Assignments on Master in Business Administration.

Name:

Page No.1

XYZ

Roll No.
Exam Regn. No.

1 Year MBA - ASSIGNMENT

SEMESTER 1
INDEX
SR.
NO.

SUBJECT-TOPIC

PAGE NO.

PRINCIPLES AND PRACTICES OF MANAGEMENT

2-11

HUMAN RESOURCES MANAGEMENT

12-21

FINANCIAL MANAGEMENT

22-26

MARKETING MANAGEMENT

27-31

ORGANIZATIONAL BEHAVIOR

32-37

PRINCIPLES OF ECONOMICS

38-42

Assignments on Master in Business Administration.

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Assignment on
PRINCIPLES AND PRACTICE OF MANAGEMENT

for

Master in Business Administration

Q. How will you influence people to strive willingly for group objectives in your
organization (target based industry)? Apply your interpersonal influence
through communication process towards attaining your specialized
goals?

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INTRODUCTION
Communication is the process by which we assign and convey meaning
in an attempt to create shared understanding. Successful people build
pleasing and magnetic personalities, which is what makes them charismatic.
The Organizational Communication is the process by which activities of a
society are collected and coordinated to reach the goals of both individuals
and the collective group. It is a subfield of general communications studies
and is often a component to effective management in a workplace
environment. It explores effective and participatory communication across
business and organizational settings.
Communication within an organization will consistently work toward
the overall benefit of each employee and of the organization in general. The
premises initially established for a communication plan will tend to drive it
towards certain specific results. But the plan should be flexible enough to
allow the communications network that it creates to accept information from
unexpected sources and integrate this information into the communications
process.

We see the results of this in improvements in productivity, the

quality of products/services, morale and ultimately, profitability.

An effective communicator must be a master of certain basic skills,
which include communication, problem solving and decision making,
planning, meeting management, delegation, and managing our self. Our goal
then is to build and maintain a communications system that allows
information to flow freely throughout the organization.

Management is the

executive function that concern itself with the carrying out the administrative
policies laid down by administration.
Communication takes a lot of work and unlike some systems in
business, once in place a communication program will never maintain its own
momentum. Management must exercise the discipline to keep the program
alive and vital to all employees. People knowledge is more important than
product knowledge. To be an effective leader requires the ability to

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communicate and inspire. Public speaking skills are a big part of being able
to communicate effectively. Communications are vital in management; in fact,
they are the essence of management.
Communication and motivation
There is need for constant motivation to get the things done from the
subordinates.

Managing people is not an easy job.

This is because, as a

manager I have to deal with a variety of people having different aspirations,

feelings and emotions.
The managers must influence the organization individuals and work
groups, to work cooperatively to achieve organizational objectives. Target
orient business needs good, clear communication. Manager should make
constant efforts to understand the nature aspirations and feelings of the
people working under them, so as to manage them effectively. Institutions
attempt to accomplish their purposes by structuring their organization so
that problems may be solved quickly and efficiently.
Effective

internal

communications

start

with

effective

skills

in

communications, including basic skills in listening, speaking, questioning

and sharing feedback These can developed with some concerted review and
practice. Perhaps the most important outcome from these skills is conveying
that the value hearing from others and their hearing from and the
management comprehends full supports to the premise that organizations
must have high degrees of communications. The developing of effective
communications in any organization is each person taking responsibility to
assert when they don't understand a communication or to suggest when and
how someone could communicate more effectively. Apart from that, Sound
meeting management skills go a long way toward ensuring effective
communications.
The management learns the need for communication by having to
respond to the lack of it. Through the communication we can influence our
people very much. Communication is essential in any workplace and it comes

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in many forms that include: Face-to-Face; Written; Email; Voice mail; Text
Messaging and Instant Messaging. Each requires engagement by the sender
and receiver to be effective and the method dictates some common sense
applications that project professionalism.
Effective Organizational Communication
Effective communication is to share meaning and understanding
between the person sending the message and the person receiving the
message.

The

key

element

understands.

Crucial

to

successful

communication plan is identifying what should be communicated. As an

Organizational Communication major, we will have the opportunity to take a
variety of courses covering a broad range of topics, or take that are closely
related to the specific area of interest.
Purpose of communication
Communication is essential for the internal functioning of enterprises
because it integrates the managerial functions.
Especially communication is needed
1. To establish and disseminate the goals of an enterprise
2. To develop plans for the achievement
3. To organize human and other resources in the most effective and
efficient way
4. To select, develop and appraise members of the organization
5. To lead, direct, motivate and create a climate in which people
want to contribute
6. To control performance
Organizational

communication

is

an

academic

discipline

of

communication. This type of communication considers the way that

businesses, organizations or groups communicate internally to their own
members or employees and how the organization as a whole communicates

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with people outside of its membership. Students learn about theory, diversity,
conflict management, relationships, organizational culture, structure and
leadership through the organizational communication.
Practices for Organizational Communication
For a communications plan to be successful it must be based on a
variety of delivery methods. The larger the organization the more measures
are needed. It is important to remember that a message delivered only once
will be far less widely received than one delivered repeatedly. This applies as
equally to a CEOs vision for the company as it does to an employee groups
concern over a safety issue.
Maintenance communication creates the context in which other goal
oriented messages are constructed by the subordinate and evaluated by the
supervisor. It is the messages issued by a corporate organization, body, or
institute to its audiences, such as employees, media, channel partners and
the general public. The concept of corporate communication could be seen as
an

integrative

communication

structure

linking

stakeholders

to

the

organization. Maintenance of the supervisory relationship is arguably the

most important of the communication objectives pursued by subordinates.
Corporate communication is the set of activities involved in managing
and orchestrating all internal and external communications aimed at creating
favorable point-of-view among stakeholders on which the company depends.
Organizations aim to communicate the same message to all Corporate
Communications which help organizations explain their mission, combine its
many visions and values into a cohesive message to stakeholders. In this
case, an inductive procedure was used to identify upward maintenance
tactics reportedly used by subordinates.
Information sheet A company information sheet, whether distributed
weekly, biweekly or monthly is one of the easiest ways to formalize a
communication process. Properly used, these documents can keep everyone

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in the organization appraised of what is going on within the company, the

industry and the community.
Enhancing Teams Whenever an organization establishes any special
purpose group, whether for process improvement, information gathering or
any other purpose, the group should be tasked with reporting their activities
and insights to other communications venues. As with training situations,
special purpose teams create different relationships between employees and
provide

different

organization.

perspectives

These

differences

on

conditions

can

provide

and

events

opportunities

within
to

the

address

problems or produce improvements in ways completely unrelated to the focus

of the group, opportunities which might be overlooked if those in the group
that uncovers them are the only ones exposed to them.
Squad Lunch In many organizations it isnt feasible for senior
management to meet with each employee, it is usually possible for a high level
executive or management level employee to hold a brown bag lunch with one
crew or office every other week or so. Even if the conversation is about
football or politics many of the same ends are served as if it is about the
workplace. There is no substitute for personal one on one communication.
Discussion at these meetings should be open to any subject and driven by the
interests of the employees.
Employees/team meetings Regularly scheduled and preferably
weekly, staff and crew meetings should be conducted. There should be no
employee in the organization not included in one of these meetings. The
selection of the time for these meetings can have a significant impact on the
way they are viewed by attendees and should there for be made with care
Training Programs Training settings, by being removed from the
normal work functions and the communications flows associated with those
functions offer people a chance to associate with many others in the
organization with whom they would not normally come into contact.

