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Unit 1Business Management and Managerial Economics
- Management is getting work done through and with people. Koontz and Weihrich: designing and maintaining an environment in which people in groups efficiently accomplish selected aims.
- Effective: doing the right things, so the goal is met. Efficient: doing things right, with the least waste.
- Nature: goal-oriented, continuous, universal, a group activity, intangible, multidisciplinary, both art and science; many marks of a profession, but no licence.
- Levels: top (objectives, policy, strategy), middle (plans and coordination), first-line (day-to-day work).
Remember: Right things (effective), done right (efficient), through people.
- Fourteen principles in four groups: work and authority; direction and organisational interest; structure and order; people and team spirit.
- Unity of command: one boss for each person. Unity of direction: one plan and one head for each objective.
- Scalar chain: an unbroken line of authority. The gang plank lets equals deal directly, with their superiors' knowledge.
- Six groups of activities: technical, commercial, financial, security, accounting and managerial.
- The principles are flexible guides, and they can pull against each other (Simon's "proverbs" criticism).
Remember: Command: one boss. Direction: one plan. Gang plank: a shortcut with permission.
- Seven elements: science not rule of thumb, harmony, scientific selection and training, functional foremanship, differential piece-rate, standardisation and simplification, time and motion study.
- Functional foremanship: eight specialist foremen, four in planning and four on the shop floor. It breaks unity of command.
- Differential piece-rate: a higher rate for meeting the standard, a lower rate for falling short.
- Taylor starts from the task; Fayol from the whole organisation. Criticism: workers seen mainly as responding to pay.
Remember: Fayol manages the organisation. Taylor optimises the work.
- Technical skill: knowing the work. It weighs most at the first line.
- Human skill: working with and through people. It matters at every level, most of all in the middle.
- Conceptual skill: seeing the organisation as a whole. It weighs most at the top.
- Design skill is not one of Katz's three; Koontz and Weihrich added it later.
Remember: Lower: technical. Middle: human (a balance). Top: conceptual.
- Mintzberg watched five chief executives and found brief, varied and fragmented work (The Nature of Managerial Work, 1973).
- Interpersonal: figurehead, leader, liaison. Informational: monitor, disseminator, spokesperson.
- Decisional: entrepreneur, disturbance handler, resource allocator, negotiator.
- Authority gives contacts, contacts give information, and information is what the manager decides with.
Remember: Relate, inform, decide: 3, 3 and 4.
- Fayol: plan, organise, command, co-ordinate, control. Gulick: POSDCORB. Terry: plan, organise, actuate, control.
- Koontz and O'Donnell's five, the most widely used list: planning, organising, staffing, directing, controlling.
- Controlling corrects the gap, and its findings feed the next round of planning.
- Coordination runs through all five: the essence of management, not a separate step.
Remember: Plan, organise, staff, direct, control, then round again.
- Planning is the primary function: goal-oriented, all-pervasive, forward-looking, continuous and a matter of choice.
- Types by level, by focus (strategic, tactical, operational, contingency) and by time.
- Eight steps: need, objectives, premises, alternatives, evaluation, selection, supporting plans, implementation.
- A forecast estimates what will happen; a plan decides what to do about it.
Remember: Think first, then act; plan first, then everything else.
- Organising brings together physical, financial and human resources (Allen: identify and group the work, delegate, establish relationships).
- Planning says what; organising says how: tasks, who does them, grouping, reporting and where decisions are made.
- Four steps: identify activities, group them, assign duties and authority, set reporting relationships.
- Organising creates positions; staffing fills them. Its result is the organisation structure.
Remember: Identify, group, assign, relate.
- Koontz and O'Donnell: manning the structure through selection, appraisal and development. Today largely HRM's work.
- Steps: manpower planning, recruitment, selection, placement and orientation.
- Then training and development, compensation, appraisal, and promotion, transfer and career planning.
- Recruitment widens the pool; selection narrows it.
Remember: Plan, find, choose, place, grow, pay, rate, move.
- Elements of directing: supervision, motivation, communication, leadership.
- Autocratic, democratic and laissez-faire styles (Lewin, 1939).
- Transactional and transformational leadership (Burns, 1978).
- No single style is best: it depends on the leader, the followers and the culture.
Remember: Direct through people: oversee, encourage, inform, influence.
- Mooney and Reiley: the orderly arrangement of group effort for unity of action.
- The essence of management (Koontz and O'Donnell); one of Fayol's five elements; the CO in POSDCORB.
- Kinds: internal and external, vertical and horizontal.
- Follett: direct contact, early start, reciprocal relating, continuity. Cooperation is willingness; coordination is arrangement.
Remember: Many efforts, one direction.
- Process: set standards, measure, compare, take corrective action, then back to the plan.
- Planning sets the standard; control checks against it and feeds the next plan.
- Control is continuous, at every level, action-oriented, and looks ahead as well as back.
- Techniques: observation, reports and MIS, budgets, ratios and ROI, break-even, benchmarking.
Remember: Set, measure, compare, correct.
- Late 19th to early 20th century. Key names: F. W. Taylor and Henri Fayol. Focus: efficiency, structure and productivity.
- Three streams: scientific management (Taylor), administrative management (Fayol) and bureaucracy (Weber).
- Taylor: time and motion studies, standard methods, differential piece-rate, functional foremanship.
- Fayol: five functions of management; principles such as division of work, unity of command and scalar chain.
- Weakness: workers treated as economic beings; principles drawn from experience, not tested.
Remember: Taylor from the shop floor up; Fayol from the top down.
- Max Weber (1864–1920): bureaucracy as the most rational way to organise large-scale work, an ideal type.
- Three types of authority: traditional, charismatic and rational-legal; bureaucracy rests on rational-legal.
- Features: hierarchy, division of labour, rules, impersonality, merit, career, records.
- Strengths: predictability, fairness, accountability. Weaknesses: rigidity, red tape, goal displacement.
Remember: The office, not the person; the rule, not the mood.
- 1920s to 1930s. Key name: Elton Mayo. Built on the Hawthorne studies.
- Focus: human relations, motivation, communication, teamwork and morale.
- The worker is a social being; informal groups and attention shape output.
- Participative leadership and attention to relationships matter.
- Limits: satisfaction links only moderately to performance; structure and conflict neglected.
Remember: From tasks and structure to people.
- Western Electric, Hawthorne Works, 1924–1932; Mayo, Roethlisberger and Dickson.
- Illumination: output rose either way. Relay assembly: attention and morale mattered.
- Interviews: being heard mattered. Bank wiring: the group sets its own norm.
- Hawthorne effect: behaviour changes when people know they are observed.
- Critics: tiny groups, pay and staff changes in the relay room, smaller effects on reanalysis.
Remember: Light, relay, listen, wire: people, not lamps.
- McGregor, The Human Side of Enterprise (1960).
- Theory X: people dislike work, avoid responsibility, need control.
- Theory Y: work is natural; people direct themselves and seek responsibility. Not the absence of control.
- Assumptions tend to prove themselves through the style they produce.
- Theory Z: Ouchi (1981), long-term employment and collective decisions; Maslow used the name in 1969.
Remember: X controls, Y trusts, Z commits for the long term.
- Mid-20th century to the present. Key names: Chester Barnard and Ludwig von Bertalanffy.
- An open system of interdependent subsystems interacting with its environment; a change in one affects the rest.
- Five parts: inputs, transformation, outputs, feedback, environment.
- Key words: interdependence, integration, coordination, feedback and synergy.
- Limit: abstract; it says everything connects, not what to do.
Remember: The whole, not isolated parts.
- 1960s to the present. Key names: Fred Fiedler, Paul Lawrence and Jay Lorsch.
- There is no single best way to manage: if this, then that.
- Effectiveness depends on the fit between structure, environment, technology and people.
- Stable settings suit rules and central control; changing ones suit flexible roles.
- Limit: "it depends" can be vague about how to weigh the factors.
Remember: It depends: structure, environment, technology, people.
- Late 20th century to the present. Key names: W. Edwards Deming, Peter Drucker and Ikujiro Nonaka.
- TQM: continuous improvement and customer satisfaction through teamwork; the Plan–Do–Check–Act cycle.
- Knowledge management: create, share and use knowledge, tacit and explicit, as a competitive resource.
- TQM is not inspection; knowledge management is not an IT system.
Remember: Plan, do, check, act. Share what you know.
- Classical: efficiency and structure. Neoclassical: people. Systems: the interconnected organisation.
- Contingency: situation-specific management. Contemporary: continuous improvement and knowledge.
- Each is a response to the limits of the one before.
- The schools overlap and coexist; they did not replace one another.
Remember: Tasks, people, the whole, the situation, improvement.
- Communication is the exchange of facts, ideas, opinions or emotions by two or more persons (Newman and Summer); Louis Allen calls it a bridge of meaning.
- Forms: verbal, non-verbal, written and digital.
- It is two-way, continuous, pervasive and goal-oriented, and needs a sender and a receiver.
- Functions: inform, instruct, persuade and motivate, integrate, counsel, hear grievances, train.
Remember: Sent is not the same as understood.
- The sender forms an idea and encodes it into words, gestures or visuals.
- The message travels through a channel: spoken, written or electronic.
- The receiver decodes it, and feedback returns to confirm understanding.
- Noise (physical, psychological or semantic) can interfere at any step. The goal is to minimise distortion and maximise understanding.
- The medium is the broad means; the channel is the specific route, such as a phone call or an email.
Remember: Encode, send, decode, reply.
- Shannon and Weaver (1949): source to destination, with noise; one-way.
- Schramm (1954): two-way, through a shared field of experience.
- Berlo (1960): SMCR, each element shaped by skills, attitudes, knowledge, social system and culture.
- Each model simplifies: Shannon and Weaver measure signals, not meaning; SMCR shows no feedback.
Remember: Noise, then shared experience, then the human factors.
- Formal: official channels and the hierarchy. Strength: consistency, clarity and accountability. Examples: reports, memos, meetings.
- Informal: natural, unstructured channels. Strength: relationship building and a quick exchange of ideas.
- Formal flows downward, upward, horizontally and externally.
- Informal travels by the grapevine, casual talk, social media, personal calls and non-verbal signals; the channel, not the medium, makes it informal.
- Formal or informal depends on the channel, not on whether words are spoken or written.
Remember: Formal: consistent and accountable. Informal: quick and personal.
- Downward: orders, policies, instructions; risk of delay and filtering.
- Upward: reports, suggestions, grievances; risk of fear and distortion.
- Horizontal: peers at the same level coordinating.
- Diagonal: across levels and departments; fast, but bypasses the chain of command.
Remember: Down commands, up informs, across coordinates, diagonal hurries.
- Formal networks: chain, wheel, circle, all-channel.
- Wheel is fastest for simple tasks; all-channel satisfies most and suits complex problems.
- Grapevine patterns (Keith Davis): single strand, gossip, probability, cluster. Cluster is the most common.
- The grapevine is a channel, not the same as rumour; it works best alongside open formal channels.
Remember: Chain, wheel, circle, all; strand, gossip, chance, cluster.
- Oral: quick, flexible, personal, immediate feedback; no record.
- Written: permanent record, precise, fixes responsibility; slow and impersonal.
- Both are verbal; non-verbal cues carry the feeling behind them.
- Discuss it, then write it down.
Remember: Say it for speed; write it to keep it.
- Physical: noise, distance, poor infrastructure. Psychological: stress, fear, bias.
- Language: vocabulary, jargon, dialect. Cultural: beliefs, traditions, practices.
- Perceptual: different interpretations, experience, attitudes.
- Organisational: rigid hierarchy, poor coordination. Attitudinal: negative behaviour, dominance, lack of respect.
- Reduce barriers: clarify, choose the medium, use simple words, listen, ask for feedback.
Remember: Physical, psychological, language, cultural, perceptual, organisational, attitudinal.
- A decision is the choice of one course of action from two or more alternatives, to solve a problem or reach a goal.
- Drucker: whatever a manager does, he does through making decisions.
- It rests on logic, analysis and intuition; each has a weakness.
- It is selective, purposive and made at every level, and not acting can itself be a decision.
Remember: Logic, analysis, intuition.
- Programmability (Herbert Simon): programmed (routine, by rules) or non-programmed (novel, needing judgement).
- Level: strategic (long-term), tactical (turns strategy into action) or operational (day-to-day).
- Purpose: routine, major (high risk, high return) or minor (low risk).
- Decision maker: individual, group, personal or organisational. One decision carries several labels at once.
Remember: Programmed or not. Strategic, tactical or operational.
- Define the problem and its urgency; gather information; identify and weight the criteria; develop alternatives.
- Evaluate alternatives on feasibility, cost, risk and outcome; choose the best balance of benefit and risk.
- Implement by assigning responsibility and resources; monitor results and correct where needed.
- A weighted score multiplies each criterion's score by its weight and adds them up.
- Herbert Simon: bounded rationality leads real managers to satisfice, taking the first option that is good enough.
Remember: Identify, inform, alternatives, evaluate, select, implement, review.
- Decision tree: risk analysis. Delphi method: forecasting. Decision matrix: selection. Cost-benefit analysis: investment.
- PEST analysis: market entry. SWOT analysis: strategy. Conjoint analysis: product and pricing.
- Pareto analysis: quality improvement. Multi-voting: project selection. Linear programming: production planning.
- Payback analysis: capital decisions. Feasibility study: new projects.
- Expected value weights each payoff by its probability; payback ignores what comes after the cost is recovered.
Remember: Match the tool to the decision.
- Structure: how job tasks are formally divided, grouped and coordinated (Robbins and Judge).
- Functional: efficiency, but silos. Divisional: flexibility, but duplication. Matrix: collaboration, but dual authority.
- Hierarchical: clear authority, but slow adaptation. Virtual: flexibility, but technology dependence. Lean: autonomy, but overload. Hybrid: adaptability, but complexity.
- Flexible forms: network, flat, holacracy, team-based and boundaryless.
- Structure follows strategy (Chandler, 1962): diversified firms tend to move to divisional structures.
Remember: Every structure trades a strength for a challenge.
- Line (scalar, military): one chain of command; simple and quick, but short of specialists.
- Line-and-staff: staff advise, line commands; risk of line-staff conflict.
- Functional (Taylor): eight specialist foremen; breaks unity of command. Committee and project forms.
- Mechanistic suits stable conditions, organic suits change (Burns and Stalker, 1961).
- The informal organisation grows from friendships and speaks through the grapevine.
Remember: Line commands, staff advise, Taylor's foremen each command one part.
- Authority: the right to decide. Responsibility: the duty to perform. Accountability: answering for results.
- Sources: formal (position), acceptance (Barnard, 1938; zone of indifference), competence.
- Line authority commands, staff authority advises, functional authority directs one activity in other departments.
- Parity: authority should match responsibility (Fayol; Urwick's correspondence). Ultimate responsibility cannot be delegated.
- Authority comes with a post; power is the wider ability to influence.
Remember: Authority down, accountability up, and the two should match.
- Span of control: the number of subordinates one manager supervises.
- Wide span: flat, faster decisions, lower cost, more autonomy; but overload and limited supervision.
- Narrow span: tall, close supervision, better coordination; but slower decisions, higher cost, bureaucracy.
- Charts show who reports to whom: hierarchical, flat, matrix, divisional, team-based.
- Organising process: purpose and goals, inputs, activities and tasks, outputs, monitoring and feedback.
Remember: Wide and flat, or narrow and tall.
- Graicunas (1933): R = n[2^(n−1) + n − 1].
- Three kinds: direct single (n), direct group n(2^(n−1) − 1), cross n(n − 1).
- 4 → 44, 5 → 100, 6 → 222, 7 → 490, 8 → 1,080 relationships.
- Urwick: five, or at most six, where work interlocks.
- Span depends on competence, the work, plans, change, technology, dispersion and decentralisation; delayering widens spans.
Remember: Add one person, and the relationships more than double.
- Delegation passes responsibility and authority for a task from superior to subordinate.
- Responsibility → authority → action → accountability; the superior keeps ultimate accountability.
- Sound delegation: training, guidance, trust, feedback, clear limits and check-ins.
- Decentralisation spreads decisions across the organisation: functional, geographic, product- or service-based, or market-based.
- Delegation: narrow, a task, an individual. Decentralisation: broad, the organisation, a unit.
Remember: Delegation is about the person; decentralisation is about the system.
- Allen: centralisation reserves authority at central points; decentralisation delegates all but that to the lowest levels.
- A matter of degree; Dale's four tests measure it.
- Centralisation: uniformity and control. Decentralisation: speed, initiative and management development.
- Factors: size, cost of decisions, need for uniformity, philosophy, managers available, controls, change.
- Decentralisation is about where decisions are made, not how many branches there are.
Remember: Keep the few at the centre; push the rest down.
- Business economics applies economic principles and methods to real business situations; it is the same subject as managerial economics.
- It informs four kinds of decision: production, pricing, investment and risk management.
- Opportunity cost, the value of the best alternative given up, is a real cost even though no account shows it.
- Accounting records the past; business economics looks ahead at choices.
Remember: Production, pricing, investment, risk.
- Integrates economic theory with business practice for decision-making and forward planning (Spencer and Siegelman, 1959); Joel Dean's 1951 book was the first textbook.
- Nature: mainly micro, normative, pragmatic, forward-looking, conceptual and quantitative; it uses macro to read the environment.
- Scope: operational (demand, cost, pricing, profit, capital) and environmental (the economy, policy, finance, trade).
- Objectives beyond profit: sales revenue (Baumol), growth (Marris), satisficing (Simon).
Remember: Theory meets practice, for decisions and forward planning.
- Adam Smith (1776): wealth. Alfred Marshall (1890): welfare, the ordinary business of life.
- Lionel Robbins (1932): scarcity and choice, ends and scarce means with alternative uses.
- J. M. Keynes (1936): income and employment. Paul Samuelson (1948): resources, choice and growth.
- Robbins objected that “material” welfare leaves out services; modern textbooks combine the definitions.
Remember: Smith wealth, Marshall welfare, Robbins scarcity, Keynes employment, Samuelson growth.
- Effective demand = desire + ability to pay + willingness to pay, over a stated period.
- Demand is the whole price–quantity relationship; quantity demanded is the amount at one price.
- Own price: a movement along the curve (expansion or contraction). Any other determinant: a shift (increase or decrease).
- Determinants: price, income, tastes, related goods, expected prices, population and government policy. Cost of production is not one.
Remember: Desire, ability, willingness.
- Dx = f(Px, Pr, Y, T, E, N, A): own price, related prices, income, tastes, expectations, population, advertising.
- A demand schedule is a table of prices and quantities; the demand curve graphs it.
- Linear (Q = 50 − 2.5P): constant slope. Non-linear Q = aP⁻ᵇ: constant elasticity b.
- Slope is not elasticity: on Q = 50 − 2.5P elasticity is 9 at ₹18, 1 at the midpoint (₹10) and 0.25 at ₹4.
Remember: Price plus six other forces; the slope is not the elasticity.
- Other things equal, when price falls quantity demanded rises, and when price rises it falls.
- Income effect: a lower price raises real purchasing power. Substitution effect: the good becomes cheaper relative to alternatives.
- Diminishing marginal utility: each extra unit is worth less, so buyers pay less for more.
- Income and substitution effects together make the price effect. The law gives direction; elasticity gives size.
