

(vi) Due to the small size of the organisations, quick and timely decisions can be taken without consulting many people as it happens in large sized organizations. New business opportunities can be captured at the right time.

(viii) Small industries arebest suited for customised production, i.e. designing the product as per the tastes/preferences/needs of individual customers, say for example tailor-made shirt or trouser. The recent trend in the market is to go in for customised production of even non-traditional products such as computers and other products. They can produce according to the needs of the customers as they use simple and flexible production techniques.

(ix) Last but not the least, small industries have inherent strength of adaptability and a personal touch and therefore maintain good personal relations with both customise and employees. The govt. doesYiot have to interfere in the functioning of a small scale unit.

Due to the small size of the organization quick and timely decision can be taken without consulting many people as in large sized organisations. New business opportunities can be captured at the right time, thus providing healthy competition to big business which is good for the economy.

Question 2.
Describe the role of small businesses in rural India.
Answer:
Small-scale enterprises provide numerous benefits in rural area. The role of small business in rural India is explained in the following points:
(i) Non – farm Employment:
Traditionally, rural households in India were exclusively engaged in agriculture. But now rural households have varied and multiple sources of income and participate in a wide range of non – agricultural activities such as wage employment and self employment in commerce, manufacturing and services, along with the traditional rural activities of forming and agricultural labour. This can be largely attributed to the setting up of agro-based rural small industries.

(ii) Employment for Artisans:
Cottage and rural industries play an important role in providing employment opportunities in the rural areas, especially for the traditional artisans and the weaker sections of society.

(iii) Prevention of Migration:
Development ofrural and village industries can also prevent migration of rural population to urban areas in search of employment.

(iv) Poverty Alleviation:
Village and small industries are significant as producers of consumer goods and absorbers of surplus labour, thereby addressing the problems of poverty and unemployment. Promotion of small scale industries and rural industrialization has been considered by the Government of India as a powerful instrument for realizing the twin objective; of accelerated industrial growth and creating additional productive employment potential in rural and backward areas ’.

(v) Socio-economic Aspects:
These industries contribute to other socio-economic aspects, such as reduction inequalities, dispersed development of other sectors of the economy.

Question 3.
Discuss the problems faced by small-scale industries.
Answer:
Problems of Small Scale Business – Small scale industries are at a distinct disadvantage as compared to large scale industries. The scale of operations, availability of finance, ability to use modern technology, procurement of raw materials are some of these areas.

This gives rise to several problems. Most of these problems can be attributed to the small size of their business, which prevents them from taking advantage, which acquire to large business organisations. However, the problems faced are not similar to all the categories of small businesses.

For instance, in the case of small ancillary units, the major problems include delayed payments, the uncertainty of getting orders from the parent units and frequent changes in production processes. The problems of traditional small-scale units include remote location with less developed infrastructural facilities, lack of managerial talent, poor quality, traditional technology and inadequate availability of finance.

The problems of exporting small-scale units include lack of adequate data on foreign markets, lack of market intelligence, exchange rate fluctuations, quality standards, and pre-shipment finance.

In general, the small businesses are faced with the following problems:

(i) Finance – One of the severe problems faced by SSIs is the non-availability of adequate finance to carry out its operations. Generally, a small business begins with a small capital base. Many of the units in the small sector lack the creditworthiness required to raise as capital from the capital markets.

As a result, they heavily depend on local financial resources and are frequently the victims of exploitation by money lenders. These units frequently suffer from a lack of adequate working capital, either due to delayed payment of dues to them or locking up of their capital in unsold stocks. Banks also do not lend money without adequate collateral security or guarantees and margin money, which many of them are not in a position to provide.

(ii) Raw Materials – Another major problem of small businesses is the procurement of raw materials, If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. Their bargaining power is relatively low due to the small number of purchases made by them.

Also, they cannot afford to take the risk of buying in bulk as they have no facilities to store the materials. Because of general scarcity of metals, chemicals and extractive raw materials in the economy, the small scale sector suffers the most. This also means a waste of production capacity for the economy and loss of further units.