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Formal training provides an excellent opportunity to foster both

horizontal communication across disciplines and vertical communication
throughout the organization. In so doing employees learn about others in the
organization both as people and as performers of their specific roles.

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Effective Communication in Target Based Industry

Communication is a universal process which infuses all elements of
management, viz. planning, organizing, staffing, directing and control. As the
organization is the group of people, need to influence the people to achieve
the organizational goal.

To influence the people need adopt various

management techniques. Communication has an inevitable role in managing

the people.
Organization

is

made

dynamic

by

communication.

It

is

the

coordinating, cementing influence which runs through all levels and all facts
of enterprise activities. Various management techniques are used to achieve
the goals in an industry. Management by Objective (MBO) should be used for
all these type of target based industries. MBO is a system of management
involving effective participation and involvement by each member of the
organization.
As manager I should influence the people to get the goal. The disciple
of MBO makes each individual output-centered,

result-oriented, and

optimum-committed and achievement- motivated.

Following are the technique of communication to influence people to
achieve the target of the industry.
Develop a basic set of procedures for how routine tasks are conducted
and include them in standard operating manual.
Ensure every employee has a copy of their job description and the
organization chart.
Ensure every employee receives a copy of the strategic plan, which
includes the organization's mission, vision, values statement, strategic
goals and strategies about how those goals will be reached.
Ensure every employee receives an employee handbook that contains
all up-to-date personnel policies.

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Regularly hold meetings to celebrate major accomplishments. This

helps employees perceive what's important, gives them a sense of
direction and fulfillment, and let's them know that leadership is on top
of things.
Ensure all employees receive yearly performance reviews, including
their goals for the year, updated job descriptions, accomplishments,
needs for improvement, and plans to help the employee accomplish the
improvements.
Hold full staff meetings every month to report how the organization is
doing, major accomplishments, concerns, announcements about staff,
etc.
Regularly hold management meetings (at least every two weeks), even if
there's nothing pressing to report. If we hold meetings only when we
believe there's something to report, then communications will occur
only when we have something to say communications will be one way
and the organization will suffer. Have meetings anyway, if only to
establish and affirm the communication those things are of a status
that there are not immediate problems.
Leaders and managers should have face-to-face contact with employees
at least once a week.
Target Base Industry Performance
A company is producing Motor Cycle and wants to increase their
production by 45% next month than this month. If the actual production for
this month is 100 Motor Cycle and the next month should be 145 nos.

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A motivated workforce or people put more energy into work in order to

achieve the required outcomes. There is low absenteeism because employees
are happy to go to work. Individuals are more loyal to their organisation and
stay longer because their needs are being met. The motivational goal cycle is
not completed without a reciprocating reward from the attained target back to
the motivation source. The motivation is target directed. A matching reward
of attainment of the target must be built into the system.
Interpersonal communication involves interchanging ideas with others
using an assortment of methods, such as words, gestures, voice tone, facial
expression and body posture. Interpersonal skills are the lifeblood of
organizations because effective communication dictates operational efficiency
and facilitates teamwork. It underlies the efficiency of key business functions
such as managing, training, selling and resolving conflicts within an
organization. Only through effective communication, we can motivate our
people.
The main premise is to understand the influence that interpersonal
relationships and interpersonal communication patterns have on tacit
knowledge transfer efficiency in a business network and to investigate the
influence

that

contextual

network

factors

have

on

enhancing

this

relationship. Motivated individuals are influenced by a number of different

factors.

Initially,

everybody

has

basic

needs,

such

as

for

food

or

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accommodation, job opportunities etc. However, there are many other

different factors that motivate individuals.
The productivity and other factors resulting from effective group action
make the development of group skills one of the most important aspects of
managerial training. A creative environment can be very stimulating. Due to
the significant gap in the literature, it is perceived that will contribute to
extant literature that contribute substantively to academic understanding on
how the efficiency of tacit knowledge can be streamlined, highlight the
importance of the relational and communication aspects of network research
and provide insights into the relationships between the previously identified
contextual factors and interpersonal relationships and communication
patterns among network actors.
Motivated employees feel that their work is special. They are
encouraged to take pride in what they do. Groups have become an
increasingly important face of organizational life. To work in organization is
to work in groups. There is clear requirement for people to operative in
groups, in order for them to combine their knowledge and abilities to achieve
the target. Membership in productive and cohesive groups is essential to our
psychological well-beings. Thus understanding how groups develop and their
dynamics is vital for me to get the best form individuals working in my target
based industry.
Conclusion
The productivity and other factors resulting from effective group action
make the development of group skills one of the most important aspects of
managerial training. There is clear requirement for people to operative in
groups, in order for them to combine their knowledge and abilities to achieve
the target.

Goal or targets, perceived us unattainable are likely to be self

defeating.

Instead of strengthening motivation to attain the target, it may

dampen the motivation to act at all.

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A growing business needs to be closely and carefully managed to

ensure the success of new investment decisions and expansion plans.
Performance measurement and target-setting are important to the growth
process. While many small businesses can run themselves quite comfortably
without much formal measurement or target-setting, for growing businesses
the control these processes offer can be indispensable.
--------#-----#------#--------

Assignment on
HUMAN RESOURCE MANAGEMENT
for
Master in Business Administration

Assignments on Master in Business Administration.

Page No.14

Qn. The present state of recession in the IT industry- as a human

resource manager how are you going to undertake Human resource
planning at macro level to tide over this crisis?

Assignments on Master in Business Administration.

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INTRODUCTION
A recession is a contraction phase of the business cycle where significant decline in economic
activity lasts more than a few months. The current economic recession has hardly spared any
country on earth. The entire field of information technology (IT) has been badly affected by
recession and its aftermaths can be easily seen by the loss in the jobs of all the software
professionals. The impact of slowdown in world economy is slowly making its jitters felt in
India also. This recession spread across the country, lasting more than a few months, normally
visible in real GDP growth, real personal income, employment, industrial production, wholesaleretail sales and also in IT field. This economic decline is usually known as global economic
recession and it adversely affect the filed of IT-information technology. A recession leads to a
decreased demand for goods and services, which in turn leads to a decrease in production, layoffs and a sharp rise in unemployment. The field of software development has undergone many
changes due to recession.
Since each IT Company requires projects on a regular basis for its
smooth functioning, in this state of the world where the economies are
lacking

profits,

thinking

of

undertaking

new

projects

is

absolutely

meaningless. Different software firms have seen an extreme down-fall in their

project undertaking. These firms are unable to receive projects from the
different IT-oriented countries which have already been hit by recession. To
overcome this turmoil requires skillful attempt. The better deal with the
inevitable ups and downs of business, we should change our outlook towards
HR planning. Human Resource Management is the strategic and coherent
approach to the management of an organizations most valued asset- the
people working there who individually and collectively contribute to the
achievement of the business.
The man power or human power the total knowledge, skills, creative
activities, talents and aptitudes of an organizations workforces as well as the
values, attitudes and benefits of an individual involved.