Remember: Price down, quantity up, other things equal.
- Veblen: a higher price raises status (The Theory of the Leisure Class, 1899). Giffen: a staple of the poor, bought more as its price rises.
- A Giffen good is strongly inferior, takes a large share of the budget and has no close substitute.
- Snob: demand rises with exclusivity. Bandwagon: others buy, so the consumer follows. Leibenstein named both in 1950.
- Speculation and necessities are often listed, but are not true exceptions: expectations shift the curve, and necessities have a steep one.
Remember: Veblen: status. Giffen: staple. Snob: exclusive. Bandwagon: follow.
- Individual and market (all buyers added at each price); firm and industry.
- Joint (used together), composite (several uses), derived (depends on another good), direct (final consumption), independent (unaffected).
- Short-run and long-run: long-run demand is usually more elastic. Durables can be postponed and are partly replacements.
- A firm with derived demand watches its customers' markets, not only its own.
Remember: Car and petrol joint, electricity composite, steel for cars derived, salt independent.
- Short-run uses: production, pricing, sales targets, working finance. Long-run uses: capacity, investment, manpower.
- Survey methods: buyers' intentions, sales-force opinion, expert opinion and Delphi, market experiments.
- Statistical methods: trend projection (Y = a + bT), regression, barometric (leading indicators).
- Surveys suit new products; statistics suit established ones. A forecast is not a target; forecast a range.
Remember: Ask people, or read the numbers; for something new, ask.
- PED = % change in quantity demanded ÷ % change in price. Above 1 elastic, 1 unitary, below 1 inelastic.
- YED = % change in quantity demanded ÷ % change in income. Above 1 luxury, 0 to 1 necessity, below 0 inferior.
- XED = % change in quantity of A ÷ % change in price of B. Positive: substitutes. Negative: complements.
Remember: PED: own price. YED: income. XED: another good's price.
- Proportionate: e = (ΔQ/Q) ÷ (ΔP/P).
- Point: lower segment ÷ upper segment; 1 at the midpoint, ∞ and 0 at the ends.
- Arc: the midpoint formula, the same both ways.
- Total outlay (Marshall): spending up when price falls means elastic.
Remember: Watch the spending: price down, spending up means elastic.
- Perfectly elastic: PED infinite, horizontal curve.
- Elastic: above 1, flatter curve. Unitary: equal to 1.
- Inelastic: below 1, steeper curve. Perfectly inelastic: 0, vertical curve.
Remember: Flat is elastic. Steep is inelastic.
- Substitutes: more close substitutes mean more elastic demand. One brand is more elastic than the whole category.
- Nature of the good: necessities are inelastic, luxuries elastic.
- Share of income: expensive items are more elastic. Time: demand is more elastic over a longer period.
- Durability: durable goods are more elastic than non-durable goods.
Remember: Substitutes, necessity, share of income, time, durability.
- Pricing: elastic demand, a price cut raises revenue; inelastic demand, a price rise raises revenue.
- Taxation: taxing inelastic goods raises more revenue.
- Cross elasticity guides bundling of complements and analysis of competition from substitutes.
- YED supports market segmentation and shows which products grow with incomes.
Remember: Elastic: cut price to raise revenue. Inelastic: raise it.
- The cardinal approach measures utility in utils (or in money) and assumes the consumer seeks the most total utility from a given income.
- Assumptions: rational consumer, cardinal measurement, divisible goods, diminishing marginal utility, constant marginal utility of money, independent utilities.
- Utility is want-satisfying power, not usefulness: a cigarette has utility for a smoker.
- The ordinal approach (Hicks and Allen, 1934) drops measurement and only ranks bundles.
Remember: Cardinal counts satisfaction; ordinal only ranks it.
- Total utility (TU): the sum of utility from all units consumed. Marginal utility (MU): the change in TU from one more unit.
- MUₙ = TUₙ − TUₙ₋₁; TU is the running sum of MU.
- MU positive: TU rises. MU zero: TU is at its maximum. MU negative: TU falls.
- Paradox of value: price follows marginal, not total, utility (water and diamonds).
Remember: TU is satisfaction in total. MU is satisfaction at the margin.
- Marshall: the additional benefit from a thing diminishes with every increase in the stock already held.
- It holds if units are identical and of sensible size, consumption is continuous, and tastes and income do not change.
- TU rises while MU is positive, peaks when MU = 0 (28 in the table), and falls when MU turns negative.
- Apparent exceptions (collections, addiction, money) mostly break an assumption. The law underlies the downward-sloping demand curve.
Remember: MU above 0: TU rises. MU = 0: TU peaks. MU below 0: TU falls.
- MU₁ ÷ P₁ = MU₂ ÷ P₂ = MU₃ ÷ P₃ = MU of a rupee, with the whole budget spent.
- Spend each next rupee where MU per rupee is highest; buying more lowers MU until the ratios are equal.
- Example: ₹100 buys 4 chai and 3 samosas, 2 utils per rupee each, 350 utils in all.
- Limits: indivisible goods, habit and impulse, unmeasurable utility. Managers use it as the equi-marginal principle.
Remember: Marginal utility per rupee, equal across goods.
- Consumer surplus = total utility in money − total expenditure (Marshall).
- One unit: ₹1,500 − ₹1,200 = ₹300; at a price of ₹1,300 it falls to ₹200.
- Several units: mangoes worth ₹50, ₹40, ₹30 and ₹20 at ₹20 each give ₹140 − ₹80 = ₹60. On a graph it is the area below demand and above price.
- Limits: unmeasurable utility, a changing MU of money, necessities. Sellers try to capture it; governments use it to weigh public projects.
Remember: Willingness to pay minus price paid.
- The ordinal approach ranks bundles; it never measures satisfaction.
- Hicks and Allen set it out in 1934. Its tools are the indifference curve and the budget line.
- Assumptions: a rational consumer, ordinal utility, complete, transitive and consistent preferences, non-satiation, diminishing MRS and divisible goods.
- Revealed preference (Samuelson, 1938) reads preferences from what consumers actually buy.
Remember: Cardinal asks how much. Ordinal asks which is preferred.
- An indifference curve joins bundles of two goods that give equal satisfaction; a set of them is an indifference map.
- Downward sloping, convex to the origin (diminishing MRS), never intersecting, and higher is better.
- Curves cannot cross: by transitivity, two levels of satisfaction would be equal.
- Perfect substitutes: a straight line. Perfect complements: an L-shape.
Remember: Downward, convex, never crossing, higher is better.
- MRSxy: the amount of Y a consumer gives up for one more unit of X, satisfaction held constant.
- MRSxy = −ΔY ÷ ΔX = MUx ÷ MUy.
- In the schedule MRS falls 4, 3, 2, 1: diminishing MRS.
- MRS is the slope of the indifference curve; as it diminishes, the curve becomes convex.
Remember: A diminishing MRS gives the convex curve.
- Px × X + Py × Y = M: every bundle affordable at a given income and prices.
- Conditions: income fixed, prices constant, entire income spent, two goods.
- Slope −Px ÷ Py: the opportunity cost of one good in units of the other. The ends are M ÷ Py and M ÷ Px.
- A change in income shifts the line in parallel; a change in one price pivots it.
- Bundles on or inside the line are affordable; those outside are not.
Remember: Slope: −Px/Py.
- Equilibrium: the highest affordable indifference curve, where it touches the budget line.
- Conditions: MRS = Px ÷ Py, and the curve convex at that point.
- Example: ₹120, samosas at ₹20 and chai at ₹10 give C (3, 6) or D (4, 4), where MRS = 2.
- Cardinal: MU per rupee equalised. Ordinal: MRS = price ratio. Since MRS = MUx ÷ MUy, they are the same condition.
Remember: Cardinal asks how much. Ordinal asks which is preferred.
- A market: buyers and sellers of a commodity in contact, not a place (Cournot, quoted by Marshall).
- It needs buyers and sellers, a commodity, contact, knowledge of conditions, and tends to one price.
- Structure depends on the number and size of sellers and buyers, the product, entry and exit, and economies of scale.
- Buyer side: monopsony, duopsony, oligopsony; bilateral monopoly settles price by bargaining.
Remember: Contact, not a place; count the sellers, and the buyers.
- TR = P × Q; AR = TR ÷ Q = P; MR = ΔTR ÷ ΔQ. The AR curve is the demand curve.
- Perfect competition: AR = MR = P. Otherwise MR is below AR; for a straight-line AR, MR is twice as steep.
- TR is at its maximum where MR = 0; MR can be negative.
- MR = AR(1 − 1/e): positive if elastic, zero at e = 1, negative if inelastic.
Remember: Average is the price; marginal is less, unless the price never moves.
- Perfect competition: very many sellers, homogeneous product, free entry, price taker.
- Monopolistic competition: many sellers, differentiated product, easy entry, limited price control.
- Oligopoly: few sellers, difficult entry, considerable price control.
- Monopoly: one seller, no close substitute, blocked entry, price maker.
- Normal profit keeps a firm in the industry; supernormal profit is anything above it, and free entry competes it away.
Remember: Sellers, product, entry.
- Conditions: many buyers and sellers, homogeneous product, free entry and exit, perfect knowledge and mobility, no transport costs.
- Pure competition (Chamberlin): the first three conditions only.
- Marshall's periods: market (demand sets price), short run (demand and supply), long run (mainly cost).
- Short run: shut down if price falls below average variable cost.
- Long run: P = AR = MR = MC = minimum AC; normal profit.
Remember: Price takers, free entry, profit competed away.
- Monopoly: one seller, no close substitutes, barriers to entry (patents, key inputs, natural monopoly); the firm is the industry.
- Equilibrium MR = MC; price from the demand curve; always on the elastic part.
- Monopolistic competition (Chamberlin, 1933): differentiation, free entry, selling costs, a product group.
- Long run: demand tangent to AC, normal profit, excess capacity.
Remember: Monopoly keeps its profit; brands compete theirs away.
- Few sellers, interdependence, entry barriers, advertising; pure or differentiated; a duopoly has two sellers.
- Cournot: output, two-thirds of competitive output; Bertrand: price, P = MC; Edgeworth: oscillation; Stackelberg: leader and follower.
- Kinked demand (Sweezy; Hall and Hitch, 1939): rigid prices.
- Collusion: cartels with quotas, and price leadership by a low-cost, dominant or barometric firm.
Remember: Few sellers, each watching the others.
- Every profit-maximising firm sets output where MC = MR, with MC cutting MR from below.
- Perfect competition: P = MR = MC, price taker. Monopolistic competition: P > MR, partial control and heavy advertising.
- Oligopoly: interdependent firms; the kinked demand curve and its MR gap explain price rigidity.
- Monopoly: P > MR, the most control over price, supernormal profit can persist.
Remember: MC = MR everywhere; the price differs.
- Price discrimination: different prices for the same product when the difference is not due to cost (Joan Robinson).
- It needs monopoly power, separable markets with resale prevented, and different elasticity across markets.
- Degrees (Pigou, 1920): first (each buyer's willingness to pay), second (by quantity), third (market segments).
- Third degree: MR equal in every market and to MC; higher price where demand is less elastic.
- Dumping: lower price abroad than at home, or below cost. Reverse dumping: higher price abroad.
Remember: Monopoly power, separable markets, different elasticity.
- National income: the money value of all final goods and services produced by a country's residents in a year, at factor cost (NNP at factor cost).
- Only final goods count, to avoid double counting; value added at each stage sums to the final value.
- Three methods: product (value added), income (W + R + I + P) and expenditure (C + I + G + X − M); in principle all agree.
- Excluded: transfer payments, second-hand sales and purely financial transactions.
Remember: Output = income = expenditure.
- GDP = C + I + G + (X − M). GNP = GDP + NFIA. NNP = GNP − depreciation.
- National income = NNP at market price − indirect taxes + subsidies.
- Personal income = NI − undistributed profits − corporate taxes + transfers. Disposable income = PI − personal taxes.
- Per capita income = NI ÷ population.
- Three switches: domestic to national (NFIA), gross to net (depreciation), market price to factor cost (net indirect taxes).
Remember: GDP, GNP, NNP, national income, personal income, disposable income.
- Inflation: a persistent rise in the general price level, which lowers purchasing power.
- Causes: demand-pull (AD shifts right), cost-push (AS shifts left), built-in (wage-price spiral).
- Creeping below about 3%; walking roughly 3 to 10%; running roughly 10 to 20%; hyperinflation above 50% a month (Cagan).
- Disinflation: the rate slows. Deflation: the price level falls. Stagflation: high inflation with high unemployment and stagnant growth.
Remember: Demand-pull, cost-push, built-in.
- CPI = current basket price ÷ base price × 100: consumer prices and the cost of living, including services.
- WPI = current wholesale price ÷ base price × 100: bulk and producer prices, no services.
- GDP deflator = nominal GDP ÷ real GDP × 100: every good and service, a changing basket.
- Inflation rate = change in the index ÷ last period's index × 100.
Remember: CPI: consumers. WPI: wholesale. Deflator: the whole economy.
- Moderate inflation can lift spending, investment, production and employment.
- High inflation cuts purchasing power and savings, deepens inequality and raises uncertainty; borrowers gain, lenders and fixed incomes lose.
- Real interest rate ≈ nominal rate − inflation.
- Tools: monetary policy (RBI: repo rate, CRR, SLR, open market operations), fiscal policy, price control measures, supply-side measures.
Remember: Monetary, fiscal, price control, supply-side.
- Ethics: standards and codes that guide right behaviour. Morals: personal beliefs about right and wrong. Values: deeply held principles about what is important.
- Business ethics applies moral principles to business decisions, balancing profit with social welfare.
- It builds trust and reputation, promotes fairness and accountability, and supports long-term sustainability.
- Law is the minimum; what is legal is not always ethical.
Remember: Ethics are codes, morals are beliefs, values are what matters.
- Impartiality, legal compliance, accountability, and trust and honesty.
- Fair practices (ethical pricing and competition, anti-corruption) and due diligence (assess risks and consequences).
- Social obligation (benefit society) and stakeholder interest (employees, customers, investors, community).
- A code of conduct is one firm's written rules applying the principles; the principles can conflict.
Remember: Eight principles, from impartiality to stakeholder interest.
- Ethical issue: a business action that violates moral principles, such as data falsification, insider trading or labour exploitation.
- Ethical dilemma: a choice between conflicting moral values or obligations, such as layoffs against avoiding bankruptcy.
- Three checks: who is affected, which values conflict, and what is legal is not always ethical.
- A temptation (right versus wrong) is an issue, not a dilemma (right versus right).
Remember: An issue breaks a principle; a dilemma pits two values.
- Utilitarian: the greatest good for the greatest number. Rights: does it protect individual rights?
- Justice: is treatment fair? Common good: does it serve community welfare? Virtue ethics: what would an honest, courageous, compassionate person do?
- Teleological ethics judges by consequences; deontological by duty; virtue ethics by character.
- Meta-ethics asks what ethical terms mean; applied ethics tackles real cases.
Remember: Person, act, results: virtue, duty, consequences.
- CSR integrates social, environmental and economic responsibility into business operations, aiming at shared value.
- Carroll's pyramid: economic, legal, ethical, philanthropic. CSR is more than charity.
- India: guidelines 2009, voluntary guidelines 2011, company law 2013, CSR spending mandatory from 1 April 2014, one of the first countries to require it by law.
- Applies to a company with net worth of ₹500 crore or more, turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more (any one).
- Spend at least 2% of the average net profit of the preceding three years.
Remember: ₹500 crore net worth, ₹1,000 crore turnover or ₹5 crore profit. Spend 2%.
- Corporate governance is the system by which companies are directed and controlled (Cadbury Report, 1992).
- Shareholders elect the board; the board appoints and oversees managers; reports flow back up.
- Agency theory: managers may act against shareholders, so monitor and align through audits, independent directors and incentives.
- Stewardship theory: managers are trustworthy stewards, so empower them.
- OECD Principles: shareholder rights, equitable treatment, transparency and disclosure, the role of stakeholders, and the board's responsibilities.
Remember: Agency: watch. Stewardship: trust.
- A VBO is an organisation in which ethical values shape culture, leadership and strategy.
- Societal contribution ranks alongside profit, not after it.
- The vision statement, the long-term aspirational direction, is at the top of its hierarchy.
- Trust is a core success factor, built through consistent ethical conduct and lost through visible breaches.
Remember: Values set the vision; conduct earns the trust.
Unit 2Organisational Behaviour and Human Resource Management
- OB studies how individuals, groups and structure affect behaviour at work, to understand, predict and improve it.
- It draws on psychology, social psychology, sociology, anthropology and political science.
- Classical school: efficiency and structure (Taylor, Fayol, Weber).
- Behavioural school: people and motivation (Mayo, Maslow, McGregor). Modern school: systems and situations.
Remember: Efficiency, then people, then systems and situations.
- Four elements: people, structure, technology and environment; a change in one reaches the others.
- Luthans's aims: understanding, prediction and control of behaviour.
- OB is multidisciplinary, humanistic, performance-oriented, applications-oriented and uses scientific method.
- Psychology: the individual. Social psychology: influence. Sociology: groups. Anthropology: culture. Political science: power.
Remember: People, structure, technology, environment: change one and the rest move.
- Autocratic: power, obedience, dependence on the boss, subsistence, minimum performance.
- Custodial: economic resources, security and benefits, dependence on the organisation, passive cooperation.
- Supportive: leadership, participation, status and recognition. Collegial: partnership, self-discipline, self-actualisation.
- System: trust and community, psychological ownership, self-motivation, passion and commitment.
- The models are not stages; most firms mix them, and the best one depends on the work.
Remember: Power, money, leadership, partnership, trust.
- Taylor (scientific management): find the most efficient way to do a job; four principles; the differential piece-rate.
- Fayol (administrative management): five functions and fourteen principles, including unity of command.
- Weber (bureaucracy): hierarchy, rules, division of labour, impersonality, appointment by competence; aim: efficiency without favouritism.
- Weakness: workers treated as machine parts; feelings, informal groups and the environment ignored.
Remember: Taylor the task, Fayol the manager, Weber the rules.
- Hawthorne studies (1924–32, interpreted by Elton Mayo): illumination, relay assembly, interviewing, bank wiring.
- Feeling valued raised productivity; the Hawthorne effect is behaviour changed by attention.
- Maslow: physiological, safety, social, esteem and self-actualisation needs.
- McGregor: Theory X (control) against Theory Y (participation), as assumptions that tend to fulfil themselves.
Remember: Control or participation: X or Y.
- Systems theory: inputs, transformation and outputs, with feedback, inside an external environment.
- Key ideas: interdependence, interaction, environment and feedback; open, not closed, systems.
- Contingency theory: no single best way; fit practice to environment, technology, structure and people.
- Mechanistic structures suit stable markets; organic structures suit changing ones.
Remember: It depends on the situation.
- Every organisation has a social system (people), a technical system (tools, methods) and an environment.
- Effectiveness needs a balance among them: joint optimisation.
- Roots: Trist and the Tavistock Institute's studies of coal mining.
- Modern theory has three approaches: systems, socio-technical and contingency.
Remember: Design the people and the tools together.
- Personality: a unique, relatively consistent pattern of thoughts, feelings and behaviour, shaped by genes, environment, experience and learning.