(iii) Managerial Skills – Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many of the small business entrepreneurs possess sound technical knowledge but are less successful in marketing the output.

Moreover, they may not find enough time to take care of all functional activities. At the same time they are not in a position to afford professional managers.

(iv) Labours – Small business firms cannot afford to pay higher salaries to the employees, which affects employee willingness to work hard and produce more. Thus, productivity per employee is relatively low. Because of lower remuneration offered, attracting talented people is a major problem in small business organisations.

Unskilled workers join for low’ remuneration but training them is a time consuming process. Also, unlike large organisations, division of labour cannot be practised, which results in lack of specialisation and concentration.

(v) Marketing – Marketing is one of the most important activ ities as it generates revenue. Effective marketing of good’ requires a thorough understanding of the customer’s needs and requirements. In most cases, marketing is a weaker area of small organisations.

These organisations have, therefore, to depend excessively on middle men, who at times exploit them by paying low price and delayed payments. Further, direct marketing may not be feasible for small business firms as they lack the necessary infrastructure.

(vi) Quality – Many small business organizations do not adhere to desired standards of quality. Instead they concentrate on cutting the cost and keeping the prices low. They do not have adequate resources to invest in quality research and maintain the standards of the industry, non do they have the expertise to upgrade technology. In Tact maintaining quality is their weakest point, when competing in global markets.

(vii) Capacity utilisation – Due to lack of marketing skills or lack of demand, many sn sail business Finns have to operate below full capacity due to which their operating costs tend to increase. Gradually this leads to sickness and closure of the business.

(viii) Technology – Use of outdated technology is often stated as serious lacunae in the case of small industries, resulting in low productivity and uneconomical production.

(ix) Sickness – Prevalence of sickness in small industries has become a point of worry to both the policy makers and the entrepreneurs. The causes of sickness are both internal and external. Internal problems include lack of skilled and trained labour and managerial and marketing skills. Some of the external problems include delayed, payment, shortage of working capital, inadequate loans and lack of demand for their products.

(x) Global Competition – Apart from the problems stated above small businesses are not without fears, especially in the present context of liberalisation, privatization and globalisation (LPG) policies being followed by several countries across the world. Remember, India too has taken the LPG path since 1991. The areas where small businesses feel threatened with the on slaight of global competition.

(a) Competition is not only from medium and large industries but also from multinational companies which are giants in terms of their size and business volumes. Opening up of trade results in cutthroat competition for small-scale units.

(b) It is difficult to withstand the quality standards, technological skills, financial creditworthiness, managerial and marketing capabilities of large industries and multinationals.

(c) There is limited access to markets of developed countries due to the stringent requirements of quality certification like 1509000.

Question 4.
What measures has the government taken to solve the problem of finance and marketing in the small scale sector?
Answer:
The contribution of small-scale industries is remarkable. Thus, Government has provided the following institutional support to solve the problem of finance and marketing in the small scale sector:
1. National Bank for Agriculture and Rural Development (NABARD):
NABARD was setup in 1982 to promote integrated rural development. Since then, it has been adopting a multi-pronged, multi-purpose strategy for the promotion of rural business enterprises in the country.

Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans using credit and non-credit approaches. It offers counseling and consultancy services and organises training and development programmes for rural entrepreneurs.

2. The Rural Small Business Development Centre (RSBDC):
It is the first of its kind set up by the world association for small and medium enterprises and is sponsored by NABARD. It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas.

Since its inception, RSBDC has organised several programmes on rural entrepreneurship, skill upgradation workshops, mobile clinics and trainers training programmes, awareness and counselling camps in various villages of Noida, Greater Noida and Ghaziabad.

Through these programmes it covers a large number of rural unemployed youth and women in several trades, which includes food processing, soft toys making, ready-made garments, candle making, incense stick making, two-wheeler repairing and servicing, vermicomposting, and non-conventional building materials.

3. National Small Industries Corporation (NSIC):
This was set up ini955 with a view to promote, aid, and foster the growth of small business Units in the country. This focuses on the commercial aspects of these functions.