It is the most

valuable asset of an organization, and not money or physical equipment.

Human resources are utilized to the optimum possible extent in order to
achieve individual and organizational goals.

An organizations performance

and resulting productivity are directly proportional to the quantity and quality
of its human resource. Human resource planning is the formal process of
linking organizational strategy with human resource practices.

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It is about perceiving organizational practices as a whole and not

piecemeal. In a competitive climate, organizations need to use models and
approaches that secure uniqueness of operations along with enhancing
organizational capability. Hence the recession affects almost all the fields
especially IT field. Human resource management emphasized on the macro
level HR planning occupies an important role in succeeding the recession. In
this turmoil HR management should look towards the following points.
HRM during Recession
It is the time to call for tough measures - and I have to figure out how to
hold on to our employees, while staying on budget at the same time. Good
employees are the driving force behind the success of my business. The
sentiments towards the employees are not a good practice. I will give special
attention to keep my employees with me and away from my competitors
during the economic crisis is a hard thing.
The culling (differentiation) of employee
During the recession, I have to check the performance of all employees in
my IT business. Thus Ill identify the good employees, which show potential
and others who could be lagging behind due to lack or interest or because
they may not be able to handle the pressure. The good employees are the ones
that I need on my side to brave out the recessionary storm. The bad ones will
turn out to be bigger liabilities once the pressure to perform inevitably
increases.
Redirect the Employees to Other Departments :One of the best ways
to retain the employees is to redirect them to other departments when the
need arises. I can do this from day-to-day, if necessary. For example, if there
are too many software professionals developing too few software one week,
then I will redirect them to another department until the storm blows over.
That way, I will not have to fire any of my employees, and they will acquire

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additional skills by learning the ropes of other departments. However, Ill keep
my best salespeople in the IT organisation, since i will still need to
concentrate on making software and its sales.
Listen To the Employees: Ill listen to the grievances of my employees in
order to nip any potential problems in the bud. This will also inspire
confidence in employees and will enable them to see me as a leader whom
they can trust. Getting feedback from employees will also enable me to make
changes in my policies faster.
Keep Them Motivated and Busy: During lean times, you need to keep
all of your employees occupied and busy. This is the best way to keep them
concentrated on the business at hand. Send some of them to attain higher
skills, so that their knowledge about your companys products and services
increases. Keep them motivated by organizing a small get-together or a short
trip on a regular basis to keep their minds diverted from stress.
Lay the Cards on Table: Ill explain to them that the recession has
forced me to take some harsh steps. Tell them that I expect their cooperation
during these tough times and that they will be rewarded when the storm
passes. Being upfront with my staff from the very beginning will help prevent
the key employees from jumping ship.
The above steps will enable me to hold my team together during a
recession, and will make a stronger bond between us. Man power planning is
a technique of correcting imbalances between man power demand and supply
in an IT organization at a micro level and in the economy at the macro level.
Such imbalance creates either the problem of excess supply or shortage of
manpower. Today in this world economic recession which affects the IT filed
needs an effective human resource planning at macro level to overcome the
adverse effects. It is necessary to plan for long-term growth also. Man power
planning has two aspects -

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a. quantitative, and
b. qualitative.
The former deals with the numerical strength of employees required or
anticipated over a period of time while the latter deals with qualifications
desired of prospective employees at different levels in an organisations.
Manpower planning at macro level has two major objectives;
1.

obtain and retains the quality and quantity of human resource it

needs at the right time and place;

2.

makes optimal utilization of these resources

I will make emphasis on macro level human resource planning to avoid

effects of the global economic slow down at the IT based organizations. For
that purpose Ill gave importance to the following points.
To eliminate haphazard expansion of personnel, there

should be adequate manpower planning so that there is logical forecasting

of manpower needs at least ten years in advance.
It is essential for organization to have declared and

consensual personnel policy which reflects the total personnel situation in

the organization rather than address it piecemeal;
Personnel policy must be developed at the headquarters or

comparable level.
Staffing section must be under the charge of a duly

qualified and trained personnel officer.

While formulating personnel policy, all possible internal as

well as external resources should be explored for data collection. To

supplement internal data, the administration would need to collect
information from external sources, for example, associations or unions of
employees.

Personnel department should lay down a clear policy and

then supervise its implementation. Instead of dealing with countless
individual cases, the department of personnel should confine itself to

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laying down principles and supervising their application for economy and
efficiency.
The personnel department must also design an effective

system for evaluating individual and staff performance. Standard of

performance must be set up to measure the quality and quantity of the
work.
The personnel department must carry out researches into

various aspects of personnel administration in collaboration with training

institutions and universities to identify future requirements and trends.
The gap between planning and implementation must be

bridged if plans are to be successfully converted into reality;

Training programmes should be need based, task oriented

and use practical simulations here trainees work and apply their skills;
There is need for role clarity to avoid overlapping and role

ambiguity.

Ultimate aim of manpower planning is to ensure optimum

utilization of the capacity of the existing personnel;

Manpower planning is a continuous, networked cyclical

process requiring constant review and adjustments.

MACRO LEVEL PLANNING - I T field

There are macro plans for the state, country, and micro plans for
smaller units. Our human resource planning in macro level will reduce the
adverse effect of the global economic recession in our nation. Such
progression continues the wider socio-economic planning of the country
wherein all such micro plans are integrated and provided.
The process can be envisioned as one progressing through a series of
concentric circles with the larger circle (macro level) moving outwards,
encompassing smaller ones (planning at micro level). Logical culmination of
the process is in the socio-economic plan of the country, to overcome the
economic recession in India.
Manpower planning is concerned not only with the balancing demand
and supply of different categories of personnel but also with overall

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development and utilization of the human resource in the country.

Development administration is not a mechanical process. It is a human
enterprise and its success depends on the skill, quality and motivation of
people involved in it.

Manpower planning is significant for development

administration.
To overcome the crisis of global economic recession I will make necessary
efforts to plan and implement the man power through the following process.

Manpower plan and objectives of the organization :

Objectives of the organization have to be stated objectively and
personnel requirements settled in accordance with estimations drawn.
Here our aim is to plan the man power to gain much from the period of
economic recession. Within the broad parameter of objectives, priorities have
to be ordered and performance indicators specified in quantifiable or
measurable terms. For example: Speed of the data entry operators at the data
entry division can be measured by the KDS per hour. Punctuality and allotted
work hours of the workers at the software division. Achievement of target by
the employees in allotted work areas etc.
Assessment of the man power situation:
Man power inventory has to be prepared, which involves collecting all
possible information regarding educational qualifications, experience, abilities,
aptitude, performance, date of joining, date of birth etc. of individual
employees. This helps assess basic skills of employees and the resource base
o the organization. Organizational effectiveness over a period of time can also
be assessed by statistics prepared.