- The Big Five (OCEAN) score traits on scales; conscientiousness links most consistently with job performance.
- MBTI: 16 types from four two-way dimensions (E–I, S–N, T–F, J–P); popular, but weak at predicting performance.
- Theories: psychoanalytic, behaviourist, humanistic, trait, cognitive, biological.
Remember: Personality is who you are, fairly steadily.
- Personality: from Latin persona, the actor's mask; Allport defines it as the dynamic organisation of psychophysical systems that determine characteristic behaviour and thought.
- Determinants: heredity (biological), culture, family, social groups and the situation; many texts use three: heredity, environment, situation.
- Heredity sets a range, not a result; shares of heredity and learning cannot be given exactly.
- A manager cannot change heredity but can change the situation.
Remember: Born with it, taught by it, brought out by the moment.
- Dark Triad (Paulhus and Williams): narcissism, Machiavellianism, psychopathy; these are socially undesirable traits.
- Narcissism: inflated self-importance; Machiavellianism: manipulation, ends justify means; psychopathy: little concern or remorse.
- Internal locus of control suits initiative-heavy jobs; external suits structured, routine ones.
- High risk-takers decide faster on less information; match risk-taking to the job.
Remember: Self, schemer, cold: the dark three.
- Perception: selecting, organising and interpreting sensory information; it is subjective.
- Shaped by the perceiver, the target and the situation.
- Attribution (Kelley): high distinctiveness or consensus points outside the person; high consistency points to the person.
- Errors: stereotyping, halo and horn effects, selective perception, projection, contrast effect, fundamental attribution error, self-serving bias.
Remember: Select, organise, interpret.
- Attitude: a learned tendency to respond consistently, favourably or unfavourably.
- Three components: affective (feel), behavioural (act), cognitive (think).
- Work attitudes: job satisfaction, organisational commitment (affective, continuance, normative), job involvement.
- Cognitive dissonance (Festinger): a clash between attitudes and behaviour is uncomfortable, so people change one or explain it away.
Remember: Think, feel, act.
- Allport: a state of readiness organised through experience; Krech and Crutchfield: an enduring organisation of motivational, emotional, perceptual and cognitive processes; Katz and Stotland: a predisposition to evaluate an object in a certain way.
- Attitudes are learned, directed at objects, vary in strength, and may be explicit (stated) or implicit (unconscious).
- Perceived organisational support (POS): belief that the organisation values contributions and cares about well-being.
- Job attitudes: satisfaction, involvement, organisational commitment, POS and engagement.
Remember: Ready, steady, felt: attitude is a readiness shaped by experience.
- Lewin: B = f(P, E). Behaviour depends on the person and the environment together.
- Biological: age, gender, health, heredity.
- Psychological: personality, perception, attitude, beliefs.
- Environmental: culture, family, peers, workplace. Collectivist cultures stress teamwork; individualist ones, personal success.
Remember: Biology, psychology, environment.
- Values: enduring beliefs about what is right, desirable or important; stable, often formed early through family and culture.
- They act as standards, influence ethics and shape priorities, but do not always predict behaviour under pressure.
- Rokeach: terminal values (ends: freedom, inner harmony, wisdom) and instrumental values (means: honesty, responsibility, politeness), 18 of each in his survey.
- Values are broad and stable; attitudes are evaluations of particular things and change more easily.
Remember: Terminal are ends; instrumental are means.
- Learning: a relatively permanent change in behaviour that occurs as a result of experience.
- Classical conditioning (Pavlov): association; the bell alone comes to bring salivation.
- Operant (Skinner): positive and negative reinforcement make behaviour more likely; punishment and extinction make it less likely.
- Cognitive (Tolman, Piaget): thinking. Social learning (Bandura): observation, through attention, retention, reproduction and reinforcement.
Remember: Pavlov associates, Skinner reinforces, Piaget thinks, Bandura watches.
- Content theories (what motivates): Maslow, Herzberg, McClelland. Process theories (how): Vroom.
- Maslow: physiological, safety, social, esteem, self-actualisation; the first two are lower-order needs.
- Herzberg: motivators create satisfaction; hygiene factors, such as pay, only prevent dissatisfaction.
- McClelland: achievement, affiliation, power. Vroom: motivation = expectancy × instrumentality × valence, so one weak link pulls it down.
- Reinforcement theory (Skinner): behaviour follows its consequences, with no need to look at inner states.
Remember: Maslow needs, Herzberg two factors, McClelland A-A-P, Vroom E × I × V.
- Self-determination theory (Deci and Ryan): three innate needs, autonomy, competence and relatedness.
- Intrinsic motivation is doing something for its own sake; extrinsic is doing it for a separate result.
- Extrinsic motivation is a range, from acting under pressure to accepting the task as one's own.
- Autonomy means a sense of choice, not working alone. Rewards for work people already enjoy can reduce interest.
Remember: Autonomy chooses, competence grows, relatedness belongs.
- Goal-setting theory (Locke and Latham): specific, difficult goals beat easy and "do your best" goals.
- Five principles: clarity, challenge, commitment, feedback, task complexity.
- Performance rises with difficulty up to the limit of ability or commitment, then levels off or falls.
- SMART is a checklist for wording goals; goal-setting theory is the research on why goals work.
Remember: Clear, challenging, committed, checked, complexity.
- Self-efficacy (Bandura): the belief that you can perform a specific task; higher belief brings more effort and persistence.
- Four sources: mastery experience (strongest), vicarious experience, social persuasion, physiological and emotional states.
- It is task-specific, unlike self-esteem, and closely related to expectancy in Vroom's theory.
- Build it by graded steps, similar role models and honest, specific encouragement.
Remember: Do it, watch it, hear it, feel it.
- Formal groups are created by the organisation; informal groups form naturally.
- Norms: unwritten rules; positive ones help, negative ones pressure.
- Social loafing: less effort in groups, lowering performance and morale.
Remember: Formal is official; informal is spontaneous.
- A work group shares information; a work team produces more than the sum of its members.
- Four types: problem-solving, self-managed, cross-functional, virtual.
- A multiteam system is a team of teams sharing a higher goal.
- Effectiveness depends on context, composition and process.
Remember: Solve, self-manage, cross over, connect virtually.
- Team building: trust, communication, conflict resolution, collaboration, shared goals.
- Tuckman: forming, storming, norming, performing, adjourning.
- Benefits: trust, creativity, communication, problem-solving.
Remember: Forming, storming, norming, performing, adjourning.
- A team role is a tendency to contribute and interact in a particular way.
- Action: Shaper, Implementer, Completer Finisher.
- People: Co-ordinator, Teamworker, Resource Investigator.
- Thinking: Plant, Monitor Evaluator, Specialist (added later).
Remember: Action, people, thinking: three groups of three.
- Leadership: influencing a group toward a vision or goals (Robbins and Judge).
- Four families: trait, behavioural, contingency, transformational.
- Lewin's styles: autocratic (control), democratic (participation), laissez-faire (autonomy).
- Situational leadership: telling, selling, participating, delegating, as follower readiness grows.
- Management copes with complexity; leadership copes with change (Kotter).
Remember: Who they are, what they do, what fits, what they change.
- Trait theory seeks the qualities that set leaders apart; it grew from the great man idea.
- Traits predict who emerges as a leader better than who is effective.
- LMX: different relationships with followers form an in-group and an out-group.
- Charismatic, authentic and servant leadership add vision, honesty and service.
Remember: Traits show who rises, not who leads well.
- Size: small groups decide faster; large ones bring diversity and coordination problems.
- Cohesiveness helps coordination, but extreme cohesiveness suppresses dissent.
- Groupthink: harmony over critical thinking, alternatives ignored, poor decisions.
Remember: Size, cohesiveness, groupthink.
- Interpersonal behaviour includes verbal and non-verbal communication: tone, body language, emotion, gesture.
- Patterns: one-to-one (trust), one-to-many (clarity), many-to-one (listening), many-to-many (collaboration).
- Reciprocal influence: positive behaviour builds morale and cooperation; negative behaviour erodes them.
- Interpersonal is between people; intrapersonal is within one person.
Remember: A shapes B, and B shapes A.
- Cooperative behaviour: shared goals, respect, openness. Conflicting behaviour: different goals, perceptions or misunderstandings.
- Determinants: personality, perception, attitudes, values, emotional intelligence, motivation.
- Skills: positive thinking, mutual trust, empathy, courtesy, avoiding ego clashes.
- Task conflict, kept moderate, can help; personal conflict rarely does.
Remember: Fight about the work, not about each other.
- Transactional analysis (Eric Berne) explains interactions through ego states.
- Johari window (Luft and Ingham): open, blind, hidden, unknown; feedback shrinks blind, self-disclosure shrinks hidden.
- Ego states: Parent (learned values), Adult (logic), Child (emotion).
- Transactions: complementary (talk flows), crossed (talk stops), ulterior (a hidden second message).
Remember: Parent is learned values, Adult is logic, Child is emotion.
- Life script: an unconscious pattern formed in childhood that shapes later behaviour.
- Life positions: I'm OK–you're OK is ideal; the others bring conflict, dependency or disengagement.
- Strokes: acts of recognition, positive or negative, conditional or unconditional.
- Games: recurring patterns with hidden motives, such as “Yes, but…”.
Remember: I'm OK, you're OK.
- Complementary: the reply reverses the opening message, so the lines are parallel and talk flows.
- Three ego states by three give nine pairs; Adult–Adult is generally best, and Parent–Child suits emergencies.
- The other pairs bring costs: hostility, frustration, role reversal, whim or rivalry.
- Ulterior transactions carry a hidden message and involve at least three ego states.
Remember: Smooth talk is not always good talk.
- Life script (Berne): a programme formed in early childhood under parental influence; it can be rewritten.
- Karpman's drama triangle (1968): Persecutor, Victim, Rescuer; players switch corners.
- Roles are legitimate when the facts call for them and illegitimate when used as masks.
- Games repeat, make surface sense and hold an ulterior transaction; people play for strokes, to reinforce life positions and to avoid intimacy.
Remember: Persecutor, Victim, Rescuer: switch corners, switch to Adult.
- Culture: a system of shared meaning that distinguishes one organisation from another (Robbins and Judge).
- Schein's three levels: artefacts, espoused values, basic assumptions.
- Seven characteristics: innovation and risk-taking, attention to detail, outcome, people and team orientation, aggressiveness, stability.
- When culture and the rule book disagree, people usually follow the culture.
Remember: Culture is how things are done here.
- Dominant culture: core values most accept. Subcultures: departmental or local variants within it.
- Strong culture: core values intensely held and widely shared (Robbins and Judge).
- Functions: boundary definition, identity, commitment, stability, behaviour guide.
- Strong is not the same as good: strong cultures can block change, diversity and mergers.
Remember: Boundary, identity, commitment, stability, guide.
- Built by the founder's philosophy and top management as role models.
- Kept by selection, training, performance evaluation, rewards and promotion.
- Socialisation: pre-arrival, encounter, metamorphosis. It teaches norms; training teaches skills.
- A positive culture builds on strengths and rewards more than it punishes, but still needs objective standards.
Remember: Pre-arrival, encounter, metamorphosis.
- Competing values framework (Cameron and Quinn): internal or external focus; flexibility or stability.
- Clan collaborates, adhocracy creates, market competes, hierarchy controls.
- Climate: shared perceptions of the workplace; people-, rule-, innovation- or goal-oriented.
- Culture is values and meaning, long-term; climate is perceptions and feelings, current.
Remember: Clan collaborates, adhocracy creates, market competes, hierarchy controls.
- Six motives mark a climate: achievement, affiliation, influence, control, dependency, extension (Pareek).
- Extension is the urge to be relevant and useful to large groups, including society.
- Control and dependency are often seen as the less healthy climates.
- Employees' perception of the workplace (its climate) affects performance and satisfaction; the more widely shared it is, the more effect.
- Climate describes what members perceive; it does not say whether they like it.
Remember: Achievement, affiliation, influence, control, dependency, extension.
- Diversity: differences in age, gender, race, religion, ethnicity, ability and background; in India also language, region and caste.
- Managing it: fairness and equity, inclusion, respect, a business link.
- Surface-level differences are seen at once; deep-level ones show over time. Primary dimensions cannot change; secondary ones can.
- Diversity is the mix; inclusion is whether the mix is heard and valued.
- Benefits are not automatic: diverse teams can also bring more conflict.
Remember: Inclusion, equal opportunity, respect.
- Benefits: market reach, better decisions, better relations, lower turnover, goodwill.
- Challenges: communication gaps, conflict, stereotypes, resistance, slower agreement.
- Thomas and Ely (1996): discrimination and fairness; access and legitimacy; learning and effectiveness.
- Equal opportunity is a fair chance for all; affirmative action is a positive step to correct past disadvantage.
- In India: Articles 15 and 16, plus statutes on harassment, disability, transgender persons and equal pay.
Remember: Fairness, access, learning.
- Techniques: awareness, shared culture, special care, career development, ending discrimination, preventing harassment, diverse committees.
- Glass ceiling: an invisible barrier to the top jobs; glass cliff: risky posts given in a crisis.
- Groups: command, task, functional; interest, friendship, reference. In-groups and out-groups create belonging and exclusion.
- Group roles: task (planner), relationship (motivator), individual (dominator).
- Equity can need different arrangements; responsibility and mentoring beat training alone.
Remember: Aware, share, care, develop, end bias, protect, include.
- Cross-cultural OB: how cultural differences affect behaviour in multicultural workplaces.
- Hofstede (IBM surveys; Culture's Consequences, 1980): power distance, uncertainty avoidance, individualism, masculinity, time orientation.
- Scores are national averages, not descriptions of individuals.
- Criticism: one company, old data, and a nation is not always one culture.
Remember: P, U, I, M, T.
- Hall: high-context cultures carry meaning in setting and silence; low-context cultures in explicit words.
- Trompenaars: seven dimensions, five about relationships plus time and nature.
- Lewis: linear-active, multi-active and reactive.
- Cultural intelligence (Earley and Ang, 2003): drive, knowledge, strategy, action.
- Models are maps, not rules; check with the person.
Remember: Context, seven, three, four.
- Culture shock: difficulty adapting to an unfamiliar culture; caused by language, customs and stress, and worse when the cultural distance is wide.
- U-curve: honeymoon, crisis, adjustment, mastery; research support is weak, so treat it as a warning.
- Reduced by training, adjustment support and integration.
- Training areas: self-awareness, host-country knowledge, role clarification, intercultural communication, conflict resolution.
- Reverse culture shock comes on returning home.
Remember: Train, support, integrate.
- Affect: broad emotional tone. Emotions: brief, intense, specific. Moods: general, longer, often without cause.
- An emotion can settle into a mood; a bad mood makes reactions stronger.
- Six universal emotions (Ekman): happiness, sadness, fear, anger, surprise, disgust.
- Display rules: a culture's rules on which feelings may be shown, where and to whom.
- Descartes's six passions (wonder, love, hatred, desire, joy, sadness) are a different list.
Remember: Emotion is short and specific; mood is long and general.
- Sources: personality, weather (limited), stress, social interaction, sleep, exercise, age, sex.
- Poor sleep weakens regulation; exercise lifts mood modestly.
- Illusory correlation: seeing a link that is not there, as with weather.
- Some sources are fixed; a manager can change rosters, workload and conflict.
Remember: Sleep, exercise and people move moods most.
- Emotional labour (Hochschild): displaying the emotions a job requires; dissonance can cause burnout.
- Surface acting fakes the display; deep acting tries to feel it. Surface acting drains more.
- Emotional intelligence (Salovey and Mayer; Goleman): recognise and manage your own and others' emotions.
- Components: self-awareness, emotional regulation, empathy, relationships.
- Criticism: EI overlaps with personality and IQ, and self-report tests can be faked.
Remember: Recognise, regulate, empathise, relate.
- Stress: demands stretching the capacity to cope; demands above resources cause strain.
- Challenge stressors can motivate; hindrance stressors block goals.
- Sources: environmental, organisational, personal. Consequences: physiological, psychological, behavioural.
- Stressor is the cause, stress the reaction, strain the harm.
- Inverted U: moderate stress may help, but its evidence for work is limited.
Remember: Demands above resources: strain.
- Organisational demands: task, role (conflict, ambiguity, overload) and interpersonal.
- Stressors add up; a small one can tip a person who is already stretched.
- Experience, locus of control, Type A behaviour and support change how stress is felt.
- Burnout: emotional exhaustion, depersonalisation, lowered sense of accomplishment.
- Managers and employees may disagree about what pressure is acceptable.
Remember: Same demand, different strain; long strain becomes burnout.
- Individual: time management, exercise, relaxation, social support.
- Organisational: job fit, training, clear goals, job redesign, empowerment, communication, sabbaticals, wellness programmes.
- Primary removes the stressor; secondary helps coping; tertiary treats the harm.
- Individual coping cannot fix a stressor that the job creates.
Remember: Manage stress from both sides.
- Five principles: daily list, rank by importance and urgency, schedule, use your best hours, cut electronic distractions.
- Other habits: noncompetitive exercise, relaxation, regular short breaks.
- Selection, training, goals, job redesign and voice work best when fitted to the person.
- Time management cannot fix an impossible workload or unclear roles.
Remember: List, rank, schedule, protect your best hours.
- Organisational justice: employees' perception of fairness at work (Greenberg, 1987).
- It is about perception: what staff believe, not what management intended.
- Three dimensions: distributive (outcome), procedural (process), interactional (treatment).
- Fairness builds trust, morale, productivity and retention.
Remember: Outcome, process, treatment.
- Distributive justice: fair shares, by equity (contribution), equality (same for all) or need.
- Deutsch: equity suits productivity, equality suits harmony, need suits welfare.
- Procedural justice: fair methods, even when the outcome is unfavourable.
- Leventhal's six rules: consistency, bias-free, accuracy, representation, correctability, ethicality.
Remember: C, B, A, R, C, E.
- Adams (1963): people compare outcomes ÷ inputs with a referent's ratio.
- Equal ratios bring satisfaction; a lower ratio brings resentment; a higher ratio can bring guilt.
- Ways to restore balance: change inputs, change outcomes, distort perceptions, change the referent, act on the referent, leave.
- Equity theory (a reaction) is not the equity principle (a way to share rewards).
Remember: My ratio against theirs: equal is calm, unequal is action.
- Interactional justice: fair treatment when decisions are carried out and told (Bies and Moag, 1986).
- Interpersonal justice: dignity, respect, courtesy.
- Informational justice: honest, timely, adequate explanations.
- Distributive is the outcome, procedural the process, interactional the treatment.
Remember: Respect in treatment, honesty in explanation.
- Whistleblowing: disclosure of illegal, immoral or illegitimate practices to those who can act (Near and Miceli, 1985).
- Employees, customers, contractors, consultants and suppliers may report; retaliation is a real risk.
- Internal first; external when internal mechanisms fail or are hostile.
- A grievance is about your own treatment; whistleblowing is about harm to others.
Remember: Wrongdoing, report inside, resolve; if not, report outside.
- Reportable: legal and ethical violations, fraud, safety risks, environmental harm, misuse of funds, abuse of power, IP violations.
- Benefits: early detection, trust, ethical culture, a responsible image, scandal prevention, transparency.
- India: Companies Act 2013 (vigil mechanisms, SFIO), SEBI framework for listed entities.