• Supply indigenous and imported machines on easy hire-purchase terms.
• Procure, supply and distribute indigenous and imported raw materials.
• Export the products of small business units and develop export worthiness.
• Mentoring and advisory services.
• Serve as technology business incubators.
• Creating awareness on technological up-gradation.
• Developing software technology parks and technology transfer centres.

4. Small Industries Development Bank of India (SIDBI):

• Set up as an apex bank to provide direct/indirect financial assistance under different schemes, to meet credit needs of small business organisations.
• To coordinate the functions of other institutions in similar activities. Thus so far, we have learnt about the various institutions operating at the central level and state level in support of the small industries.

5. The National Commission for Enterprises in the Unorganised Sector (NCEUS):
The NCEUS was constituted in September 2004, with the following objectives:

• To recommend measures considered necessary for improving the productivity of small enterprises in the informal sector.
• To generate more employment opportunities on a sustainable basis, particularly in the rural areas.
• To enhance the competitiveness of the sector in the emerging global environment.
• To develop linkages of the sector with other institutions in the areas of credit, raw materials, infrastructure, technology up-gradation, marketing and formulation of suitable arrangements for skill development.

The commission has identified the following issues for detailed consideration:

• Growth poles for the informal sector in the form of clusters/hubs, in order to get external economic aid.
• Potential for public-private partnerships in imparting the skills required by the informal sector.
• Provision of micro-finance and related services to the informal sector.
• Providing social security for the workers in the informal sector.

6. Rural and Women Entrepreneurship Development (RWED):
The Rural and Women Entrepreneurship Development programme aims at promoting a conducive business environment and at building institutional and human capacities that will encourage and support the entrepreneurial initiatives of rural people and women.

RWE provides the following services:

• Creating a business environment that encourages initiatives of rural and women entrepreneurs.
• Enhancing the human and institutional capacities required to foster entrepreneurial dynamism and enhance productivity.
• Providing training manuals for women entrepreneurs and training them.
• Rendering any other advisory services.

7. World Association for Small and Medium Enterprises (WASME):
It is the only International Non- Governmental Organisation of micro, small and medium enterprises based in India, which set up an International Committee for Rural Industrialisation. Its aim is to develop an action plan model for the sustained growth of rural enterprises. Apart from these, there are several schemes to promote the non-farm sector, mostly initiated by the Government of India.

For instance, there are schemes for entrepreneurship through subsidised loans like Integrated Rural Development Programme (IRDP), Prime Minister Rojgar Yojana (PMRY), schemes to provide skills like Training of Rural Youth for Self Employment (TRYSEM), and schemes to strengthen the gender component like Development of Women and Children in Rural Areas (DWCRA).

There are schemes to provide wage employment like Jawahar Rojgar Yojana (JRY), food for work etc., on rural works programmes to achieve the twin objectives of creation of rural infrastructure and generation of additional income for the rural poor, particular during the lean agricultural season. Last, but not least, there are schemes for specific groups of industries such as khadi, handlooms and handicrafts.

8. Scheme of Fund for Re-generation of Traditional Industries (SFURTI):
To make the traditional industries more productive and competitive and to facilitate their sustainable development, the Central Government set up this fund with Rs. 100 crores allocation to begin within the year 2005. This has to be implemented by the Ministry of Agro and Rural Industries in collaboration with State Governments.

The main objectives of the scheme are as follows:

• To develop clusters of traditional industries in various parts of the country.
• To build innovative and traditional skills, improve technologies and encourage public-private partnerships., develop market intelligence etc., to make them competitive. pro-Stable and sustainable.
• To create sustained employment opportunities in traditional industries.

9. The District Industries Centers (DICs):
The District Industries Centers Programme was launched on 1, May 1978, with a view to providing an integrated administrative framework at the district level, which would look at the problems of industrialization in the district, in a composite manner.

In other words District Industries Centers is the institution at the district level which provides all the services and support facilities to the entrepreneurs for setting up small and village industries. Identification of suitable schemes; preparation of feasibility reports, arranging for credit, machinery and equipment, provision of raw materials and other extension services are the main activities undertaken by these centers.

Broadly DICs are trying to bring change in the attitude of the rural entrepreneurs and all other connected with economic development in the rural areas.