It also helps gain perspective for the

future in terms of how efficiency levels can be enhanced, hat qualifications

need to be prescribed at what level, what training to institute, etc. in order to
raise efficiency to desired/optimal level.
Projection of man power requirements:

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In IT field, there is a need to anticipate future trends in personnel

availability and requirements. Application of statistical methods ranging from
simple

extrapolation,

regression,

or

correlation

analysis

to

complex

econometric models help the management analyse past and present trends
and estimate future requirements relatively accurately. A man power plan has
two components
1. man power demand plan
2. man power supply plan
The supply plan deals with the source of proposed man power. A
personnel inventory is prepared which helps in determining the desired ratio
in which direct and indirect recruitments will be combined.

Personnel

placement from inside and outside sources are separately catalogued.

A man power plan should spell out the man power requirements of an
organization in totality. It should have temporal, location, and job positional
dimensions beside qualitative and quantitative. The process of man power
planning involves use of techniques such as quantitative analysis, multivariate
skill analysis, operations research, PERTand CPM, orghogonal polynomials,
etc.
By the global economic recession, the foreign companies like us soft, cut
short their BPO works. Indian I T based industries very much affected by
lessening of Outsourcing. IT-BPO sector is going through a difficult phase; it
has to wash the stigma of Satyam also. The new economic policy by America is
also favor non-BPO (Non- Business Process Outsourcing) service. This also
shocked the Indian IT industry, in this period of economic recession.
The outsourcing, multi-skill training of workers and downsizing are
some of the activities undertaken under human resource planning. I know,
many software industries have started giving 'Pink Slips' to the senior officials
of their company. The exact figure of such retrenchment is not known, but
this decline in inflow would dwindle the job opportunities in IT sectors, which
have given direct employment to 5.6 lakh IT professionals.
Classification and interpretation of information:

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Information collected must be classified to facilitate analysis. Data have

to be read properly and inferences drawn accurately to derive correct
conclusions and formulate objective policy based upon such conclusions.
Developing work standards and performance norms
A serious drawback in personnel administration is under utilization of
capacity expressed as underemployment, lay offs and general below par
performance of employees. There is no measuring rod to judge performance by
or

examine

causatives

behind

perceived

inadequate

or

insufficient

performance. To improve objectivity, work norms need to be developed and

should be framed realistically in that the limitations or constraints of bounded
rationality should be provided for. Standards must be developed in the light of
all available information, in conformity with the requirements at specific
levels.
Objectives should be laid down clearly in that they should be intelligible
to the ordinary worker and should not in any way result in ambiguity or lack
of role specificity. The reference is to have effective communication. Besides,
necessary flexibility should be built- into them so that changing requirements
could be provided for. Precisely standard laid don should be realistic,
provisional, appropriate, flexible and clearly defined.
Hence the order in man power planning is to set up hierarchy of
objectives, stipulate qualifications for each level, set up a manpower assign
weights to performance indicators, work-out plan judge efficiency by
performance indicators, review plan, etc.
Anticipating manpower problems
Comparison of current and future man power needs reveals the
quantitative

and

qualitative

gaps

in

performance

of

personnel.

The

information is useful in writing job descriptions and specifications and also

plugging gaps to reduce the efficiency lag by discovering requirements at
different levels and making provision for the same.
Costing inventory:

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For manpower planning information is also needed regarding:

1. materials available in the organization
2. buildings in use
3. availability of computers
Supply of personnel:
Entire exercise would be futile if ultimately personnel with requisite
qualifications cannot be made available in time. Policy planners need to work
in close co-operation with educational and training institutes to ensure
adequate supply of personnel. Besides, policy should be sustainable in that
the organization must have sufficient funds to pay for new and added services.
To meet resource constraints, less expensive alternatives need to be tried.
One way could be to avoid employing highly trained personnel for tasks that
can be accomplished by less qualified staff.

Research studies:
Research Studies are important to monitor and evaluate a manpower
plan. It is only on the basis of empirical studies that future changes can be
advised. Policy has to be fact based and as objective as possible to maximize
rationality and avoid satisficing solutions or a priori judgement in decision
making.

The economic dimension of policy making and implementation is

increasingly in focus.

Research is needed to assess the effectiveness of

training programs by application of tools like post training surveys.

Sophisticated analysis is needed to examine discrimination claims and
complaints.
Manpower planning and the budget
Man power needs and implementation costs have to be documented
under appropriate activity heads or cost enters and integrated at each stage
with objectives of other sections to build coherent policy. Monitoring and
evaluation mechanisms also have to be integrated to get the big picture and
ensure cost effectiveness at succeeding stages. Knowledge of the principles of

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budget and manpower planning is particularly critical at the formulation and

monitoring stages.
Hence the human capital transforms passive resources into active
agents of production during the global economic recession. At the recession in
IT field, most developing countries confront the immense task or reforming
their

personnel

administration

to

ensure

better

implementation

of

development programmes. The more important task is the improvement of

policymaking

and

implementation

capabilities

of

personnel

units.

Organization that fails to do an adequate job of personnel planning take

incorrect decisions regarding personnel function involving hiring promotion,
transfer, and other related issues.

Conclusion
Recession has caused a hindrance in the progress of different software
firms, but still it is believed that the economy would see many years of
success due to the extensive contribution of the software industry. In this age
of global economic recession, our HRD policies can act as a key factor to
overcome the effects of the turmoil. As a Human resource manager, I know the
manpower planning helps IT industry to develop uniformity and consistency in
personnel policy, in consonance with socio-economic plan of the country.
These macro levels HR planning will help me to overcome the adverse effects
of global economic slow down.
-------#------#------#-------

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Page No.25

Assignment on Financial Management

for
Master in Business Administration

Question: What will your outlook towards maintenance of liquid assets

to ensure that the firm has adequate cash in hand to meet its
obligations at all times?

Ans:

INTRODUCTION :

Liquidity means that:

Assignments on Master in Business Administration.

Page No.26

o Firm has adequate cash to pay for the expenses,

o Firm has enough cash to make unexpected large purchases,
o Firm has cash reserve to meet emergencies at all times,

For this, regular Cash flow is must and it can be done by maintaining ratio
between Expenses and Profit.

Determine the source of finance:

Long term finance in the form of shares is good option, it can be sold
and buy back as and when required without much loss.

Short term finance must be used for emergency and for higher profit
expected project.

Plan some of regular profit amount in safe way in the form of deposit,
company infrastructure, property which can be a future source of
cash

Manufacturing Cycle must be faster so that final furnished product can be

sold early and get working cash back to reduced debt interest.

Estimation of working capital to optimum level as it balances risk and

returns. For this Working Capital Policy Index (WCPI) can be calculated by
the ratio of Current Assets to Fixed Asset. Higher Ratio indicates
conservative policy and low ratio indicate aggressive policy. Conservative
policy gives greater liquidity and lower risk and returns and opposite for
aggressive policy. Current Ratio should be at least 2:1

MAINTENANCE OF LIQUID ASSETS TO ENSURE ADEQUATE CASH IN HAND

A common problem for small business owners is the struggle to maintain
adequate cash flow levels. Without cash, a business must eventually close
its doors. Understanding and managing the companys cash flow will help to
measure the amount of cash on hand and prepare for cash flow shortfalls in

Assignments on Master in Business Administration.