- Whistle Blowers Protection Act 2014: disclosures about public servants; enacted, not yet in force.
Remember: Companies Act, SEBI, Whistle Blowers Protection Act.
- Section 177(9): listed companies, and by rule deposit-taking companies and those borrowing above ₹50 crore, must have a vigil mechanism.
- Safeguards against victimisation and direct access to the audit committee chairperson are required.
- Clause 49 of the listing agreement gave way to the LODR Regulations, 2015.
- Good policies add confidentiality, several channels, fair investigation and feedback.
- Frivolous reports are screened by the audit committee; the vigil mechanism is not the 2014 Act.
Remember: Listed, deposits, ₹50 crore: vigil mechanism, safeguards, audit committee access.
- HRM: acquiring, developing, motivating and retaining employees to achieve organisational goals.
- Aims: performance, welfare, alignment with strategy.
- Objectives: personal (the employee), organisational (the firm), and other (law and society: compliance, diversity, fairness).
- Every manager does HRM; the HR department designs the systems.
- The objectives can conflict, and HRM has to choose between them.
Remember: Acquire, develop, motivate, retain.
- Pre-industrial, Industrial Revolution, scientific management (Taylor), human relations (Mayo).
- Post-war personnel, modern HRM, TQM and globalisation, strategic HRM.
- Three broad shifts: control, people, strategy.
- Each stage left something behind; the stages overlap rather than replace each other.
Remember: Control, efficiency, human relations, personnel, HRM, strategic HR.
- Plan (HR planning), acquire (recruitment and selection), develop (training).
- Evaluate (appraisal), reward (compensation), relate (employee relations).
- Protect (safety and welfare), prepare (career and succession planning).
- Flippo: managerial functions (plan, organise, direct, control) against operative ones.
Remember: Plan, acquire, develop, evaluate, reward, relate, protect, prepare.
- The HR function has three roles: advisory, functional and service.
- A policy is a general guide to decisions; a procedure sets out the steps for applying it.
- The HR manager's seven roles: humanitarian, counsellor, mediator, spokesperson, problem solver, change agent and manager of manpower.
- The roles can conflict: the counsellor needs trust, the spokesperson speaks for management.
Remember: Advise, frame, serve; and seven hats for the manager.
- Approaches: traditional, human relations, HRD, contingency, strategic, high-performance, best practices, RBV, employee-centric, evidence-based.
- Best practices: one way works everywhere. Contingency: it depends. RBV: people as a hard-to-copy resource.
- HRM is strategic and proactive; personnel management administrative and reactive.
- HRM asks how to manage people; OB asks why people behave as they do.
Remember: HRM manages; OB understands.
- Normative: how HRM should be done, through the hard (Michigan) and soft (Harvard) models.
- Critical: a gap between rhetoric and reality.
- Behavioural: employee behaviour links strategy to performance.
- Systems: input, throughput and output in an environment; HRM manages competence, behaviour and environment contact.
- Standard causal chain: strategy, HR strategy, practices, outcomes, performance; practices can be intended, actual or perceived.
Remember: Should, doubt, behave, system.
- Internal influences: corporate, operational, marketing and financial strategies.
- External influences: market, economic, technological, social, and political and legal changes.
- Trends: rising expectations and turnover, downsizing, continuous improvement, re-engineering, contingent workforce and decentralised work sites.
- Continuous improvement is incremental; re-engineering is radical.
Remember: Inside strategies, outside forces, then the trends.
- HRP: forecasting and managing the demand for and supply of human resources.
- The right number and kind of people, at the right place, at the right time.
- Objective: balance. A shortage calls for recruiting, training or overtime; a surplus for a hiring freeze or redeployment.
- HRP comes before recruitment, selection and training, which follow from it.
Remember: Right people, right place, right time.
- Main objective: balance between the people available and the people required.
- Human resources include skill, knowledge, values, commitment and motivation, not only headcount.
- Five features: defined objectives, determining needs, an inventory, adjusting demand and supply, a proper work environment.
- Planning controls cost, gives recruitment and training a target, and shows skill gaps early.
Remember: Goals, needs, inventory, adjust, environment.
- Analyse objectives; forecast demand (number and type, by department); analyse supply.
- Match demand and supply; analyse skill gaps; develop action plans.
- Monitor and control, and update the plan as conditions change.
- Net requirement = forecast demand − forecast supply (present staff, less leavers and moves out, plus moves in).
Remember: Strategy, forecast, analyse, match, act, review.
- Skills inventory; succession planning; turnover analysis.
- Promotion and mobility analysis, which shows internal movement; Markov analysis and replacement charts refine it.
- Turnover rate = separations ÷ average number of employees × 100.
- Supply also comes from the outside labour market.
Remember: Skills, succession, turnover, mobility.
- Factors: type and strategy, stage of growth, environmental uncertainty, time horizon, information, nature of jobs, outsourcing.
- Plans are commonly short-term (about a year), medium-term and long-term (several years); limits vary.
- Barriers: inaccurate forecasts, poor records, resistance, weak support, treating people as numbers, short-term pressure.
- A factor is a condition to account for; a barrier is a failure in planning that can be fixed.
Remember: Factors shape the plan; barriers block it; review often.
- Recruitment: searching for prospective employees and stimulating them to apply (Flippo).
- Internal: job posting, referrals, promotions, transfers, rehiring, previous applicants; cheaper and faster, but a smaller pool.
- External: online, social media, agencies, campus, headhunting, walk-ins and more; wider pool and fresh skills, but costlier and riskier.
- Referrals count as internal, though the people referred come from outside.
Remember: Vacancy, attract, talent pool, select.
- Identify the vacancy, analyse the job, write the description and specification.
- Advertise, review applications, build a talent pool, brand the employer.
- Communicate, network, run campaigns, track and report.
- Yield ratios and cost per hire show how well recruitment worked.
Remember: Need, analyse, attract, screen, build, evaluate.
- Five stages: planning, strategy, searching, screening, evaluation and control.
- Strategy choices: make or buy, centralised or decentralised, area, sources.
- Internal factors: policy, HR plan, size and growth, budget, attractiveness. External: labour market, unemployment, laws, competitors, conditions.
- Policy is the permanent rule book; strategy is the plan for one drive.
- Recruitment costs include recruiter pay, advertising, agency fees, overheads and the cost of an empty post.
Remember: Plan, strategise, search, screen, evaluate.
- Selection: evaluating applicants and choosing the most suitable one.
- Process: screening, tests, interview, verification, decision, medical, offer. Onboarding follows selection.
- Tests: intelligence, aptitude, interest, personality, achievement, trade, dexterity.
- Good tests are reliable (consistent) and valid (predict job performance).
Remember: Skills, attitude and values must match the role.
- Types: structured, unstructured, semi-structured, individual, panel, group, behavioural, situational, stress, depth.
- An exit interview is held at leaving, not for selection.
- Errors: halo, first impression, contrast, similar-to-me, stereotyping; structure and independent scoring reduce them.
- After the interview: reference and background check, final selection, medical examination and offer.
- Selection ratio = number hired ÷ number of applicants.
Remember: Ask all the same, score on paper, check, then offer.
- Recruitment: attracting candidates; positive; broad; a pool of candidates.
- Selection: choosing the best; negative (it eliminates); narrow; the hiring decision.
- Recruitment is mainly HR; selection is HR with departmental heads.
- Judge recruitment by the quality of the pool, selection by how hires perform.
Remember: Recruitment attracts; selection chooses.
- Training: increasing knowledge and skill for doing a particular job (Flippo).
- On the job: coaching, job rotation, mentoring, internships, apprenticeships.
- Off the job: classroom, seminars and workshops, e-learning, simulations, case studies, vestibule training.
- Training fixes skill gaps only; it cannot cure faulty equipment, unclear targets or low morale.
Remember: On the job or off it.
- Case study: a detailed problem to analyse; incident method: one short event and a decision.
- Role play: act a part, then review; in-basket: prioritise and delegate under a time limit.
- Business games: teams run an imaginary firm; lectures and conferences give concepts and shared views with little practice.
- Committee assignments are usually listed as on-the-job: a group studies a real problem.
- The learning fades unless trainees can use it at work, and the debrief is where it happens.
Remember: Practise the decision before you face it.
- Identify needs; determine participants; prepare learners.
- Present the operation; performance try-out under supervision; follow up.
- Steps 3 to 6 are job instruction training: prepare, present, try out, follow up.
- Kirkpatrick's levels: reaction, learning, behaviour, results.
- Needs analysis has three levels (organisation, task, person) and uses observation, interviews, focus groups, surveys, customer feedback and records.
Remember: Needs, participants, preparation, presentation, try-out, follow-up.
- Development: knowledge, skills and abilities for future responsibilities and growth.
- Focus: future roles, career growth, leadership potential, the talent pipeline.
- Training is short-term and job-specific; development is long-term and career-oriented.
- Purpose, not method, decides: the same mentoring can be training or development.
- Textbooks add that training is mostly for operatives and reactive, development for managers and proactive; these are tendencies, not rules.
Remember: Training for now; development for next.
- Induction: the planned welcome that helps a new employee settle in and start work.
- Three kinds: general (HR, the organisation), specific (supervisor, the job) and follow-up (satisfaction check after some weeks).
- Benefits: lower early turnover, faster learning, better morale, fewer grievances, a sense of belonging.
- Onboarding is wider: preboarding, induction and orientation, then integration.
- Induction welcomes and informs; training builds job skills.
Remember: General, specific, follow-up.
- Job analysis: a systematic study of a job's tasks, methods, equipment, skills and attitudes.
- Yields purpose, organisational fit, the human profile, and relationships and context.
- Methods: direct observation, work method analysis, critical incident technique, interviews; most analyses combine several.
- It produces the job description and job specification, and comes before job evaluation.
Remember: Study the job before you fill it.
- Interviews can be structured, unstructured or open-ended, with jobholders and supervisors.
- Questionnaires reach many people cheaply; diaries show where the time really goes.
- Work method analysis has two levels: time and motion study, and micro-motion analysis (filming).
- These methods rely on what people say, so combine two and cross-check with supervisors.
Remember: Watch it, ask about it, or let the jobholder write it down.
- Both come from job analysis: the description looks at the work, the specification at the worker.
- Job description: purpose and summary, tasks and duties, reporting line, working conditions, tools.
- Job specification: qualifications, experience, mental and physical attributes, emotional traits, skills.
- The description feeds the advertisement and appraisal; the specification feeds screening and interviews.
Remember: Description is what; specification is who.
- Job evaluation: a systematic, comparative process for the relative worth of jobs.
- Objectives: internal equity, a standard pay structure, fairness, benchmarking.
- Process: job analysis, documentation, rating, hierarchy; pay ranges attach to the grades.
- Methods: ranking and grading (non-quantitative); points and factor comparison (quantitative).
Remember: Analyse, document, rate, rank.
- Ranking: job against job; quick but subjective. Classification: job against grade description.
- Points: factor scores that total to grades; consistent but costly to set up.
- Factor comparison: factors priced in rupees against key jobs whose pay is agreed to be fair.
- Paired comparison of n jobs needs n(n-1)/2 comparisons: 15 for six jobs.
Remember: Job against job, job against grade, factor scores, factor rupees.
- Job design: structuring jobs for efficiency while meeting motivational needs.
- Simplification: fewer tasks. Rotation: different tasks.
- Enlargement: more tasks (horizontal). Enrichment: more authority (vertical).
- Match the method to the problem: boredom, low ownership or errors.
Remember: Simplify, rotate, enlarge, enrich.
- Compensation management: rewarding employees for their contribution.
- Direct monetary: wages, incentives, bonuses. Indirect monetary: benefits and perks. Non-monetary: recognition, the work itself.
- Objectives: attract, retain, motivate, equity, productivity, compliance.
- Internal equity is fairness between jobs inside the firm; external equity is fairness against the market.
- Pay is a hygiene factor: it prevents dissatisfaction but does not motivate on its own.
Remember: Reward, motivate, retain, ensure equity.
- Four components: wage or salary, dearness and other allowances, incentives, fringe benefits and perquisites.
- Dearness allowance is the cost-of-living allowance; HRA, CCA, medical, education and conveyance allowances each meet one cost.
- Gross salary minus deductions is take-home salary; cost to company also includes the employer's contributions.
- Provident fund and gratuity follow basic pay plus DA, so the split between basic pay and allowances matters.
Remember: Gross less deductions is take-home; CTC is more than gross.
- Fringe benefits: extras beyond wages for employees generally, such as provident fund, gratuity, medical care, insurance and paid leave.
- Perquisites: special benefits for top executives, such as a company car, a furnished house, stock options and club membership.
- Statutory benefits are required by law; voluntary benefits are the employer's choice.
- A stock option is the right to buy shares later at a price fixed today; the gain is market price minus option price.
Remember: Fringes for all, perks for the top.
- Financial protection for employees injured at work or suffering occupational diseases.
- Test: injury arising out of and in the course of employment; both parts must hold.
- Employer liability; dependants' claims; medical examination; prompt notice; penalties.
- Amount depends on injury, disability percentage, monthly wage and age.
- The Code on Social Security, 2020 now replaces the Act.
Remember: Injury at work brings compensation.
- Halsey: time wage plus 50% of time saved. Rowan: bonus = time wage × share of standard time saved.
- Rowan pays more below 50% time saved, Halsey above; they are equal at 50%.
- Bedaux: base pay plus Bedaux points. Emerson: bonus rising with efficiency from two-thirds.
- Gantt: time rate plus a bonus for meeting the standard. Taylor: differential piece rates, no guaranteed wage.
Remember: Halsey shares, Rowan proportions, Taylor differentiates.
- SHRM: the pattern of planned HR deployments and activities that help the organisation achieve its goals (Wright and McMahan, 1992).
- Chain: HR activities → strategic alignment → workforce capability → competitive advantage.
- Employees are long-term strategic assets; HR is proactive; the focus moves from administration to strategy.
- HR planning, which forecasts numbers, is one tool inside SHRM.
Remember: HR activities, alignment, capability, advantage.
- Employer branding and talent acquisition: a strong brand brings better applicants and fewer mismatches.
- Employee lifecycle management: onboarding, development, engagement, retention.
- Performance and learning: growth, not fault-finding. Retention and engagement: recognition, fairness, and why people leave.
- Culture and change management: people-focused change meets less resistance.
- Retention is staying; engagement is the energy people bring while they stay.
Remember: Brand, lifecycle, performance, retention, culture.
- Components: human resources as core capital, HR policies and programmes, plans and patterns, unified direction.
- SHRM = people capability + HR systems + strategic direction.
- Vertical fit: HR serves the strategy. Horizontal fit: HR practices support each other.
- Objectives: strategic fit, resource-based strategy, high performance (measures), high involvement (ideas), high commitment (trust).
Remember: Fit, resource, performance, involvement, commitment.
- Implementation: vision, measures and data, HR readiness, talent forecast, HR systems, evaluate and iterate.
- The steps form a loop: evaluation feeds the next round.
- Strategic HR planning: SMART goals, capabilities, workforce skills, departmental needs, strategic recruitment.
- Data reduce bias only when the data are sound; reporting counts the past, analytics explains and predicts.
Remember: Right people, right capabilities, right strategy, right time.
- A competency is a demonstrable characteristic that enables effective job performance.
- Four parts: knowledge (knows), skills (can do), attitudes (outlook), traits (enduring qualities).
- Core: needed by everyone, tied to strategy. Cross-functional: needed across many functions. Functional: job-specific hard skills.
- Core competencies in HR differ from a firm's core competence (Prahalad and Hamel), a strength of the whole firm.
Remember: Know, can do, outlook, trait; core, cross-functional, functional.
- Competency mapping identifies the competencies for an organisation and each job and builds them into HR processes.
- Why: costly staff, people as an asset, getting more from existing people, customer focus.
- Four stages: design the questionnaire, collect data, analyse and map, finalise.
- Stage 1 covers purpose, critical success factors, key result areas and key activities.
- Uses: recruitment, training, appraisal and promotion.
Remember: Design, collect, analyse, finalise.
- Assessment centre: observed simulations such as group discussion, in-basket and role-play.
- Critical incident technique (Flanagan): real examples of exceptional success or failure, grouped by behaviour.
- Interviews: first-hand insight, compared with the competency map.
- Questionnaires: CMQ, PAQ and others are job analysis tools; Functional Job Analysis is a method rating data, people and things.
- Psychometric tests: aptitude (can learn) and achievement (has learned).
Remember: Centre, incidents, interviews, questionnaires, tests.
- The balanced scorecard (Kaplan and Norton, 1992) turns mission and strategy into measures in four perspectives.
- It is a general strategic framework, not an HR-only tool; the four are Financial, Customer, Internal Business Process, Learning and Growth.
- Learning and growth holds employee skills, training, engagement and culture; customer retention belongs under Customer.
- The competency map gives a yardstick for learning and growth measures.
- People measures are hard to choose well: training hours show effort, not skill.
Remember: Money, customers, processes, learning: people at the foundation.
- Performance management: a continuous, strategic process that aligns people's work with organisational goals; appraisal is a formal, periodic look at past performance.
- Objectives: goal alignment, continuous improvement, employee development, recognition and motivation.
- Five phases: plan (SMART goals), monitor (KPIs), feedback and coaching, review, reward and development. The loop repeats.
- Key terms: KPI, performance standard, performance gap (expected minus actual), performance improvement plan.
Remember: Plan, monitor, feedback, review, reward.
- Traditional methods: ranking, paired comparison, graphic rating scale, checklist, critical incident, confidential report.
- Paired comparison needs N × (N − 1) ÷ 2 pairs; the employee with the most wins ranks first.
- Others in textbooks: forced distribution, forced choice, essay, field review, performance tests.
- Ranking compares people with each other; rating compares each person with a standard.
- Common weakness: trait ratings, a backward look, and room for rater bias.
Remember: Rank, pair, scale, tick, incident, secret report.
- 360-degree feedback: ratings from supervisor, peers, subordinates, customers and self; it needs a mature culture.
- MBO (Drucker, 1954): set goals jointly, set standards, compare results, set new goals.
- BARS (Smith and Kendall, 1963): each scale point is anchored by an example of behaviour.
- Assessment centres use simulations; psychological appraisal looks at potential; human resource accounting counts cost and value in money.
Remember: 360 sources, objectives, behaviour anchors, simulations, psychologists, money.
- Rater errors: halo, horn, leniency, strictness, central tendency, recency, first impression, spillover, personal bias and stereotyping.
- The halo effect is a rater error, not an appraisal method.
- Fairer appraisal: clear standards, one dimension at a time, a running record, several raters or calibration, rater training.
- Challenges: bias, time and cost, feedback avoidance, inconsistent standards.
- A good feedback talk is one to one, specific, two-way and ends with agreed actions.
Remember: The rater is the problem: halo, horn, lenient, strict, middle, recent.
- A career is the sequence of work experiences over a person's life (Hall); Flippo stresses continuity, order and meaning.
- Schein's cone: vertical (rank), circumferential (function), radial (closeness to the centre).
- Five stages: exploration, establishment, mid-career, late career, decline. Ages are rough guides.
- Textbooks differ on the ages and on the number of stages (Super, Greenhaus and others).
Remember: Up, across, inward; explore, establish, mid, late, decline.