Even within the narrow spectrum, an attempt is being made to look at some of the neglected factors such as the rural artisan, the skilled craftsman and the handloom operator and to tune up these activities with the general process of rural development being taken up through other national programmes. The DIC is thus emerging as the focal point for economic and industrial growth at the district level.

Question 5.
What are the incentives provided by the Government for industries in backward and hilly areas?
Answer:
Since independence, industrial development in India has been geographically uneven and non-equal. Some parts of the country have become highly developed while others have remained backward. Therefore, the government provide various incentives to the industries set up in rural, backward and hilly areas which are as follows :

Incentives – Special emphasis on the industrial development of backward, tribal and hilly areas has been the concern of the Government of India expressed in all the Five Year Plans and Industrial Policy statements. Some parts of the country have become highly developed while others have remainder backward.

Realising that backward areas development is a long-term process, several committees were appointed to identify the criteria for identifying backward areas and also to suggest schemes to take up the Herculean task of balanced regional development.

The implementation of the integrated rural development programme is one such attempt made by the government to develop backward areas. The rural industries project programme initiated by the Government of India was meant to develop small business units in selected rural areas. Though the backward area development programmes varied from state to state, they cumulatively represented a significant package of incentives to attract industries in backward areas.

Some of the common incentives offered are discussed as below :

Land – Every state offers developed plots for setting up of industries, file terms and conditions may vary. Some states don’t charge rent in the initial years, while some allow payment in installments. Providing financial assistance on concessional rates for the purchase of and for units located in specified backward areas.

Power – Power is supplied at a concessional rate of 50 percent, while some states exempt such units from payment in the initial years. Creating electricity facilities in backward areas.

Water-Water is supplied on a no-profit, no-loss basis or with 50 percent concession or exemption from water charges for a period of 5 years.

Sales Tax – In all union territories, industries are exempted from sales tax, while some states extend the exemption for 5 years period.

Octroi – Most states have abolished octroi to promote rural and hilly area industries.

Raw materials – Units located in backward areas get preferential treatment in the matter of allotment of scarce raw materials like cement, iron and steel etc.

Finance – Subsidy of 10-15 percent is given for building capital assets. Loans are also offered at concessional rates.
Industrial estates – Some states encourage setting up of industrial estates in backward areas.

Tax holiday – Exemption from paying taxes for 5 or 10 years is given to industries established in backward, hilly and tribal areas. Special tax concessions provided to industries in backward areas.

To sum up, it may be stated that the small business sector in India is getting the support of government through various institutions in different forms for different purposes.

Despite special attention being given to backward areas, it is observed that imbalances in development are still there. There is a need to develop infrastructural facilities in these areas,as no amount of subsidies or concessions can overcome the natural handicaps caused by a lack of such facilities.

The Future – The present era is the regime of the World Trade Organisation (WTO), in which the rules of trade are subject to frequent changes as per global expectations. As a founder member of WTO, India too has committed itself to the policy framework of WTO.

As a result, small business is also moving away from the pre-liberalization era of protection. With the Indian economy getting integrated with the global economy, it is inevitable for small businesses to gear up their capabilities to explore, penetrate and develop new markets.

They have to steadily reorient themselves to face the challenges posed by increased competition, domestically and internationally too. With their dynamism, flexibility and innovative entrepreneurial spirit, small businesses have to adapt themselves to thei fast-changing needs of the market-driven economy. The government should reorient its assistance to the small business sector by acting as a facilitator and promoter and not as a regulator.

New strategies have to be evolved to foster a partnership between large and small industries, adopt cluster approach, develop creative marketing, improve technological skills by upgradation, building export competitiveness by identifying the core competencies of the small businesses.

In fact small business sector should view globalisation as an opportunity for its active participation as suppliers of specialized components and parts. If small businesses are to maintain their market share and healthy growth, they have to create a level-playing field for themselves.

The long-term competitive position for the small businesses will depend on how well they learn to manage, adopt and improve their competitive strength. In short the mantra of success for small businesses in this modern era has to be ‘think global, act local.’