Page No.27

the future.

[A] DO THE MATH

Cash flow is the movement of money in and out of a business. Cash inflow is
the movement of money into your business, and most likely comes from the
sale of goods or services to your customers. Cash outflow is the movement of
money out of your business, and is generally the result of paying expenses.
By projecting the inflow and outflow of your businesses cash, you can
determine the amount of cash that will be available during a designated
period of time.

[B] PREPARE YOUR PROFIT AND LOSS STATEMENT

Your business plan should contain several financial statements. If youre a

start-up businessman, base your estimates of cash inflow and outflow on
the revenues and expenses listed in your profit and loss statements.
Complete your profit and loss statement before completing your cash flow
statement. Over time, you will be able to base cash inflows and outflows on
actual historical data.

[C] DEVELOP A CASH FLOW STATEMENT

A cash flow statement measures cash flow over time. During your first year
in business, you should include a month-by-month cash flow statement in
your business plan. If youre seeking a loan, an important feature of your
cash flow statement is that it will show the lender exactly how youre going
to afford loan payments.

In order for a business to stay afloat, it must maintain an adequate level of

cash. These are some which we can apply to improve the cash flow in our

Assignments on Master in Business Administration.

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organization. Adequate cash means that you can meet your obligations. It is
to remember that cash is king and life blood of the organization.

The following points help make it easier to maintain the adequate cash level
and an improvement in cash position can be seen sooner rather than later:

1. Check Customers Credit Histories

Decide the type of customer to whom you want to extend credit. Do you want
to have a particular cut-off credit score? If you extend credit to customers
with questionable credit histories or low credit scores, you may experience
late payments or no payments, which will slow down your cash flow and
increase your collection costs.

2. Keep Track of Your Customers Payments

Have up-to-date payment records. Keep accurate payments records by using
a specialized accounting software program that will keep track of your
invoices and when payments are made. If customers are late with their
payments, it could cause a cash flow bottleneck for you. Accurate
recordkeeping will help solve this problem.

3. Set Appropriate Credit Terms and Offer a Cash Discount

Ensure your customers understand how long they have to pay their bill. In
order to speed up the cash they pay, you might want to offer a cash discount
to any customer that pays in a short period of time, designated by you, or to
a customer who pays cash.

4. Extend Your Timetable for Making Cash Payments

Pay your bills on time and take advantage of any cash discounts your
suppliers offer you. However, hold onto your cash as long as possible. Dont
pay bills weeks earlier than they are due. Your company can use that cash

Assignments on Master in Business Administration.

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balance, rather than letting your supplier use your companys cash.

5. Cut Back on Spending Wherever Possible

Do you really need to take money out of your business for a Hawaiian
vacation right now? Cut back on spending until it is less than your revenue
on a month-by-month basis. If an emergency happens, then you will be
prepared from a cash standpoint.

6. Increase Your Sales

Make sure you are not holding on to obsolete inventory. If you are, mark it
down and sell it. Storing it is costing you money and selling it at a lower
price is better than not selling it at all. The longer you hold on to obsolete
inventory, the less likely it is to sell.

7. Think before investing

The price and value of investments and their income fluctuates: you may get
back less than the amount you invested. Remember that how an investment
performed in the past is not a guide to how it will perform in the future.
Thus by maintaining such track we able to maintain liquid assets of
business which help to meet its obligations at all times.

CASH MANAGEMENT:

Controlling level of cash balance by preparing cash budget monthly

basis, finding alternate source of cash, for seen situation like strike,
recession, flood while preparing cash budget.

Controlling the inflow of cash by using techniques which help in speedier

collection of cash.

Assignments on Master in Business Administration.

Controlling

outflow

of

cash

by

Page No.30
creating

centralized

system

for

disbursement, effective payments only on the due dates, float system for
cheque payment.

Optimum investment of surplus cash in short deposits.

CONCLUSION :
The higher short term assets and the less your short Term debt; make your
ability better to pay the debt (short Term liquidity ratio / liquidity ratio help
you determine this). The short term creditors of a company like supplies of
good of credit and Commercial banks providing short-term loans are
primarily interested in knowing the companys ability to meet its current or
short term obligations of a firm can be met only when there are sufficient
liquid assets.

Therefore, a firm must ensure that it has sufficient liquidity or the capacity
to pay its current obligations due to good liquidity position. The current
assets should either be liquid or near liquidity. These should be
exchangeable into cash for paying obligations of short-term nature. If
current assets can pay off current liabilities, then liquidity position will be
satisfactory.

The ideal current ratio is 2:1 means if companys current assets are reduced
to half, then also the creditor will also able to get their payment in full. The
firm has to maintain core current assets which is easily realizable at all
times. The laid down bench mark ratio to maintain the ratio of core current
assets to current liabilities is 1:1.

The ideal liquidity ratio is 1. This indicate short term solvency of company.

Hence, adequate cash planning, cash budgeting, financial fore casting is

required to maintain liquidity.

Assignments on Master in Business Administration.

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Assignment on
Marketing Management
If you are working in a super market, what techniques/ tools you will use in
data collection. How are you going to analysis the data and make inferences?
How will you finally apply your market research to improve sales and win over
customers?
Supermarket shopping is often categorized as a self-service retail environment.
For supermarket retailers who want to build relationships with their
customers, its essential to track their levels of satisfaction with the key
elements of the supermarket environment. From the retailers perspective the
aim is to minimize the reasons for complaints and dissatisfaction and
establishing a track of direct feedback from customers about their reactions to
those key elements.
In Data Collection, we should focus on various factors affecting Consumer Behavior

Consumer Behavior Model

INPUT

PROCESS

OUTPUT

Assignments on Master in Business Administration.

Marketing
Stimuli
1. Product
2.Price
3. Promotion
4. Distribution
Channel

Other
Stimuli
1. Economic
2.
Technological
3. Political
4. Social

Buyer
Characteristics
1. Psychological
2. Personal
3. Cultural

Page No.32
Buyer
Decision
1. Process

Buyer Action
1. Product Choice
2. Brand Choice
3. Dealer Choice
4. Purchase Timing
5. Purchase Amount

Study of above factors, output and finding out the buyers demand and requirement leads to
growth. After deciding about above factors, input, output and process for super market, we do
Randomized Control Trial by selecting random consumer residing nearby store, coming to the
store as per decided sample size.
DATA COLLECTION
The type of research would be a descriptive research, which uses survey
method. The data used for research is primary data. The data collection could
be done using questionnaire as well as schedule method. Leisure shoppers can
be given questionnaire where as data can be collected by schedule method. The
respondents are those who come for the supermarket for shopping.
An evaluation of supermarket is done using a questionnaire that emphasizes
on the key elements of such as:
1. Accessibility,
Customer-service,Range-of-products,Availability-of-products,Storereputation,Ethical-business,Quality-of-products,Product-availability
,Pricing,,shopping,Parking,Cleanliness,Hygiene
The questionnaire is designed using a five-point scale that ranges from
5-Strongly Agree 4- Agree 3-Neutral 2-Disagree 1-Strongly disagree
The rating of satisfaction with specific attributes can be done by question
such
as,
How satisfied are you in general with the following aspects of customer
service of the supermarket/s where you generally do your shopping? and
Willingness to recommend supermarkets can be got by Would you
recommend the following supermarkets to your best friend- for regular
purchases?.
More questions should be framed covering all the key elements and
questionnaire
should
be
easy
to
understand
and
to
fill.
Data Analysis and results
As much as possible the collect the customer details or survey for the
said

Assignments on Master in Business Administration.