- Career planning: the individual selects career goals and the path to them (Werther and Davis).
- Seven steps: self-assessment, explore options, SMART goals, action plan, acquire skills, seek feedback, monitor and adjust.
- Five initiatives: career planning workshops, mentoring, career counselling, coaching, personal development plans.
- Textbooks disagree on which of career management and career development is the umbrella; learn each definition.
Remember: Assess, explore, goal, plan, learn, feedback, adjust.
- Succession planning: the systematic process of identifying and developing future leaders for key positions.
- Six steps: key positions, competency mapping, potential successors, readiness, development plans, implement and monitor.
- Aims: leadership continuity, retained knowledge, readiness for sudden vacancies.
- Career planning is employee-focused; succession planning is organisation-focused.
- Replacement charts are its simple form; plans can favour people who resemble today's leaders.
Remember: Key jobs, skills, candidates, readiness, plans, review.
- Career path: the sequential pattern of jobs that forms a career; three kinds are historical, organisational and behavioural.
- Career mobility: movement across grades or positions, upward or downward, or a change of occupation.
- Career plateau: promotion chances are low and the work is repetitive; the cause may be structure or content.
- Career anchors are Schein's: eight themes, found by self-assessment.
Remember: Path, move, plateau, anchor.
- Talent management: the full scope of HR processes to attract, onboard, develop, motivate and retain high-performing employees.
- Seven processes: workforce planning, recruitment and onboarding, performance management, learning and development, engagement, succession planning, retention.
- It matters for performance, competitive advantage, innovation, team synergy, lower turnover, employer branding and internal capability.
- It is wider than succession planning and narrower than all of HRM. Critics say it can be old HR under a new name.
Remember: Attract, develop, motivate, retain: the whole path.
- Five phases: planning, attracting, developing, retaining, transitioning. Transitioning keeps knowledge (knowledge management) and feeds the next plan.
- Methods are examples: predictive analytics, employer branding, mentoring and rotation, inclusion and flexibility, mobility and documentation.
- Hire elite talent: speed, a high benchmark. Nurture emerging talent: lower cost, loyalty. Blend both: mentoring and knowledge transfer.
- The phases are stages of the cycle; the seven processes are the HR functions that carry them out.
Remember: Plan, attract, develop, retain, transition.
- Seven steps: specify skills, attract, onboard and organise work, learn and develop, appraise, retain, plan succession.
- Step 1 includes checking whether existing staff can be taught; step 7 involves knowledge management.
- Appraisal shows who is ready for more, saving outside hires and preparing promotions.
- Gamified applications, pulse surveys, job crafting, gig platforms and similar tools are examples, not requirements.
- The seven processes name HR functions; the seven steps give an order of use.
Remember: Skills, attract, onboard, learn, appraise, retain, succeed.
- Skill development: identify skill gaps, then develop and hone the skills. Its value: innovation, agility, job satisfaction, role mastery.
- Soft (behavioural) skills: emotional intelligence, cultural sensitivity, decision-making, negotiation, empathy.
- Functional (technical) skills: budgeting, spreadsheet modelling, digital literacy, technical writing. The phrase has other senses elsewhere.
- Management skills (Katz): conceptual, human, technical. Technical skill is sometimes loosely called hard skill, in contrast to soft skills. See Principles of Management.
Remember: Find the gap, build the skill: soft, functional, managerial.
- Engagement: enthusiasm and dedication toward the job. Kahn (1990): people bring themselves physically, cognitively and emotionally.
- Physical is energy and effort, cognitive is attention and thinking, emotional is care, pride and trust.
- Four levels: highly engaged, moderately engaged, barely engaged, disengaged. Gallup's three groups: engaged, not engaged, actively disengaged.
- Engagement is not satisfaction (a feeling about the job) or commitment (attachment to the employer).
Remember: Physical is energy, cognitive is thinking, emotional is attachment.
- Process: diagnose and design, survey, analyse (the most important step), act (action planning), follow up. It repeats.
- Action needs owners, measurable targets and coached line managers; follow-up reports back to staff.
- Engagement score: a summary of survey answers, with no single formula. eNPS = % promoters (9–10) − % detractors (0–6), from −100 to +100.
- Common drivers: meaningful work, supportive manager, recognition, growth, voice, autonomy and a manageable workload.
Remember: Diagnose, survey, analyse, act, follow up.
- Work-life balance: the relationship between work and the other commitments in life, and how they affect each other.
- Four principles: prioritise, reduce stress, manage time, set boundaries.
- Five strategies: work-leisure plan, cut time-wasters, delegate or outsource, schedule rest, prioritise smartly.
- Benefits: health, output, relationships, motivation. Balance is not an equal split.
Remember: Prioritise, reduce stress, manage time, set boundaries.
- Warning signs: physical (exhaustion, illness), emotional (irritability, low motivation), behavioural (absence, withdrawal, procrastination) and at work (mistakes, missed deadlines).
- Burnout (WHO, ICD-11): chronic workplace stress not successfully managed; exhaustion, cynicism, reduced effectiveness.
- Employer actions: flexible hours, leave that is used, no-meeting days, clear boundaries, realistic workload, support.
- Change the work first (primary), then help people cope (secondary).
Remember: Change the work first; help people cope second.
- Organisational change is any modification in structure, processes, culture or strategy; it may be planned (proactive) or unplanned (reactive).
- Four types: structural, technological, people-oriented and strategic. Real changes often cross types.
- Forces come from inside (vision, culture, leadership, performance, employees) and outside (competition, technology, regulation, economy, social change).
- Resistance comes from individual and organisational sources. Kotter and Schlesinger's six approaches run from education to coercion.
Remember: What changes: structure, technology, people, strategy.
- OD is a planned, systematic, data-driven process to improve effectiveness, adaptability and health (Beckhard: planned, organisation-wide, top-managed).
- Dual approach: the human side (culture, behaviour, communication) and the technical side (structure, goals, processes).
- Four characteristics: planned, collaborative, data-driven, and feedback with reinforcement.
- Five steps: diagnosis, planning interventions, implementation, evaluation, reinforcement. Action research has seven, from entry to evaluation.
Remember: Diagnose, plan, implement, evaluate, reinforce.
- An OD intervention is a structured, data-driven, participative, goal-oriented action on a diagnosed problem.
- Levels: individual (coaching, training), team (team building, role negotiation), organisation (strategic planning, redesign), process (BPR, process consultation).
- Main interventions: sensitivity training, team building, process consultation (Schein), survey feedback, structural redesign, organisational learning, role negotiation, BPR (Hammer and Champy).
- Tools: surveys, focus groups, workshops, job rotation, reward systems.
Remember: Level first, then the tool.
- Lewin (1947): unfreezing (prepare, show the need), changing (introduce the new, with training), refreezing (reinforce with KPIs and rewards).
- Performance often dips during the change stage. Without refreezing, people drift back.
- Criticism: too linear and simple, assumes stable periods, neglects power and politics, suits top-down change.
- OD gains: productivity, communication, adaptability, retention, teamwork. Challenges: resistance, time, measuring impact, top-management buy-in.
Remember: Unfreeze, change, refreeze: prepare, implement, stabilise.
- IR is the management of relationships among employers, employees, trade unions and the government, aimed at harmony and productivity.
- Industry means any productive activity, from farming and mining to manufacturing, trade and banking.
- Five objectives: healthy relationships, preventing and resolving disputes, welfare and productivity, limited government intervention, industrial democracy.
- HRM deals with each employee; IR deals with the collective side.
Remember: Four parties, one aim: harmony and productivity.
- Unitary: one team, conflict rare. Pluralist: many groups, conflict normal and bargained. Marxist: conflict from class division.
- Dunlop: systems approach, with actors, contexts, ideology and a web of rules (1958).
- Flanders: Oxford approach. Margerison: industrial sociology. Silverman (1970): action frame of reference. Mayo: human relations.
- Gandhian approach: trusteeship, non-violence and moral persuasion.
Remember: Dunlop systems, Flanders Oxford, Silverman action, Mayo human.
- 1947 Act definition: a dispute connected with employment, terms of employment or conditions of labour between employers and employers, employers and workmen, or workmen and workmen.
- The Industrial Relations Code, 2020 consolidates the 1947 Act; older exam questions still use the 1947 Act's terms.
- Economic causes: wages, bonus, hours, leave, dismissal. Non-economic: union recognition, victimisation, ill-treatment, sympathy, politics.
- Forms: strike, lockout, gherao, picketing; strike kinds include economic, unfair labour practice, sympathy, general, wildcat, sit-down and go-slow.
- Prevention: works committee. Settlement: conciliation, adjudication, voluntary arbitration. Collective bargaining is a method of negotiation, not settlement machinery.
Remember: Prevent, conciliate, then decide.
- Grievance: dissatisfaction or a sense of injustice about the job, justified or not, often the gap between expectation and reality.
- Types: individual (one employee), group (a team), policy or union (many, or how a policy is read).
- Five steps: acknowledge, investigate, communicate, resolve, document and follow up without retaliation.
- Open procedures catch problems early, build trust and show where policies fail; unresolved grievances can become industrial disputes.
Remember: Acknowledge, investigate, communicate, resolve, document.
- A trade union is an organised group of workers that protects and promotes their collective interests.
- Objectives: economic, protective, political and social.
- Types: craft (by skill), industrial (by industry), general (open to all), blue-collar and white-collar (by kind of job).
- The Trade Unions Act, 1926 was the main law; the Industrial Relations Code, 2020 now consolidates it.
- INTUC, AITUC, HMS and CITU are well-known central union organisations.
Remember: Economic, protective, political, social.
- Collective bargaining: negotiation between employee representatives, usually a union, and the employer on terms of employment.
- Features: collective, two sides, a continuing process, give and take.
- Five stages: preparation, negotiation, agreement, implementation, follow-up and renegotiation.
- The collective bargaining agreement runs for a fixed period; in India a conciliation settlement binds all workers, a direct agreement only its signatories.
- Levels: plant, industry, national. Bargaining is not the same as worker participation.
Remember: Prepare, negotiate, agree, implement, review.
- Distributive: win-lose over a fixed sum. Integrative: win-win through shared interests.
- Concessionary: union gives up benefits to protect jobs. Productivity: pay tied to output. Composite: many issues in one bargain.
- Benefits: better pay, workplace democracy, fewer disputes, better relations, higher morale.
- Challenges: multiplicity of unions, lack of unity, employer resistance, legal limits, globalisation.
Remember: Distributive wins and loses; integrative wins together.
- Closed shop: only union members hired. Open shop: free choice. Agency shop: no need to join, but all pay the union a fee.
- Arbitration: a neutral third party decides when talks fail. Grievance procedure: a formal route for a worker's complaint.
- Economic strike: failure to agree contract terms. Unfair labour practice strike: protest at illegal conduct by the employer.
- Wildcat strike: sudden and unapproved, such as during an agreement. Sympathy strike: one union supports another's strike.
Remember: Terms, employer's wrong, no approval, for another.
- Labour welfare: services, facilities and amenities for workers, over and above wages, from employers, unions, government and other bodies.
- Aims: health, comfort and morale for workers; a steadier workforce and better relations for employers.
- Seven theories (motives): policing, religious, philanthropic, paternalistic or trusteeship, placating, public relations, functional.
- Religious, philanthropic and paternalistic motives treat welfare as a favour, not a right.
- Trusteeship theory is related to Gandhi's trusteeship but is narrower.
Remember: Law, faith, love, guardianship, calm, image, output.
- By place: intra-mural (inside the workplace) and extra-mural (outside it).
- By provider: statutory (required by law), voluntary (employer's choice), mutual (workers' own effort).
- Examples: drinking water, canteen, crèche, rest rooms and first aid are intra-mural; housing, recreation and education are extra-mural.
- The Factories Act's basic amenities are now consolidated in the Occupational Safety, Health and Working Conditions Code, 2020.
- Not every extra-mural facility is voluntary; plantation law requires housing.
Remember: Place: in or out. Provider: law, employer, workers.
- Social security: protection against lost earnings from sickness, maternity, injury, old age and unemployment.
- Instruments: provident fund (retirement savings), employees' state insurance (medical and cash benefits), gratuity (employer's lump sum), maternity benefit, employee compensation (injury caused by work).
- The Code on Social Security, 2020, in force since 21 November 2025, consolidates the older laws; older exam questions use the old Acts' names.
- Welfare is facilities at or near work; social security protects income and health against life risks.
- Coverage gaps remain, especially for informal workers.
Remember: Provident fund, ESI, gratuity, maternity, compensation: one Code.
- A wage is pay by the hour, day or week; a salary is a fixed monthly or annual sum, whatever hours are worked.
- Minimum wage: the floor, owed whatever the industry's capacity to pay. Fair wage: between minimum and living. Living wage: frugal comfort, an aim.
- Eight influences on pay: ability to pay, labour supply and demand, prevailing rate, cost of living, the living-wage idea, productivity, union power, job requirements.
- The concepts say what a wage should be; the theories explain what sets it.
- In India the Code on Wages, 2019 consolidates four older laws, including minimum wages and bonus.
Remember: Minimum is the floor, living is the aim, fair sits between.
- Subsistence (associated with Ricardo; the name iron law is Lassalle's): wages settle at the natural price of labour.
- Wage fund (Mill): wage = a fixed fund ÷ number of workers. Surplus value (Marx): workers add more value than the wage replaces.
- Residual claimant (Walker): wage = output − (rent + interest + profit). Marginal productivity (Clark, Wicksteed): hire until the last worker's output equals the wage.
- Bargaining (Davidson): strength decides where the wage falls in a range. Behavioural: fairness, comparison and status matter, as in Jaques's felt-fair pay.
- No theory is complete: market and productivity set a range; bargaining and fairness place the wage in it.
Remember: Ricardo survives, Mill funds, Marx surplus, Walker leftover, Clark margin, Davidson bargains.
- Profit sharing: an agreement by which employees receive a share, fixed in advance, of the profits, in addition to regular wages.
- Forms: cash (current), company shares, deferred. Bases of division: service, percentage of wages, merit rating, attendance, performance, general record.
- Unlike a bonus, the rule is agreed in advance and continuing; only the amount varies with profit.
- Limits: weak link between one person's effort and profit, no payout in poor years, doubts about the accounts.
Remember: Fixed share, variable amount, on top of wages.
- Taylor: two piece rates, higher at or above the standard, lower below it; no guaranteed wage; a sharp jump at the standard.
- Merrick: three rates, basic below 83% of standard, 110% from 83% to 100%, 120% above 100%; no guaranteed wage; smaller steps than Taylor.
- Bedaux: Earnings = T × R + 75% × (S − T) × R, with time in B points; the base is the time taken, not the standard.
- All three need a fair standard from work study, and inspection of quality.
Remember: Taylor two rates, Merrick three, Bedaux 75 per cent of time saved.
- A group incentive plan pays one bonus pool to a whole team or plant, shared among its members.
- Priestman: bonus as a percentage of wages equals the percentage rise in output over the standard.
- Scanlon: labour cost against sales value; the saving is shared by an agreed split, with employee suggestion committees.
- Profit sharing is also a group plan, measured by profit.
- Risk: a weak link between one person's effort and the bonus, so some may ride on others.
Remember: Priestman output, Scanlon cost ratio, profit sharing profit.
- IHRM: the HR activities a firm carries out at the international level, to meet its objectives and gain an advantage over rivals at home and abroad.
- It does the usual HR functions across borders, plus expatriate management, relocation, cross-cultural training and language help.
- It differs from domestic HRM in scope, employees, activities, environment, involvement in personal lives and risk.
- Objectives: skills, performance, pay and careers of staff abroad, cross-cultural and language training, common practices, competitive strategies, less cultural friction.
- Comparative HRM compares countries; IHRM manages one firm across them.
Remember: More countries, more kinds of staff, more activities, more risk.
- PCN: citizen of the head-office country (home country employee), at head office or posted abroad. HCN: citizen of the unit's country. TCN: citizen of neither.
- The type depends on the firm and the unit, not on where a person works.
- Morgan (1986): three broad HR activities (procurement, allocation, utilisation), three country categories (home, host, other) and three employee types (PCN, HCN, TCN).
- Recruitment, training, appraisal and pay are examples of the work, not Morgan's headings.
- Nationality is a blunt label: dual nationals and long-term residents fit badly.
Remember: ACE: Activities, Countries, Employees.
- Perlmutter (1969) classified top management's orientation as ethnocentric, polycentric and geocentric; regiocentric was added in later work.
- Ethnocentric: PCNs in key posts, head office in control, little subsidiary autonomy. Strength: control. Weakness: local morale.
- Polycentric: HCNs run each subsidiary, which has more local autonomy; PCNs hold head-office posts. Weakness: head office and subsidiaries drift apart.
- Geocentric: the best person of any nationality; costly and slow. Regiocentric: managers from the region; the region can become a silo.
- These are ideal types: most firms mix them and change over time.
Remember: Ethno: home. Poly: host. Geo: best anywhere. Regio: the region.
- An expatriate is an employee sent to work in another country, for a long or short term. PCNs and TCNs can be expatriates; an HCN at home cannot.
- Six roles: direct control, socialisation, network builder, transfer of competence and knowledge, boundary spanner, language node.
- The cycle: selection, preparation (with cross-cultural training), compensation, support, performance review, then repatriation.
- Balance-sheet approach: keep the home standard of living by comparing costs in four groups (income tax, housing, goods and services, savings), paying the gaps, and adding incentives.
- Failure often traces to the family's adjustment, poor selection, weak preparation or weak support; popular failure figures are shaky.
Remember: Control, socialise, network, transfer, span, speak.
- Repatriation: an expatriate's return to the home country after the assignment. Four stages, in order: preparation, physical relocation, transition, readjustment.
- Readjustment brings reverse culture shock and career worries: the post, status, pay and use of new skills.
- Keep the knowledge: agree the next post early, keep a mentor at head office, hold a debriefing, use her skills, ask her to brief the next expatriate.
- The four stages are the firm's tasks; the U-curve describes feelings over time.
- Cultural distance shapes the whole cycle; Hofstede's dimensions give the vocabulary for it.
Remember: Prepare, relocate, transition, readjust.
- Green HRM: HR policies, practices and systems that encourage green behaviour, so that the organisation is environmentally sensitive, resource-efficient and socially responsible.
- It is the people side of environmental management: attitudes, skills and daily habits. Engineers and facilities teams handle the technology.
- The chain: green HR practices, green employee behaviour, resource efficiency, environmental sustainability.
- Why firms do it: lower costs, meeting expectations, employer brand, employee commitment and responsibility to society.
- Limits: the definitions are broad, and much evidence rests on what employees report. Sustainable HRM is the wider idea.
Remember: People change habits; habits change resource use.
- Five dimensions, in order: green products and services; green workforce; green workplace; green function or process model; green management and governance.
- Products and services: waste and pollution management, resource replacement, sustainable design, adaptive reuse. Workforce: recruiting, training, careers, culture.
- Workplace: buildings, ergonomics, virtual work, energy. Function or process: sustainability in each HR function. Governance: board accountability, incentives, reporting.
- Do not confuse the list with the key strategic dimensions of Strategic HRM.
- The list organises ideas; its dimensions overlap and its author is rarely named.
Remember: Products, workforce, workplace, process, governance.