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Name and contact details

Allows you to market directly to them.
Also
lets
you
make
communications
personalized.
You may also need to contact them if an order is running late.
Transaction-history:
Indicates user preferences - which products they're most inclined to
buy, when-and how often Reveals how valuable a customer they are: how
much
they
spend
and
how
often.
Communications from you to customers and any response they make:
You need to keep records of this to make sure you space out your
communications
correctly
(i.e.
not
too
often).
It also lets you monitor how effective different types of communication
are and which the customer best respond best to. If you compare their
transaction history with the communications record, you may find one
method of communication encourage them to buy more than others.

Profile: age, gender, profession, income, hobbies, and so on:

This information is harder to obtain (see advice below), but can be
useful
for
more
advanced
marketing
strategy.
Once you have the info for a number of customers, you can build up
clearer
picture
of
who
exactly
your
target
customer
is.
It allows you to better focus your advertising and marketing efforts, as
well as affiliate opportunities and sponsorships. If you know your target
customer goes to the gym three times a week, it opens up a new place to
advertise, a new line of gym-related products and an opportunity to do a
deal with the local gym to offer discounted membership if they shop with
you
X
number
of
times.
Knowing their age and profession (and so an idea of their income) helps
with
pricing
strategy.
The better and more detailed picture you have of your target customer,
the more you can tailor and develop products to please them.
Spending habits: how your customers shops - such as impulse buys,
considered purchases, comparing the prices from different businesses,
always
with
you
on
a
regular
basis,
and
so
on:
You can display goods and structure deals around consumers'
spending habits - think of how supermarkets put magazines and chocolate
bars
at
the
checkout:
impulse
buys.
Can be difficult to assess - you may need the help of a market research
agency or detailed surveys with trusted customers. Or you can try out
different strategies and see which work. You can also take an educated
guess
based
on
your
knowledge
of
the
market.
Birthdays: Sending out a birthday text or card can add a personal
touch
and
make
a
customer
feel
valued.
Whether or not they pay on time:

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This is obviously important for cash flow reasons rather than

marketing ones, but it's worth adding to the list anyway if you're thinking
about data collection.

How to collect customer data

First and foremost, do not harass customers for data. Endless form
filling is enough to put a consumer off a purchase. Data collection has to
be either unintrusive or incentivized. Collect it bit by bit to build up a
fuller picture of your customer gradually and in a non-annoying way.
From orders:
Obtain contact details and name from orders and begin building a
transaction history, whether on or offline (although online makes things
even easier as data can automatically be entered into a database).
You can add in a birth date as optional.
If the transaction is happening online, you can add in an optional
section requesting more information. Phrase it in a way that appeals to the
customer, such as: "So that we can learn more about you and provide you
with a service more suited to your personal needs, please fill in...." You can
also use this technique if a customer has to register an account with you
at any point.
Surveys:
If you run a survey on your business, you can obtain a fair amount of
information by asking details about their profile (gender, age, etc). While
some respondents may be reluctant to give their name, some will. For
those that don't, you get a clearer picture of your overall target customer
anyway, which is the aim here.
Competitions:
Run a competition asking for email address and a couple of other
details - customers will be more inclined to share personal data when they
have
something-to
gain
from
it.
Online can help you track spending habits and user preferences,
though you may only be able to get an overall picture of your target
customer rather than profiles of specific users - use Google Analytics.
Research:
Statistics and research already out there can help you build a more
detailed picture of your target customer (though of course they won't
provide information on individuals).
Look at demographic-related reports and spot trends. There's almost
certainly other people targeting the same demographic as you, which
means you can simply look at the research they've done and any statistics

Assignments on Master in Business Administration.

Page No.35

on the matter to find out more about your target audience.

A market research agency will be able to provide you with the most
detailed picture of your target customer and their habits, but this is quite
an expenditure. You probably only need to go into this much depth when
you're marketing techniques are very advanced - and you'll recognise your
need
for
an
agency
as
and
when
that
happens.
Noticing things when you see customers face-to-face can of course also
give you a very general idea about who the bulk of your customer are and
what
demographic
and
age
group
they're
part
of.
How to store customer data
Initially, you can store things on Excel or similar spreadsheet software.
But as your data becomes more detailed, you'll need specific database
software to manage your customer data.
Ask a software and computer shop or supplier to recommend you some
software, explaining your needs both present and future to make sure they
provide you with the right level of complexity. You don't want to end up
with something either far too complicated or far too basic for your needs.
Make sure your data collection spans all different departments and
members of staff. Everyone should be contributing to the same document.
Use CRM software to manage this.
Guidance and the law on storing customer data
There are complex laws surrounding business' collection of data.
See our guide on the data protection act to find out more and to make
sure you don't accidentally break the law.
Make sure you ask customers' preferences when you take their contact
details. Allow them to opt out of receiving marketing material - you don't
want
to
get
on
the
wrong
side
of
them,
after
all.
Jargon-buster
CRM software: customer relationship management software. Software that
allows different departments and members of a company to contribute to
individual data files of customers, and track their orders and so on
without having to ask other members of the company. An up-to-date,
shared database of all customer communications and transactions and
other details.

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Assignment on
Organizational Behavior
If you are made the campaign leader for a particular political party. How will
you use your leadership skills to motivate your party men to ensure success of
the party nominee in the elections? (Focus on the individual, motivate and
apply leadership style).
A leader is someone who understands and lives life in line with their purpose.
Someone who is authentic, who has a clear sense of their own personal values
and is seen by others to embody those values. Someone who believes in giving
first, with no expectation of a return. Someone who inspires others to follow
their
example,
just
by
being
themselves.
T

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LEADERS SHOW
-Drive
-Vision
-Leadership-Motivation
-Integrity
-Self-confidence
-Knowledge in somefields etc
But-this does not ensure success as a leader.
There are other characteristics, that helps to make a leader

success, like

-group leadership
-organizational talent
-sensitivity
-collaboration
-persuasiveness
-rapport-building
-analyzing situations
-making judgment
-decision making
-planning
-delegating
-empowering
-controlling
-appraising
-communicating
-iniating
-flexibility
-adaptability,etc.
Most

of

these

are

needed

for

managing

Most leaders are not born

with all
either in classrooms or self taught on jobs.

situations

these

and

people.

factors, but

trained

Most of the above factors are learnable.

Hence leadership is a combination of born talents and trained skills/
knowledge.
Provide team leadership
1 Create an environment oriented to trust, open communication, creative
thinking, and cohesive team effort

Assignments on Master in Business Administration.

Page No.38

2 Provide the team with a vision of the project objectives

3 Motivate and inspire team members
4 Lead by setting a good example (role model) - behavior consistent with
words
5 Coach and help develop team members; help resolve dysfunctional behavior
*Facilitate problem solving and collaboration
1 Strive for team consensus and win-win agreements
2 Ensure discussions and decisions lead toward closure
3 Maintain healthy group dynamics
4 Intervene when necessary to aid the group in resolving issues

Assignments on Master in Business Administration.

Page No.39

5 Assure that the team members have the necessary education and
training to effectively participate on the team
6 Encourage creativity, risk-taking, and constant improvement
7 Recognize and celebrate team and team member accomplishments and
exceptional performance
*Focus the team on the tasks at hand or the
internal
and
external
customer
requirements
1

Coordinate

with internal

and external

customers

as necessary

2 Familiarize the team with the customer needs, specifications, design

targets, the development process, design standards, techniques and tools to
support task performance
3 Assure that the team addresses all relevant issues within the
specifications and various standards
4 Provide necessary business information
5 Serve as meeting manager, WHEN YOU HAVE A MEETING.
6 Initiate sub-groups or sub-teams as appropriate to resolve issues and
perform tasks in parallel
7 Ensure deliverables are prepared to satisfy the project requirements, cost
and schedule
8 Help keep the team focused and on track
*Coordinate team logistics

1 Work with functional managers and the team sponsor to obtain necessary
resources to support the team's requirements
2 Obtain and coordinate space, furniture, equipment, and communication
lines for team members
3 Establish meeting times, places and agendas
4 Coordinate the review, presentation and release of design layouts,
drawings, analysis and other documentation
5 Coordinates meetings with the product committee, project manager and
functional management to discuss project impediments, needed resources or
issues/delays in completing the task
*Communicate team status, task accomplishment, and direction
1 Provide status reporting of team activities against the program plan or

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Page No.40

Schedule
2 Keep the project manager and product committee informed of task
accomplishment, issues and status

3 Serve as a focal point to communicate and resolve interface and

integration
issues with other teams

4 Escalate issues which cannot be resolved by the team

5 Provide guidance to the team based on management direction

Communicating

Communicating with Coworkers: Communicating information using either

face-to-face, written, or via telephone or computer.

Active Listening: Listening intently to what others are saying and asking
for further details when appropriate.

Facilitating Discussion: Promoting the involvement of various individuals

and a norm of openness and collegiality during group discussions.

Public Speaking: Vocalizing clearly, maintaining a comfortable pace, and

using appropriate non-verbal behaviors during formal presentations. Utilizing
visual aids during presentations. Engaging the audience and responding to
questions from the audience.

Developing External Contacts: Developing portfolio of external contacts

within the professional community.

Communicating Outside the Organization: Exchanging information with

others outside the organization (e.g., customers, other organizations) using
face-to-face, written, telephonic or electronic means.

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Page No.41

Transformational Leadership

Assumptions
People
will
follow
a
person
who
inspires
them.
A person with vision and passion can achieve great things.
The way to get things done is by injecting enthusiasm and energy.
Style Working for a Transformational Leader can be a wonderful and uplifting
experience. They put passion and energy into everything. They care about you
and want you to succeed.

Transformational Leadership starts with the development of a vision, a view of

the future that will excite and convert potential followers. This vision may be
developed by the leader, by the senior team or may emerge from a broad series
of discussions. The important factor is the leader buys into it, hook, line and
sinker.

The next step, which in fact never stops, is to constantly sell the vision. This
takes energy and commitment, as few people will immediately buy into a
radical vision, and some will join the show much more slowly than others. The
Transformational Leader thus takes every opportunity and will use whatever
works to convince others to climb on board the bandwagon.
In order to create followers, the Transformational Leader has to be very careful
in creating trust, and their personal integrity is a critical part of the package
that they are selling. In effect, they are selling themselves as well as the
vision.
In parallel with the selling activity is seeking the way forward. Some
Transformational Leaders know the way, and simply want others to follow
them. Others do not have a ready strategy, but will happily lead the
exploration
of
possible
routes
to
the
promised
land.
The route forwards may not be obvious and may not be plotted in details, but
with a clear vision, the direction will always be known. Thus finding the way
forward can be an ongoing process of course correction, and the
Transformational Leader will accept that there will be failures and blind
canyons along the way. As long as they feel progress is being made, they will
be
happy.
The final stage is to remain up-front and central during the action.
Transformational Leaders are always visible and will stand up to be counted
rather than hide behind their troops. They show by their attitudes and

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actions how everyone else should behave. They also make continued efforts to
motivate and rally their followers, constantly doing the rounds, listening,
soothing and enthusing.
It is their unswerving commitment as much as anything else that keeps
people going, particularly through the darker times when some may question
whether the vision can ever be achieved. If the people do not believe that they
can succeed, then their efforts will flag. The Transformational Leader seeks to
infect and reinfect their followers with a high level of commitment to the
vision.
One of the methods the Transformational Leader uses to sustain motivation is
in the use of ceremonies, rituals and other cultural symbolism. Small changes
get big hurrahs, pumping up their significance as indicators of real progress.
Overall, they balance their attention between action that creates progress and
the mental state of their followers. Perhaps more than other approaches, they
are people-oriented and believe that success comes first and last through
deep and sustained commitment.
Discussion
Whilst the Transformational Leader seeks overtly to transform the
organization, there is also a tacit promise to followers that they also will be
transformed in some way, perhaps to be more like this amazing leader. In
some respects, then, the followers are the product of the transformation.
Transformational Leaders are often charismatic, but are not as narcissistic as
pure Charismatic Leaders, who succeed through a believe in themselves
rather than a believe in others.
One of the traps of Transformational Leadership is that passion and
confidence can easily be mistaken for truth and reality. Whilst it is true that
great things have been achieved through enthusiastic leadership, it is also
true that many passionate people have led the charge right over the cliff and
into a bottomless chasm. Just because someone believes they are right, it
does not mean they are right.
Paradoxically, the energy that gets people going can also cause them to give
up. Transformational Leaders often have large amounts of enthusiasm which,
if
relentlessly
applied,
can
wear
out
their
followers.
Transformational Leaders also tend to see the big picture, but not the details,
where the devil often lurks. If they do not have people to take care of this level
of
information,
then
they
are
usually
doomed
to
fail.
Finally, Transformational Leaders, by definition, seek to transform. When the
organization does not need transforming and people are happy as they are,
then such a leader will be frustrated. Like wartime leaders, however, given the

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right situation they come into their own and can be personally responsible for
saving entire companies.

Assignment on
Principles of Economics
Question: Suppose the price elasticity of demand for text books is two and the price of the
text book is increased by 10%. By how much does the quantity demand fall? Inter the
result and discuss reasons for the fall in quantity demand?
Ans:
Price Elasticity of Demand (Ep) = Percentage change in the Demand
----------------------------------------------Percentage change in Price
Hence, here

Assignments on Master in Business Administration.