- Six stages: sourcing and acquisition, recruitment and selection, orientation, learning and development, performance management, compensation and rewards.
- Sourcing puts green targets in job descriptions and awareness in the competency model. Recruitment uses online applications, e-resumes and video interviews.
- Orientation builds a green culture. Learning and development builds green skills, with job rotation through green assignments.
- Performance management sets green indicators and targets. Rewards recognise green skills and results, and link executive pay to emission and renewable-energy targets.
- A policy states the aim; a practice is what people actually do.
Remember: Recruit, orient, train, measure, reward, retain.
- Practices: paperless HR, virtual meetings and interviews, energy saving, recycling, green commuting, flexible work, green rewards and employee involvement.
- Green KPIs work at three levels: activity (did we do it), behaviour (do people act differently), result (did resource use fall).
- Set a baseline and report use per employee and the total. Each figure alone can mislead.
- Activity is not impact: training 90% of staff is not a lower electricity bill.
- Flexible work can shift energy use rather than cut it. Exams pair green workplace with resource efficiency and flexible work with lower travel emissions.
Remember: Do it, see it, count it: activity, behaviour, result.
- Greenwashing: a false or misleading impression of how green the firm is. Test it with baseline, target, owner and consequence.
- Resistance: green rules add effort or look imposed. Explain the reason, involve staff, give tools, show results and offer alternatives.
- Cost: costs come first and savings later. If savings fall short, say so and rest the case on gains that are harder to count.
- Green HRM is one part of CSR, not the whole. Legal limits on pollution are the minimum it aims to go beyond.
- Goals: green HRM bears on SDG 12 (responsible consumption and production), 13 (climate action), 7 (clean energy), and 8 through fair work.
Remember: Claim only what you can count.
Unit 4Managerial Accounting
- Entity: the business is separate from its owner. Owner’s money put in is capital; owner’s withdrawals are drawings.
- Money measurement: only what has a reliable money value is recorded.
- Cost: assets are shown at what was paid, not at later market value.
- Cost is objective but understates old assets in inflation.
Remember: Entity: the owner stands apart. Money: only what a rupee can measure. Cost: what you paid.
- Dual aspect: every transaction has a debit and an equal credit.
- Assets = Liabilities + Capital, and it holds after every transaction.
- Debit increases assets and expenses; credit increases liabilities, capital and income.
- Balanced books can still hold wrong entries.
Remember: Two sides, one amount: debit equals credit.
- Going concern: the business is assumed to continue, so assets are valued for use and depreciated.
- Periodicity: a business’s life is divided into equal periods; in India the financial year is 1 April to 31 March.
- If going concern fails, the basis changes and must be disclosed.
- Periods force estimates, and the year-end cut-off matters.
Remember: Going concern: the business goes on, so spread the cost. Periodicity: cut the life into years.
- Realisation: revenue is counted when earned, not when cash is received.
- Accrual: revenues and costs are counted when they occur, in the period they belong to.
- Matching: set each period’s costs against the revenue they earned.
- Profit is not cash; credit sales and unsold stock tie cash up.
Remember: Earn it, count it. Use it, count it. Match cost to the sale.
- Disclosure: show all material facts, such as contingent liabilities in the notes.
- Consistency: use the same methods each year; justify and disclose changes.
- Conservatism: anticipate no profit, provide for all possible losses; stock at lower of cost and net realisable value.
- Materiality: detail only what could change a user’s decision.
Remember: Disclose it. Keep it consistent. Provide for losses, not for gains. Ignore the trivial.
- Standards fix how items are recorded, measured, shown and disclosed.
- ICAI recommends; the Central Government notifies under section 133 of the Companies Act, 2013, after consulting NFRA.
- AS 2, 3, 9, 19, 20 and Ind AS 109, 110, 113, 115, 116 are the numbers to recall.
- Ind AS follow IFRS; they apply to listed and larger unlisted companies.
Remember: ICAI recommends, the Government notifies. AS for most, Ind AS for the large and listed.
- Balance sheet: position on a date; Assets = Liabilities + Equity.
- Profit and loss: performance over a period; Income − Expenses = Profit.
- Cash flow: Closing cash = Opening cash + Net change; changes in equity: Opening + Profit + Shares − Dividends = Closing.
- Notes explain the figures; Schedule III sets the company layout.
Remember: Position at a date, performance over a period, cash by activity, owners’ funds, and notes.
- Steps: record, journal, ledger, trial balance, adjust, adjusted trial balance, statements, approval.
- Steps 1 to 4 run through the year; 5 to 8 at year-end.
- The trial balance proves arithmetic only: omission, commission, principle and compensating errors can hide in it.
- The board approves the statements, and the statutory auditor reports on them.
Remember: Record, journal, ledger, test, adjust, retest, report, approve.
- Depreciation allocates an asset’s cost over its useful life; it sets no cash aside.
- Outstanding expense: add it. Prepaid expense: remove the part for the future.
- Accrued income is earned not received; unearned income is received in advance.
- A provision is charged to profit for a likely loss; a reserve is profit kept back.
Remember: Wear it, owe it, prepay it, doubt it.
- Reasons: uniformity, transparency, global alignment, fraud prevention, guidance for auditors.
- Two sets in India: AS (2006 Rules) and Ind AS (2015 Rules, converged with IFRS).
- Convergence means harmony, not copying.
- ICAI drafts, NFRA advises, the Ministry notifies.
Remember: ICAI drafts, NFRA advises, MCA notifies; convergence is harmony, not copying.
- IFRS: IASB, global. Ind AS: notified by the Ministry, India only.
- Both require a statement of compliance; Indian layouts come from Schedule III.
- Phases started on 1 April 2016, by net worth and listing; thresholds have been amended.
- Ind AS use more fair values and estimates, so they depend more on judgement.
Remember: IASB makes IFRS; the Ministry notifies Ind AS; companies join by phase.
- Ind AS 2/AS 2, 7/AS 3, 10/AS 4, 16/AS 10, 19/AS 15, 33/AS 20, 36/AS 28, 37/AS 29, 38/AS 26.
- Ind AS 115 matches AS 9 (revenue); Ind AS 116 matches AS 19 (leases).
- Ind AS 109, 110 and 113 have no full AS counterpart.
- Always check a pairing against the standard; some notes print wrong pairs.
Remember: Same topic, different number, different content.
- A ratio divides one accounting figure by another so that firms and years can be compared.
- Four families: liquidity, profitability, activity (turnover) and solvency.
- Read a ratio against the firm’s trend, similar firms and a standard, never alone.
- Ratios use past accrual figures; they show that something looks odd, not why.
Remember: Short-term, earning, efficiency, long-term.
- Traditional: income statement, balance sheet, composite. Functional: liquidity, profitability, activity, solvency.
- Different users want different ratios: short-term creditors liquidity, long-term lenders solvency.
- Advantages: simpler statements, trends, control, links between parts.
- Limits: qualitative factors, single-year ratios, defective accounting data.
Remember: Where the figures come from, and what the ratio tests.
- Current ratio = Current assets ÷ Current liabilities; convention about 2 : 1.
- Quick ratio = (Current assets − Inventory) ÷ Current liabilities; about 1 : 1.
- Cash ratio = Cash and equivalents ÷ Current liabilities.
- A very high ratio can mean idle cash, slow stock or unpaid debtors.
Remember: Current: all. Quick: no stock. Cash: cash only.
- Gross profit ratio = Gross profit ÷ Net sales × 100 (30% here).
- Net profit ratio = Net profit ÷ Net sales × 100 (8.4%).
- ROA = Net profit ÷ Total assets (10.5%); ROE = Net profit ÷ Equity (17.5%).
- P/E = Share price ÷ EPS (15); a high ROE built on heavy debt is not a safe one.
Remember: Gross, net, assets, equity: the base moves from sales to what is invested.
- Operating ratio + operating profit ratio = 100%.
- ROCE = EBIT ÷ (Debt + Equity) × 100, also Fixed assets + Working capital.
- EPS = (Profit after tax − Preference dividend) ÷ Equity shares.
- A bonus issue lowers EPS without lowering profit.
Remember: Operating ratio plus operating profit ratio makes 100.
- Inventory turnover = Cost of goods sold ÷ Average inventory.
- Debtors turnover = Net credit sales ÷ Average receivables; creditors turnover uses credit purchases.
- Asset turnover = Net sales ÷ Total assets (1.25 for Kaveri).
- Days = 365 ÷ turnover; stock days + debtors days − creditors days is the cash cycle.
Remember: Stock on cost, debtors on credit sales, creditors on purchases, assets on sales.
- Debt-to-equity = Total debt ÷ Equity (0.42 for Kaveri).
- Debt ratio = Total debt ÷ Total assets (0.25).
- Interest coverage = EBIT ÷ Interest (7 times).
- Debt is not bad in itself; it magnifies both gains and losses.
Remember: Debt against owners, against assets, and profit against interest.
- Funds = working capital = current assets − current liabilities.
- A flow of funds is a change in working capital.
- Only current ↔ non-current transactions move funds.
- Cash is only part of working capital; the cash flow statement covers cash.
Remember: Cross the line, move the funds.
- Current asset up → working capital up; current asset down → down.
- Current liability up → working capital down; current liability down → up.
- The schedule uses current items only, for two balance sheet dates.
- Its net result must equal the gap between sources and applications.
Remember: Assets up, working capital up. Liabilities up, working capital down.
- Sources: funds from operations, issue of shares or debentures, long-term loans, sale of fixed assets.
- Applications: purchase of fixed assets, repaying loans, dividends, losses.
- Sources − Applications = change in working capital.
- Add back non-fund charges such as depreciation; they are not sources.
Remember: Long-term in is a source, long-term out is an application.
- Operating: the main business, including tax; investing: long-term assets; financing: owners and lenders.
- Cash includes cash in hand, demand deposits and cash equivalents.
- Non-cash transactions are excluded.
- The class of an item depends on the firm’s business.
Remember: Operating: the business. Investing: the assets. Financing: owners and lenders.
- Indirect: profit before tax + non-cash items ± working capital changes − tax paid.
- Direct: cash received from customers − cash paid to suppliers and employees − tax.
- A rise in a current asset lowers cash; a rise in a current liability raises it.
- Both methods give the same answer.
Remember: Asset up, cash down. Liability up, cash up.
- Funds = working capital; cash = cash and equivalents.
- Operating + Investing + Financing = Net change in cash.
- Closing cash = Opening cash + Net change.
- A firm can grow working capital while its cash falls.
Remember: Funds for the structure, cash for the survival.
- Cost accounting: record, classify, analyse and control costs.
- Aims: cost control, pricing, inventory valuation, profitability, budgeting.
- Methods: job, batch, process, contract, ABC. Techniques: standard, marginal, budgetary, uniform.
- It serves management; financial accounting serves outsiders.
Remember: Methods follow the product; techniques follow the question.
- Fixed: constant with output. Variable: moves with output. Semi-variable: both.
- Direct: traceable to a product. Indirect: not.
- Elements: material, labour, expenses and overheads.
- Prime cost = DM + DL + direct expenses; total cost = prime cost + overheads.
Remember: Fixed is stuck, variable follows; direct is traced, indirect is shared.
- Prime cost + factory overheads = factory cost.
- Factory cost + administrative overheads = cost of production.
- Cost of production + selling and distribution overheads = total cost.
- Total cost + profit = selling price; check whether profit is on cost or on sales.
Remember: Prime, factory, production, sales, price.
- ABC: resources → activities → products, by cost drivers.
- Cost pool: indirect costs with similar behaviour. Cost driver: the cause of the cost.
- Driver rate = Pool cost ÷ Driver units.
- Drivers: transaction (count), duration (time), intensity (direct charge).
Remember: Activities cause costs; products use activities.
- Four steps: identify activities; pool costs; choose drivers; charge products.
- Four levels: unit, batch, product, facility.
- ABC changes the split of overhead, not the total.
- Facility-level costs still have no true driver.
Remember: Pool the cost, find the driver, charge by use.
- Life cycle cost = acquire + operate + support + dispose, usually discounted.
- Product LCC: research to withdrawal. Project LCC: purchase to disposal of an asset.
- Uses: choose between assets, judge benefits, build accurate budgets.
- The cheapest asset to buy is not always the cheapest to own.
Remember: Count the cost of owning, not just the cost of buying.
- Target cost = Selling price − Desired profit.
- Price is set by the market, so cost is managed from the design stage.
- Steps: research, maximum cost, design, adjust, improve, approve, record, implement.
- Benefits: profit, innovation, customer satisfaction, efficient production.
Remember: Price first, profit second, cost is what is left.
- Kaizen: continuous improvement by everyone, in small steps.
- Kaizen costing: regular cost-reduction targets and variance review.
- Seven wastes: over-production, inventory, waiting, defects, motion, transportation, over-processing.
- Different from re-engineering (radical) and from standard costing (fixed yardstick).
Remember: Small cuts, every month, by everyone.
- JIT: the right unit, in the right quantity, at the right time.
- Origin: Toyota; Taiichi Ohno.
- Four environments: production, inventory, services, information.
- Needs reliable suppliers, steady quality and tight schedules.
Remember: The right unit, in the right quantity, at the right time.
- Contribution = Sales − Variable cost; per unit = Price − Variable cost per unit.
- P/V ratio = Contribution ÷ Sales × 100.
- Profit = Contribution − Fixed costs.
- Absorption costing carries fixed cost into stock, so its profit is higher when stock rises.
Remember: Variable costs go in the product; fixed costs wait in the period.
- Marginal cost = variable cost of one more unit; also called variable or contributory costing.
- Features: only variable costs in product cost; fixed costs charged to the period; stock at variable cost.
- Advantages: decision data, profit planning, no arbitrary fixed-cost sharing.
- Limits: semi-variable costs are hard to split; ignores fixed costs in decisions; not for published accounts.
Remember: Extra unit, extra variable cost; fixed cost waits for the contribution.
- Break-even (units) = Fixed costs ÷ Contribution per unit.
- Break-even (₹) = Fixed costs ÷ P/V ratio.
- Margin of safety = Actual sales − Break-even sales.
- Target profit: add the desired profit to fixed costs before dividing.
Remember: Break-even is where contribution equals fixed cost.
- Marginal cost equation: S − V = F + P; C = F + P.
- At break-even C = F; in the margin of safety C = P.
- P/V ratio = Change in profit ÷ Change in sales; MoS = Profit ÷ P/V.
- Angle of incidence: the angle at which sales cut total cost; wide means high profit-earning capacity.
Remember: Break-even: contribution equals fixed cost. Above it: contribution equals profit.
- Use only the costs and revenues that change with the decision.
- Special order: accept if price exceeds variable cost, there is spare capacity and no spill-over.
- Make or buy: compare the avoidable cost, not the full cost.
- Marginal pricing cannot be the rule for every sale; fixed costs must be recovered.
Remember: Ask what changes. Ignore what stays.
- Standard cost: predetermined cost under good conditions.
- Variance = Standard cost − Actual cost; F if actual is lower, A if higher.
- MCV = MPV + MUV; LCV = LRV + LEV + LITV; VOCV = VOEV + VOEEV; FOCV = FOEV + FOVV.
- A variance is a question to investigate, not a verdict.
Remember: Set, measure, compare, find the cause, act.
- Standard cost: predetermined cost based on a technical estimate for stated conditions.
- Standard says what cost should be; estimate says what it will be.
- Kinds: ideal, basic, current, expected, normal.
- Best for repetitive products; poor for jobbing work.
Remember: Standard: should be. Estimate: will be.
- MPV = AQ × (SP − AP); MUV = SP × (SQ − AQ); MCV is their sum.
- LRV = AH × (SR − AR); LEV = SR × (SH − AH worked); LITV = idle hours × SR.
- SQ and SH are the standards for the actual output.
- Mix and yield together make up the usage variance when several materials are used.
Remember: Price for what you pay, usage for what you use.
- VOEV = AH × (SR − AR); VOEEV = SR × (SH − AH).
- FOEV = Budgeted − Actual; FOVV = Standard − Budgeted; FOCV = Standard − Actual.
- Standard fixed overhead = standard hours for actual output × standard rate.
- A volume variance tests the plan more than the spending.
Remember: Variable: spend and speed. Fixed: spend and volume.
- Sales value variance = Actual sales − Budgeted sales.
- Price variance = Actual quantity × (Actual price − Standard price).
- Volume variance = Standard price × (Actual quantity − Budgeted quantity).
- Sign rule for sales: actual above standard is favourable, the opposite of costs.
Remember: Sales: actual minus standard, so above is favourable.
- Budgeting: a financial plan for a period; budgetary control: compare, find variances, act.
- Functions: planning, coordination, control, performance evaluation, discipline.
- Steps: objectives, budgets, comparison, variance analysis, corrective action.
- The key budget factor is the limit that fixes the first budget.
Remember: Plan, act, compare, correct.
- Sales budget → production budget → materials and purchase budgets → cash budget.
- Units to produce = Sales + Closing stock − Opening stock.
- Cash budget methods: receipts and payments, adjusted profit and loss, balance sheet.
- The master budget is a summary of all, with a projected profit and loss account and balance sheet.
Remember: Sales first, then production, then purchases; cash tells whether it can be paid.
- Fixed budget: unchanged with activity; simple but rigid.
- Flexible budget: recalculated for actual output; used for fair variance analysis.
- ZBB: identify decision units, develop packages, rank them, approve and fund.
- Zero-based means no assumption that past costs are justified.
Remember: Fixed is rigid; flexible follows the work; zero-based starts again.
- Financial management: planning, raising, using and controlling funds.
- Objectives: profit maximisation, wealth maximisation, liquidity, risk minimisation.
- Three decisions: investment, financing, dividend.
- Wealth maximisation is the preferred objective in most textbooks.
Remember: Where to invest, how to raise, how much to give back.
- Seven functions: planning, investment, financing, liquidity, risk, dividend, reporting.
- The manager plans, raises capital, controls, advises and ensures compliance.
- The accountant records the past; the financial manager decides the next step.
- Liquidity is the function that fails first.
Remember: Plan, invest, fund, keep liquid, cover risk, pay out, report.
- Payback ignores the time value of money and cash flows after recovery.
- NPV > 0: accept. IRR > cost of capital: accept.
- The cost of capital is the discount rate for NPV and the hurdle for IRR.
- Residual theory: pay out only what remains after funding good projects.
Remember: Positive NPV adds value; IRR above the cost of capital agrees.
- Five bases: time, ownership, origin, nature, control.
- Long-term: over 5 years; medium: 1–5 years; short: up to 1 year.
- Owned capital is permanent; borrowed capital is repayable with interest.
- ‘External’ does not always mean ‘borrowed’.
Remember: Time, ownership, origin, nature, control.
- Equity: ownership, votes, variable dividend; highest risk and cost.
- Preference: fixed dividend, priority over equity, usually no vote.
- Retained earnings: internal, cheap to raise, but with an opportunity cost.
- Preference shares are shares, not debt, and dividends are not tax-deductible.
Remember: Equity shares the risk, preference shares the order, retention shares nothing.
- Long-term: debentures and bonds, long bank loans.
- Medium-term: public deposits, hire purchase, leases.
- Short-term: trade credit, overdraft, bills discounting, commercial paper, factoring.
- Interest on debt is tax-deductible; dividends are not.
Remember: Match the life of the money to the life of the need.
- Cost of capital: the required return of providers of finance.
- Explicit: paid in cash. Implicit: opportunity cost. Specific: one source. WACC: all, weighted.
- Factors: risk, capital structure, dividend policy, tax, market conditions, credit rating.
- Accept projects that earn more than the cost of capital.
Remember: Risk up, required return up, cost of capital up.
- Kd after tax = I(1 − T) ÷ NP; Kp = Dp ÷ NP.
- Ke by dividend growth, earnings yield or CAPM.
- Kr ≈ Ke: retained profit has an opportunity cost.
- Use net proceeds (after issue costs) in the denominator.
Remember: Debt after tax, preference on net proceeds, equity by one of three routes.
- WACC = wdKd + wpKp + weKe + wrKr; weights sum to 1.
- Debt is taken after tax.
- Project return above WACC adds value; below it reduces value.
- Marginal cost of capital is the cost of the next increment.
Remember: Weight each cost by its share, then add.
- NI: debt up → Ko down → value up; in theory 100% debt.
- NOI: debt up → Ke up → Ko constant → value constant; V = EBIT ÷ Ko.
- Both rest on assumptions about investors, not proof.
- Real firms lie between them.
Remember: NI: more debt, more value. NOI: more debt, same value.
- No taxes: VL = VU; capital structure is irrelevant.
- Ke rises with leverage: Ke = Ko + (Ko − Kd) × D/E.
- With taxes: VL = VU + T × D; debt adds value via the interest tax shield.
- Homemade leverage: investors can borrow themselves, so the firm’s mix adds nothing.
Remember: Without taxes: irrelevant. With taxes: debt gives a shield.
- Trade-off: tax shield ↔ distress costs.
- Pecking order: internal funds → debt → equity (Myers and Majluf).
- Agency cost: debt discipline ↔ monitoring costs and conflicts.
- Market timing: issue equity when overvalued, buy back when undervalued.
Remember: Trade off the shield, peck from inside, discipline with debt, time the market.
Unit 6Strategic Management
- Strategy integrates activities, commits resources for the long term and anticipates customers, competitors and employees.
- Chandler (1962): long-term goals plus courses of action and resources. Thompson and Strickland: means to ends. Porter (1996): being different.
- Mintzberg's five Ps (1987): plan, ploy, pattern, position, perspective.
- Operational effectiveness, doing the same things better, is not strategy: rivals can copy it.
Remember: Strategy bridges the gap between where we are and where we want to be.
- A stream of decisions and actions, in businesses, cooperatives, government bodies and non-profits.
- David: formulating, implementing and evaluating cross-functional decisions; strategic planning in the narrow sense is formulation only.
- It exploits and creates new opportunities, where long-range planning optimises today's trends.
- Its result is a strategic plan: hard choices among good alternatives that commit the firm.
Remember: Formulate, implement, evaluate, across every function.
- Step 1 scanning, step 2 formulation, step 3 implementation, step 4 evaluation.
- It is a continuing cycle: evaluation feeds back into scanning.
- Its aim is strategic alignment of resources, structure and capabilities with objectives.
- Fred David's model has three stages and treats scanning as part of formulation.
Remember: Scan, formulate, implement, evaluate, and begin again.
- Mintzberg's three modes (1973): entrepreneurial, adaptive and planning.
- Adaptive mode is Lindblom's ‘muddling through’ (1959).
- Quinn's logical incrementalism (1980): set the mission, then learn through partial commitments.
- Mintzberg and Waters (1985): realised strategy mixes deliberate and emergent strategy; some intended strategy is never realised.
Remember: Strategy can be planned, improvised, bargained over or learned along the way.
- Strategic intent (Hamel and Prahalad, 1989): a long-term aspiration with a strong competitive focus.
- It stretches resources and competencies, clarifies priorities, focuses effort and motivates people.
- Hierarchy: vision, mission, goals, objectives, each supporting the one above.
- The intent fixes the destination and stays steady; the plan says how, and changes.
Remember: Vision, mission, goals, objectives: from aspiration to target.
- Vision: where do we want to be? Future; inspires and gives direction. Clear, realistic, memorable and shared.
- Mission: what do we do, for whom and why? Present; defines scope and frames strategy.
- A mission has purpose, core values and main goals, and should be feasible, clear, inspiring, precise, distinctive and credible.
- Vision: the future it wants. Mission: what it does now, for whom, and the goals it is working towards.
Remember: Vision looks ahead; mission says what we do now.
- Goals are precise, measurable, realistic yet challenging, time-bound, and include non-financial results.
- Objectives are set by top management, multiple, short and long term, flexible, feasible and operational.
- SMART: specific, measurable, achievable, realistic, time-bound (Doran, 1981, had ‘assignable’).
- One number invites gaming; pair targets, such as waiting time with errors.
Remember: Goals make the mission concrete; objectives make goals measurable.
- Strategic decisions commit major resources, define scope, involve major change, are made at the top and carry risk.
- Ansoff: strategic (long term, infrequent), administrative (medium term, periodic), operational (short term, daily).
- Example: enter a new line or compete on cost (strategic), reorganise to do it (administrative), schedule shifts (operational).
- Strategic is not the same as expensive; and strategy can also emerge from many small decisions.
Remember: Strategic decisions are few, far-reaching and hard to reverse.
- Corporate: which industries and markets, and how to divide resources; made by top management and the board.
- Business: how this business competes; made by SBU heads.
- Functional: how each department supports the business strategy. Operational: how a plant, territory or section meets immediate targets.
- Each level is formulated in line with the one above; in a single-business firm corporate and business merge.
Remember: Corporate: where to compete. Business: how to compete. Functional and operational: how to deliver.
- Business strategy uses competitive and cooperative strategies to gain an advantage; it must be sustainable to last.
- Porter's generic strategies: cost leadership, differentiation, cost focus, differentiation focus; avoid being stuck in the middle.
- Blue ocean strategy creates uncontested space; key success factors decide who can compete.
- Focus is a deliberate choice of segment, not just being small.
Remember: Low cost or different; broad or focused.
- Its purpose is to find the opportunities and threats that drive profitability, growth and volatility.
- Industry level: competitive structure, the firm's position, dynamics and history. Macro level: economic, global, political, social, demographic and technological conditions.
- Elements include supply chain, industry, economic trends, competitors, demographics, life cycle and PESTEL.
- External analysis finds opportunities and threats; internal analysis finds strengths and weaknesses. Strategy needs both.
Remember: Look outside for opportunities and threats.
- PEST: political, economic, social, technological; PESTEL adds environmental and legal.
- Used in corporate planning and to weigh the pros and cons of a strategy.
- Rank the changes by likelihood and impact; the top few become the opportunities and threats in a SWOT.
- Political is business and government; legal is the laws that define what business may do.
Remember: Political, Economic, Social, Technological, Environmental, Legal.
- Forces: new entrants, supplier power, buyer power, substitutes, rivalry (Porter, 1979).
- Intense forces (airlines) leave little profit; mild forces (soft drinks) leave room for higher returns.
- A low concentration ratio, such as a CR4 of 20%, signals intense rivalry.
- A substitute meets the same need in a different way; a rival sells the same product.
- Complementors are sometimes added as a sixth force; Porter treats them as a factor affecting the five.
Remember: Entrants, suppliers, buyers, substitutes, rivalry.
- Simple version: introduction, growth, maturity, decline; profitability usually peaks in growth and maturity.
- Hill and Jones: embryonic, growth, shakeout, maturity, decline.
- Entry threat is highest in growth, though fast growth keeps rivalry low; rivalry is intense in shakeout and decline.
- Growth: build scale and brand. Maturity: segment and protect margins. Decline: lead what remains or leave early.
Remember: Embryonic, growth, shakeout, maturity, decline.
- Internal analysis examines the firm's own resources, assets and processes, tangible and intangible.
- It finds strengths and structural weaknesses, and how ready the firm is for opportunities and threats.
- Tools: gap analysis, strategy evaluation, SWOT, VRIO, OCAT, 7-S, core competencies, value chain.
- Value chain (Porter, 1985): five primary and four support activities; margin is what customers pay minus what the activities cost.
Remember: Find the gap, then trace it along the chain.
- Advantage comes from inside: resources and capabilities, not industry position.
- Tangible resources can be bought; intangible ones are hard to imitate and give lasting advantage.
- Resources are heterogeneous and immobile; core competences pass three tests (Prahalad and Hamel).
- Criticism: the argument comes close to a circle, and it says little about building resources.
Remember: Look inside: lasting advantage lies in what rivals cannot buy or copy.
- Barney (1991): VRIN; later recast as VRIO, with organisation replacing non-substitutability.
- Not valuable: disadvantage; not rare: parity; easy to imitate: temporary; not organised: unused.
- Ask the questions in order; the first "no" gives the result.
- Answers are judgements, and the result holds only until the market changes.
Remember: Valuable, Rare, costly to Imitate, Organised.
- Waterman, Peters and Phillips (1980): seven interdependent elements.
- Hard: strategy, structure, systems. Soft: shared values, style, staff, skills.
- Shared values are the glue; a change in one element needs changes in the others.
- The model says what must fit, not how or in what order to change it.
Remember: Hard: strategy, structure, systems. Soft: shared values, style, staff, skills.
- SWOT: internal strengths and weaknesses, external opportunities and threats.
- TOWS (Weihrich, 1982): SO maxi-maxi, ST maxi-mini, WO mini-maxi, WT mini-mini.
- SWOT gives no weights; lists are often long, vague and unused.
- Build it from external analysis, the value chain and VRIO, not from opinion.
Remember: SWOT lists the factors; TOWS turns them into strategies.
- The business portfolio is the collection of businesses and products that make up the company (Kotler and Armstrong).
- Two steps: analyse the current portfolio, then shape the future one with growth and downsizing strategies.
- The unit of analysis is the SBU: a division, product line or brand that can be planned on its own.
- Each SBU is rated on market attractiveness and the strength of its position; businesses also share costs, so ratings start the argument, not end it.
Remember: Rate each business on market attractiveness and its own strength.
- Axes: market growth rate (attractiveness) and relative market share, own share ÷ largest rival's (strength).
- Star: build or hold; cash cow: hold or harvest; question mark: build or phase out; dog: harvest or divest.
- SBUs often move from question mark to star to cash cow to dog; cash cows fund the rest.
- Limits: one measure per axis, share is not always profit, a dog may still have strategic value, and market definition shifts the result.
Remember: Stars, cash cows, question marks, dogs: build, hold, harvest, divest.
- Developed by McKinsey for General Electric in the early 1970s.
- Axes are weighted scores: industry attractiveness (external) and business unit strength (internal).
- Each score: multiply weight by rating for every factor, add, then call it high, medium or low.
- Zones: invest/grow, selectivity/hold, harvest/divest; richer but more subjective than BCG.
Remember: Nine cells, three zones: grow, hold, harvest.
- Corporate strategy sets which businesses to be in and how to allocate resources among them.
- The wheel: stability, growth, integration, diversification, cooperation, retrenchment, combination.
- Glueck's grouping: stability, expansion, retrenchment and combination; the other options are routes to expansion.
- Grand strategy chooses businesses; business strategy chooses how to compete in one.
Remember: Stability, expansion, retrenchment, or a combination.
- Expansion seeks growth, profit, share and scale; strategists must tell desirable from undesirable expansion.
- Five routes: concentration, integration, diversification, cooperation, internationalisation.
- Concentration takes three forms: market penetration, market development and product development.
- Its risk is dependence: one shift in the market can undo it.
Remember: Concentrate: penetrate the market, develop the market, or develop the product.
- Ansoff (1957): grow by changing products, markets or both.
- Market penetration (lowest risk), product development, market development, diversification (highest risk).
- Penetration sells more to the same buyers; development finds new buyers for the same product.
- The grid shows direction, not payoff; related diversification lowers the risk.
Remember: Penetration, product development, market development, diversification: risk rises as you leave home.
- Backward: acquire or control suppliers; reliable supply, better control of quality and cost.
- Forward: acquire or control distributors and retailers; market access, higher margins.
- Horizontal: merge with or acquire competitors; share, scale, less competition.
- Costs: capital tied up, less flexibility, and competition-law review for large horizontal deals.
Remember: Backward to suppliers, forward to customers, horizontal to rivals.
- Related (concentric): synergies in technology, brand, channels and competencies; lower risk.
- Unrelated (conglomerate): spreads risk across sectors; higher risk, and new skills needed.
- Ansoff's horizontal: new products for existing customers; concentric: draws on existing technology or marketing.
- Judge an example by what the new business shares with the old.
Remember: Related for synergy; unrelated for spreading risk.
- Merger: A + B = C. Acquisition: A + B = A.
- Joint venture: a new jointly owned company, parents continue. Alliance: cooperation with no new company.
- Co-opetition (Brandenburger and Nalebuff, 1996): competing and cooperating at once.
- On average, acquisitions do little for the buyer's own performance; buyers often overpay.
Remember: Merge, acquire, venture jointly, or ally.
- Entry ladder: exporting, licensing, joint venture, local manufacturing, wholly owned subsidiary.
- Two pressures (after Bartlett and Ghoshal): cost reduction and local responsiveness.
- Global (cost high, local low); multi-domestic (local high, cost low); international (both low); transnational (both high).
- Many firms skip stages; born-global firms sell abroad from the start.
Remember: Global, multi-domestic, international, transnational.
- Turnaround (minor crisis), divestment (moderate), liquidation (serious, the last resort).
- Harvest: cut investment and draw cash before exit.
- Divestment sells a running business; liquidation sells assets piece by piece.
- Combination (Glueck): stability, expansion and retrenchment in different units or over time.
Remember: Turn around, divest, harvest, or liquidate; or combine.
- Implementation turns strategy into actions, tasks and programmes.
- It involves structure, resources, policies, people, culture, leadership, and information and reward systems.
- Formulation is intellectual and before action; implementation is operational and during action.
- The two overlap: what is learned in implementing reshapes the strategy.
Remember: A strategy is only as good as its execution.
- Common challenges: weak strategy, poor goals, misalignment, poor training, lack of resources, poor communication, no follow-through, people not connected, no measures.
- ‘You manage what you measure’: set measurable goals and leading indicators.
- Three forms: structural, behavioural (leadership) and functional and operational.
Remember: Clear goals, alignment, training, resources, communication, follow-through, measures.
- Commander and organisational change: top management decides and drives it through.
- Collaborative: senior managers formulate together; cultural: employees empowered, managers coach.
- Crescive: strategy grows from lower-level ideas; top management judges.
- They are five approaches, not four challenges; real leaders mix them.
Remember: Commander, change, collaborative, cultural, crescive.
- Uses: organisational change, implementing a new strategy, anticipating future change, aligning units in a merger.
- Each element has diagnostic questions; all seven deserve equal attention.
- Steps: identify misalignment, design the optimum, plan changes, make them, review continuously.
- The model shows what must fit, not how or in what order to change it.
Remember: Find the misfits, design the fit, plan, change, keep reviewing.
- Fred David: review the factors, measure performance, take corrective action.
- Strategic control: premise, implementation, surveillance, special alert.
- Balanced scorecard (Kaplan and Norton, 1992): financial, customer, internal process, learning and growth.
- Financial measures lag; the other three perspectives give early warning.
Remember: Review the premises, measure the results, correct the course.
Unit 7Marketing Management
- The AMA (2017) and Kotler define marketing as creating and exchanging value with others; Kotler and Keller: “meeting needs profitably”.
- Need is felt deprivation; want is the form it takes; demand is a want backed by ability and willingness to pay.
- Marketing works through exchange and adds form, place, time, possession and information utility.
- Drucker: the aim of marketing is to make selling superfluous.
Remember: Need, want plus buying power, demand.
- Marketing management is demand management: the level, timing and composition of demand.
- Negative demand needs conversional marketing; no demand, stimulational; latent, developmental; declining, remarketing.
- Irregular demand needs synchromarketing; full demand, maintenance marketing.
- Overfull demand needs demarketing; unwholesome demand, countermarketing.
Remember: Negative, none, latent, declining, irregular, full, overfull, unwholesome.
- Six philosophies: production, product, selling, marketing, societal and holistic; all still exist today.
- Marketing myopia (Levitt, 1960) defines a business by its product, not the need it meets.
- Levitt: selling serves the seller's need, marketing the buyer's. Kotler and Armstrong: selling is inside-out, marketing outside-in.
- Holistic marketing: relationship, integrated, internal and performance marketing (once called socially responsible).
Remember: Production, product, selling, marketing, societal, holistic.
- The marketing mix is a set of controllable tools; Borden popularised the term, McCarthy (1960) gave the 4Ps.
- Lauterborn's 4Cs (1990): consumer wants and needs, cost, convenience, communication.
- Sheth and Sisodia's 4As: acceptability, affordability, accessibility, awareness.
- Services add people, process and physical evidence.
Remember: Product, price, place, promotion, seen from the buyer's side.
- Forces: network technology, globalisation, deregulation and privatisation, competition, convergence, retail transformation, disintermediation.
- Consumers have more buying power, information and voice, and more resistance.
- Traditional firms answer disintermediation with re-intermediation: brick-and-click.
- New capabilities: online channels, richer data, social and mobile marketing, permission marketing, mass customisation, cost savings.
Remember: Technology, globalisation and empowered buyers keep changing the task.
- STP: segmentation, targeting and positioning; segmentation comes first.
- Levels run from mass marketing through segment and niche to local and individual marketing.
- Consumer bases: geographic, demographic, psychographic, behavioural; business markets use Bonoma and Shapiro's nested approach.
- Useful segments are measurable, substantial, accessible, differentiable and actionable.
Remember: Geographic, demographic, psychographic, behavioural.
- Segments are evaluated on size and growth, structural attractiveness, and fit with objectives and resources.
- Five patterns (Abell, 1980): single-segment concentration, selective specialisation, product specialisation, market specialisation, full coverage.
- Product specialisation: one product, many markets. Market specialisation: many products, one market.
- Strategies run from undifferentiated through differentiated and concentrated to micromarketing.
Remember: Evaluate the segments, then choose a pattern of coverage.
- Ries and Trout: positioning is what you do to the prospect's mind.
- Keller's PODs give a reason to choose; POPs remove reasons not to.
- Five winning value propositions: more for more, more for the same, more for less, the same for less, less for much less.
- Brands can be positioned on attributes, benefits, use, user, competitor, product class, or price and quality.
Remember: Positioning lives in the customer's mind, not in the product.
- Five bases of differentiation: product, services, personnel, channel, image.
- A point of difference must be desirable, deliverable and differentiating.
- Points of parity are category, correlational or competitive.
- The bull's-eye: brand mantra and key POPs and PODs at the centre, then reasons to believe, then values and executional properties.
Remember: Differentiate on product, services, people, channel or image.
- Kotler and Armstrong: core, actual and augmented product.
- Kotler and Keller: five levels, from core benefit to potential product.
- Consumer products are classed by buying behaviour: convenience, shopping, specialty and unsought.
- When actual products look alike, firms compete on the augmented level.
Remember: Core benefit, actual product, augmented product.
- Product item, product line and product mix (assortment).
- Width: number of lines. Length: total items. Depth: variants per product. Consistency: how related the lines are.
- Average line length = length ÷ width; depth multiplies sizes by flavours or formulations.
- A line is too short if adding items would raise profit, too long if dropping them would.
Remember: Width: lines. Length: items. Depth: variants. Consistency: relatedness.
- Eight NPD steps: idea generation, screening, concept testing, marketing strategy, business analysis, product development, test marketing, commercialisation.
- Screening drops poor ideas early because costs rise later; short lists often skip marketing strategy development.
- Concept testing uses a description; test marketing sells the real product in a few places.
- Rogers (1962): innovators 2.5%, early adopters 13.5%, early and late majority 34% each, laggards 16%.
Remember: Generate, screen, test the concept, plan the strategy, analyse, develop, test-market, launch.
- Sales: low, rising fast, peak, falling; profit starts negative, peaks before sales, then declines.
- Objectives: awareness and trial, maximise share, maximise profit while defending share, cut spending and milk the brand.
- Product classes, forms and brands age at different speeds; styles cycle, fashions fade slowly, fads collapse.
- Stages are hard to identify, and treating a product as declining can make it decline.
Remember: Introduce, grow, mature, decline: change the mix at each stage.
- AMA: a brand identifies one seller's goods and differentiates them from competitors.
- Keller: customer-based brand equity is the differential effect of brand knowledge on consumer response.
- Equity lives in customers' minds; value is a money figure. Equity can be positive or negative.
- Aaker's five components and Keller's pyramid (salience, meaning, response, resonance) are two models of equity.
Remember: Equity lives in customers' minds; value is what the brand is worth in money.
- BAV: differentiation, relevance, esteem, knowledge; strength (forward) and stature (backward) form the power grid.
- BrandZ: presence, relevance, performance, advantage, bonding.
- Keller: identity, meaning, response, relationships, on six blocks from salience to resonance.
- Aaker: equity as assets and liabilities, under five heads.
Remember: BAV's four pillars, BrandZ's pyramid, Keller's resonance, Aaker's five assets.
- Four decisions: positioning, name selection, sponsorship, development.
- Position on attributes, benefits or, strongest, beliefs and values.
- Sponsorship: manufacturer's, private, licensed or co-branding.
- Naming: individual, blanket family, separate family, or corporate with individual names.
Remember: Position, name, sponsor, develop.
- A brand portfolio is all the brands and lines a firm offers in a category or segment.
- Reasons: shelf space, variety-seekers, internal competition, economies of scale.
- Roles: flankers, cash cows, low-end entry brands, high-end prestige brands.
- Too big if dropping a brand raises profit; too small if adding one would.
Remember: Flankers, cash cows, entry brands, prestige brands.
- Parent, family or master brands, and sub-brands such as Cadbury Dairy Milk Silk.
- Grid: line extensions, brand extensions, multibrands, new brands.
- Gains: lower risk, lower cost, wider coverage. Risks: dilution, confusion, retailer resistance, cannibalisation.
- Kotler and Keller use ‘brand extension’ for both line and category extensions; Kotler and Armstrong for a new category only.
Remember: Extend the line, extend the brand, add brands, or start anew.
- Loyalty: a commitment to buy again and recommend, despite rivals' efforts.
- Aaker (1991): switchers, habitual buyers, satisfied buyers with switching costs, brand likers, committed buyers.
- Repeat buying is not the same as loyalty; the order follows Aaker, and study notes often muddle it.
Remember: Switchers, habitual, switching costs, likers, committed.
- Price is the sum of the values customers give up; it is the only revenue-producing element of the mix.
- Objectives: survival, maximum current profit, maximum market share, maximum skimming, product-quality leadership.
- Costs set the floor, customer value and demand the ceiling, competitors' prices a point of comparison between.
- Internal factors (costs, objectives, mix, brand image) and external ones (value and demand, competitors, economy, regulation, channels).
Remember: Costs set the floor, customer value the ceiling, competitors the range between.
- Buyers act on perceived prices, judged against reference prices, with lower and upper thresholds.
- Six steps: objective, demand, costs, competitors, method, final price.
- Methods: cost-based (mark-up, target-return, break-even), value-based (perceived value, value pricing), competition-based (going-rate, sealed-bid).
- Mark-up price = unit cost ÷ (1 − return on sales); target-return price = unit cost + (return × capital) ÷ unit sales.
Remember: Objective, demand, costs, competitors, method, final price.
- Cost-plus, target-return, value-based and going-rate set price from cost, return, value or rivals.
- Skimming starts high and cuts in steps; penetration starts low to win share and need not rise later.
- Premium, customary, EDLP, psychological, differential and bundle pricing use image, habit, perception, segments and combinations.
Remember: Skim when buyers pay for novelty; penetrate when volume lowers cost.
- Geographical pricing, including countertrade: barter, compensation deals, buyback arrangements and offsets.
- Discounts and allowances: cash, quantity, functional, seasonal, and allowances.
- Promotional pricing, from loss leaders to psychological discounting.
- Differentiated pricing (customer-segment, product-form, image, channel, location, time) is price discrimination: prices not proportional to cost.
Remember: Geography, discounts, promotions, differentiation.
- Buyers who lack information take price as a signal of quality.
- Diagonal strategies (premium, medium-value, economy) can coexist.
- High-value, super-value and good-value attack the diagonal; overcharging, rip-off and false economy overprice and are hard to sustain.
Remember: Diagonal coexists, above it attacks, below it overprices.
- A channel transfers ownership from production to consumption; it is part of a wider value network.
- Intermediaries are merchants (take title), agents (negotiate, no title) or facilitators (neither).
- Channels are direct, indirect or hybrid, and run from zero-level to three-level.
- Intensity is intensive, selective or exclusive. Levels measure length; intensity measures breadth.
Remember: Direct or through intermediaries; intensive, selective or exclusive.
- Conventional channels breed conflict; a VMS unifies them by ownership (corporate), contract (contractual) or power (administered).
- Franchises: manufacturer-sponsored retailer, manufacturer-sponsored wholesaler, service-firm-sponsored retailer.
- Horizontal systems join firms at the same level without merging; multichannel marketing uses several channels at once.
- Push through the trade, or pull through consumers; reverse-flow and service channels matter too.
Remember: Owned, contracted or led; push through the trade, pull through the buyer.
- Also called physical distribution; it starts at the factory, and has grown into supply chain management.
- Inbound brings inputs in, outbound sends finished goods out, reverse brings goods back.
- No system both maximises service and minimises cost, so decide on a total-system basis, for profit.
- Kotler and Keller's four steps: value proposition, network, operational excellence, implementation.
Remember: Right goods, right place, right time, lowest cost: trade-offs throughout.
- Order processing aims to shorten the order-to-payment cycle.
- Warehousing trades delivery speed against cost; storage warehouses hold, distribution warehouses move goods out.
- Inventory: the reorder point says when, the order quantity says how many; EOQ balances ordering and carrying costs.
- Transport weighs speed, dependability and cost across modes and private, contract or common carriers.
Remember: Order processing, warehousing, inventory, transportation.
- Logistics is part of SCM; SCM coordinates many organisations for competitive advantage.
- SCOR: plan, source, make, deliver, return.
- Hugos' drivers (production, inventory, location, transportation, information) are set for responsiveness or efficiency.
- Tight coordination brings dependence: one supplier's failure can stop the chain.
Remember: Plan, source, make, deliver, return; responsive or efficient.
- Five tools: advertising, sales promotion, personal selling, public relations, direct and digital marketing.
- Kotler and Keller list eight modes, adding events and experiences, interactive and word-of-mouth marketing.
- IMC keeps every brand contact relevant and consistent over time.
- Push works through channel members; pull works through final consumers.
Remember: Advertising, sales promotion, personal selling, PR, direct marketing.
- Steps: audience, objectives, design, channels, budget, mix, results, managing IMC.
- Objectives: category need, brand awareness, brand attitude, brand purchase intention.
- Design: message, creative (informational or transformational) and source.
- Channels are personal (advocate, expert, social) or non-personal (media, atmospheres, events).
Remember: Audience, objectives, design, channels, budget, mix, results.
- Affordable: what is left after other costs; ignores the effect on sales.
- Percentage of sales treats sales as the cause; competitive parity copies rivals and aims at share of voice.
- Objective and task costs the tasks needed to reach the objectives.
- Share of voice is a brand's share of category promotion spending, not of sales.
Remember: Objective and task is the most logical method.
- Paid, non-personal, by an identified sponsor; pervasive, expressive, impersonal and controlled.
- 5 Ms: mission, money, message, media, measurement.
- Objectives: inform, persuade, remind, reinforce.
- Media weigh reach, frequency and impact; GRPs = reach × frequency.
Remember: Mission, money, message, media, measurement.
- Sales promotion: consumer, trade and sales-force promotions; attention, incentive and invitation.
- Consumer tools include samples, coupons, rebates, price packs, premiums and prizes; trade tools include price-offs, allowances and free goods.
- Price packs eat margin fast; frequent deals teach buyers to wait.
- Personal selling is two-way, trusted and persuasive, but costly and limited in reach.
Remember: Sales promotion buys action now; personal selling builds conviction.
- Consumer behaviour covers searching for, buying, using, evaluating and disposing of products.
- Four sets of factors: cultural, social, personal and psychological, from the broadest to the most personal.
- Buying roles: initiator, influencer, decider, buyer and user; the payer is often not the chooser.
Remember: Cultural, social, personal, psychological.
- Stages: need recognition, information search, evaluation of alternatives, purchase, post-purchase behaviour.
- Awareness set, evoked (consideration) set, choice set.
- Cognitive dissonance is doubt about the choice, eased by reassurance, guarantees and after-sales contact.
- Satisfaction depends on the gap between expectations and perceived performance.
Remember: Need, search, evaluate, buy, reflect.
- Two dimensions: the buyer's involvement and the differences between brands.
- Complex (car) and dissonance-reducing (carpet) are high involvement.
- Variety-seeking (biscuits) and habitual (salt) are low involvement.
- Involvement belongs to the buyer, not the product.
Remember: High involvement and real differences make buying complex.
- Non-compensatory rules: conjunctive (every minimum), disjunctive (any high standard), lexicographic (top attribute first).
- Compensatory rules, such as Fishbein's expectancy-value model, weigh all attributes so strengths offset weaknesses.
- Models: economic, psychological, sociological, and comprehensive (Nicosia, Engel–Kollat–Blackwell, Howard–Sheth).
Remember: Conjunctive: every minimum. Disjunctive: one high standard. Lexicographic: the top attribute first.
- Business markets: fewer, larger buyers, professional purchasing, several influencers, derived demand.
- Buyclasses: straight rebuy, modified rebuy, new task; crossed with eight buyphases in the buygrid (Robinson, Faris and Wind, 1967).
- Buying centre: users, influencers, buyers, deciders, gatekeepers, plus initiators and approvers.
- Influences: environmental, organisational, interpersonal and individual (Webster and Wind).
Remember: Straight rebuy, modified rebuy, new task.
- A service is essentially intangible and results in no ownership (Kotler).
- Five characteristics: intangibility, inseparability, variability, perishability, lack of ownership; Kotler and Keller list the first four.
- Responses: tangible evidence, trained staff, standard processes, yield management, membership.
- Offerings range from pure tangible goods to pure services.
Remember: Intangible, inseparable, variable, perishable, not owned.
- The 4Ps: product, price, place, promotion.
- Booms and Bitner (1981) added people, process and physical evidence.
- People answers inseparability, process answers variability, physical evidence answers intangibility.
- People include staff, the customer and other customers present.
Remember: The 4Ps plus people, process and physical evidence.
- SERVQUAL (1988): reliability, assurance, tangibles, empathy, responsiveness.
- Score per dimension: perception minus expectation; a negative score is a shortfall.
- Gaps model (1985): knowledge, standards, delivery and communication gaps lead to the customer gap.
- Zone of tolerance (1993) lies between desired and adequate service; Oliver's expectancy disconfirmation (1980).
Remember: Reliability, Assurance, Tangibles, Empathy, Responsiveness.
- External marketing: company to customers; making promises.
- Internal marketing: company to employees; enabling staff to keep promises.
- Interactive marketing: employees to customers; keeping promises in the service encounter.
- Clients judge technical quality (what) and functional quality (how).
Remember: External, internal, interactive: promise, enable, deliver.
- A customer-obsessed strategic concept and top-management commitment (QSCV).
- High standards, profit tiers, and monitoring through voice-of-the-customer measures and mystery shopping.
- On average about 40 per cent of customers with a bad experience leave; complaints handled well keep them.
- Brand experience: sensory, affective, behavioural, intellectual.
Remember: Customer-obsessed, committed, high standards, tiers, monitoring, complaints welcomed.
- Relationship marketing (Berry, 1983): attracting, maintaining and enhancing customer relationships.
- CRMk is the strategy; CRM manages detailed information about customers and every touch point to maximise loyalty (Kotler and Keller).
- Retention usually costs less than acquisition: cutting defections 5 per cent raised profits 25 to 85 per cent (Reichheld and Sasser, 1990).
- CLV is the present value of a customer's future profits; churn is the rate at which customers leave.
Remember: CRMk is the strategy; CRM is the technology.
- Peppers and Rogers (1993): IDIC, identify, differentiate, interact, customise; focus on most valuable customers.
- Permission marketing (Godin, 1999): anticipated, personal and relevant messages to people who want them; the opposite of interruption marketing.
- Participatory marketing: firm and customer work out together how to satisfy the customer.
- Friends and family remain the strongest influence; reviews and influencers matter more and more, and favours should be disclosed.
Remember: Identify, Differentiate, Interact, Customise.
- Retention rate: the share of customers at the start of a period still buying at its end; churn is the share who leave.
- Customer base management: reduce churn, lengthen relationships, raise share of wallet by cross-selling and up-selling, focus on high-value customers.
- The marketing funnel and conversion rates show where customers drop out.
- Loyalty activities: interaction, loyalty programmes, institutional ties. Berry and Parasuraman (1991): financial, social, structural.
Remember: Financial, social, structural: each binds more tightly.
- Buttle (2004): portfolio analysis, customer intimacy, network development, value proposition, customer lifecycle management.
- Supports: leadership and culture, data and IT, people, processes. Shorter versions often leave out customer intimacy.
- Process: awareness, leads, conversion, support, upselling; tools include buyer personas and lead scoring.
- CRM systems keep one shared customer history, and raise conversion and productivity.
Remember: Awareness, leads, conversion, support, upselling.
- Retailing: selling directly to final consumers for personal, non-business use; anyone can do it.
- The retailer is the final link in the channel and passes feedback back up.
- Service levels: self-service, self-selection, limited service, full service.
- Store types range from specialty and department stores to supermarkets, discounters and superstores with category killers.
- Low margin with high volume can earn more rupees than high margin with low volume.
Remember: By service, by product line, by price, by organisation.
- Non-store: direct selling (in person), direct marketing (through media), automatic vending, buying services.
- Corporate forms: corporate and voluntary chains, retailer and consumer cooperatives, franchises, conglomerates.
- Voluntary chain: organised by a wholesaler. Retailer cooperative: organised by the retailers. Consumer cooperative: owned by customers.
- Private labels give the retailer control of price and quality, higher margins and loyalty.
Remember: Chain, voluntary chain, cooperative, franchise, conglomerate.
- Organised retail: registered chains; unorganised: kiranas, owner-run shops and vendors.
- Demographic change, convenience, online retail, technology and digital payments drive change; kiranas are modernising.
- FDI: 100 per cent single-brand (automatic, 2018); up to 51 per cent multi-brand (approval, 2012).
- Worldwide: new combinations, intertype competition, giant and global retailers, shopper marketing, store experience.
Remember: Organised, online, digital and reaching smaller towns.
- International marketing: planning, pricing, promoting and directing goods to buyers in more than one nation for a profit (Cateora and Graham).
- Reasons: growth, scale, spreading risk, competitive advantage, following global customers. Risks: preferences, culture, regulation, instability, currency.
- Uppsala stages (Johanson and Wiedersheim-Paul, 1975): domestic, agents, export department and subsidiaries, production abroad. Born globals skip them.
- Global marketing process: opportunities, entry strategy, marketing programme, implementation, monitoring and control.
Remember: Domestic, agents, subsidiaries, production abroad.
- Criteria: product suitability, geographic proximity, economic potential, political stability; a weighted score compares them.
- Psychic proximity: similar language, culture and legal system. It differs from geographic distance, and can hide real differences.
- Waterfall: one by one, lower risk, learning. Sprinkler: many at once, first-mover advantage, higher investment.
- Emerging markets such as the BRICS need affordable prices, adapted products and local marketing.
Remember: Similar markets first, or many at once.
- Indirect exporting (through intermediaries at home) and direct exporting (own export department or branches): low to medium commitment.
- Licensing, including franchising and contract manufacturing: low investment and control; the licensee may become a competitor.
- Joint venture: shared ownership, risk and profit, plus local know-how. Direct investment: full control at very high investment.
- A franchise is a fuller licence: the brand plus the whole way of running the business.
Remember: Export, license, joint venture, invest: more commitment, more control.
- Social marketing (Kotler and Zaltman, 1971): audience, behaviour change, exchange theory, marketing mix.
- Exchange theory: the change must offer benefits that outweigh its perceived costs.
- Green marketing: eco-friendly products, sustainable processes, eco-labelling, green advertising.
- Greenwashing breeds scepticism; social marketing is not the societal marketing concept.
Remember: Sell behaviour change for society; sell sustainability honestly.
- Green products conserve resources and avoid pollution; firms check materials, product and packaging.
- Green 4Ps: a premium only for visible added value; availability shapes who buys.
- Strategies: green design, positioning, pricing and disposal.
- Kotler and Armstrong's five principles are of sustainable marketing, which green marketing applies; beware greenwashing.
Remember: Green product, price, place and promotion.
- Online components: SEO, content, social media, email, PPC.
- Strategies: inbound, affiliate, influencer and performance marketing; challenges include data privacy.
- Cost per order = ad spend ÷ orders; ads pay while it stays below the margin per order.
- Direct marketing: one-to-one, immediate measurable response; not the same as direct selling.
Remember: Targeted, measurable and paid for by results.
- Internet marketing sits within e-marketing, which sits within digital marketing.
- Methods include SEO, SEM, PPC, social media, email, affiliate, content, native ads and automation.
- Benefits: reach, low entry cost, measurable ROI, targeting, flexibility; budgets scale from basic to advanced.
- Strategy: goals, sales process, personas, channels, benchmarks, adjustment.
Remember: Goals, sales process, personas, channels, benchmarks, adjustment.
- Needs: efficient distribution, affordable small packs and sachets, adapted products, local languages.
- Four As: availability, affordability, acceptability, awareness.
- Census: urban means a statutory town, or 5,000+ people, 400+ per sq km and 75%+ of male main workers outside farming.
- Rural marketing runs both ways; agricultural marketing moves farm produce to buyers.
Remember: Available, affordable, acceptable, known.
- Guerrilla (Levinson, 1984): street, viral and experiential tactics for attention and recall; hard to measure.
- Roadblock: the same message on many channels at once for maximum reach; costly, risk of ad fatigue.
- Ambush marketing is one guerrilla tactic: linking a brand to an event without sponsoring it.
- Choose by budget and goal: guerrilla for local buzz, a roadblock for one big moment.
Remember: Guerrilla surprises cheaply; roadblock saturates expensively.