Page No.44

= Percentage of change in demand

--------------------------------------------10

Percentage Change in Demand is 20 as per formula.

So, Quantity Demands fall by 20 %.
Here, Quantity Demand falls, because text books are the things which are not used for life long
and there are many substitutes available for text books. If price increases, some may use old
book instead of newer to save money. People might copy it to use, though it is illegal. Many text
books alternative also available online.
For Example, XYZ Company has made some text book production about social science. His text
books in market now in demands. But if he increases cost, then consumer ask about low cost
alternative for same book which was easily available as so many companies doing the social
science text book related publication.
Elasticity of demand PED,measures the responsiveness of demand for a
product following a change in its own price. The formula for calculating the
co-efficient of elasticity of demand is:
Percentage change in quantity demanded divided by the percentage change in
price
Since changes in price and quantity nearly always move in opposite
directions, economists usually do not bother to put in the minus sign. We are
concerned with the co-efficient of elasticity of demand. Understanding values
for
price
elasticity
of
demand
If Ped = 0 then demand is said to be perfectly inelastic. This means that
demand does not change at all when the price changes the demand curve
will
be
vertical
If Ped is between 0 and 1 (i.e. the percentage change in demand from A to
B is smaller than the percentage change in price), then demand is inelastic.
Producers know that the change in demand will be proportionately smaller
than
the
percentage
change
in
price
If Ped = 1 (i.e. the percentage change in demand is exactly the same as the
percentage change in price), then demand is said to unit elastic. A 15% rise in
price would lead to a 15% contraction in demand leaving total spending by the
same
at
each
price
level.
If Ped > 1, then demand responds more than proportionately to a change in
price i.e. demand is elastic. For example a 20% increase in the price of a good
might lead to a 30% drop in demand. The price elasticity of demand for this
price
change
is
1.5
=========================================
IN
THIS
EXAMPLE
OF
TEXT
BOOKS
1.PRICE ELASTICITY OF DEMAND==2
2==%CHANGE IN QUANTITY

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-------------------------------------%CHANGE IN PRICE
2==%CHANGE IN QUANTITY ?
--------------------------------------==_________
%CHANGE IN PRICE 10% PRICE ELASTICITY OF TEXTBOOK UP BY
10%
QUANTITY
DEMAND
IS
DOWN
BY
==========================================
What Determines Price Elasticity of Demand?

20%

Demand for rail services

At peak times, the demand for rail transport becomes inelastic and
higher prices are charged by rail companies who can then achieve higher
revenues
and
profits
The number of close substitutes for a good / uniqueness of the product
the more close substitutes in the market, the more elastic is the demand
for a product because consumers can more easily switch their demand if
the price of one product changes relative to others in the market. The huge
range of package holiday tours and destinations make this a highly
competitive market in terms of pricing many holiday makers are price
sensitive
The cost of switching between different products there may be
significant transactions costs involved in switching between different goods
and services. In this case, demand tends to be relatively inelastic. For
example, mobile phone service providers may include penalty clauses in
contracts or insist on 12-month contracts being taken out
The degree of necessity or whether the good is a luxury goods and
services deemed by consumers to be necessities tend to have an inelastic
demand whereas luxuries will tend to have a more elastic demand because
consumers can make do without luxuries when their budgets are
stretched. I.e. in an economic recession we can cut back on discretionary
items of spending
The % of a consumers income allocated to spending on the good
goods and services that take up a high proportion of a households income
will tend to have a more elastic demand than products where large price
changes makes little or no difference to someones ability to purchase the
product.
The time period allowed following a price change demand tends to be
more price elastic, the longer that we allow consumers to respond to a
price change by varying their purchasing decisions. In the short run, the
demand may be inelastic, because it takes time for consumers both to
notice and then to respond to price fluctuations
Whether the good is subject to habitual consumption when this

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occurs, the consumer becomes much less sensitive to the price of the good
in question. Examples such as cigarettes and alcohol and other drugs
come into this category
Peak and off-peak demand - demand tends to be price inelastic at peak
times a feature that suppliers can take advantage of when setting higher
prices. Demand is more elastic at off-peak times, leading to lower prices
for consumers. Consider for example the charges made by car rental firms
during the course of a week, or the cheaper deals available at hotels at
weekends and away from the high-season. Train fares are also higher on
Fridays (a peak day for travelling between cities) and also at peak times
during the day
The breadth of definition of a good or service if a good is broadly
defined, i.e. the demand for petrol or meat, demand is often fairly inelastic.
But specific brands of petrol or beef are likely to be more elastic following a
price change
Demand curves with different price elasticity of demand
Elasticity of demand and total revenue for a producer
The relationship between price elasticity of demand and a firms total
revenue is a very important one. The diagrams below show demand curves
with different price elasticity and the effect of a change in the market
price.
When demand is inelastic a rise in price leads to a rise in total revenue
for example a 20% rise in price might cause demand to contract by only
5% (Ped = -0.25)
When demand is elastic a fall in price leads to a rise in total revenue - for
example a 10% fall in price might cause demand to expand by only 25%
(Ped = +2.5)
The table below gives a simple example of the relationships between
market prices; quantity demanded and total revenue for a supplier. As
price falls, the total revenue initially increases, in our example the
maximum revenue occurs at a price of 12 per unit when 520 units are
sold giving total revenue of 6240.
Price Quantity Total Revenue Marginal Revenue
perunit Units s s
20 200 4000
18 280 5040 13
16 360 5760 9
14 440 6160 5
12 520 6240 1
10 600 6000 -3
8 680 5440 -7
6 760 4560 -11
Consider the price elasticity of demand of a price change from 20 per unit to

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18 per unit. The % change in demand is 40% following a 10% change in

price giving an elasticity of demand of -4 (i.e. highly elastic). In this situation
when demand is price elastic, a fall in price leads to higher total consumer
spending / producer revenue
Consider a price change further down the estimated demand curve from 10
per unit to 8 per unit. The % change in demand = 13.3% following a 20% fall
in price giving a co-efficient of elasticity of 0.665 (i.e. inelastic). A fall in
price when demand is price inelastic leads to a reduction in total revenue.
Change in the market What happens to total revenue?
Ped is inelastic and a firm raises its price. Total revenue increases
Ped is elastic and a firm lowers its price. Total revenue increases
Ped is elastic and a firm raises price. Total revenue decreases
Ped is -1.5 and the firm raises price by 4% Total revenue decreases
Ped is -0.4 and the firm raises price by 30% Total revenue increases
Ped is -0.2 and the firm lowers price by 20% Total revenue decreases
Ped is -4.0 and the firm lowers price by 15% Total revenue increases
Elasticity of demand and indirect taxation
Many products are subject to indirect taxation imposed by the government.
Good examples include the excise duty on cigarettes (cigarette taxes in the UK
are among the highest in Europe) alcohol and fuels. Here we consider the
effects of indirect taxes on a producers costs and the importance of price
elasticity of demand in determining the effects of a tax on market price and
quantity.
A tax increases the costs of a business causing an inward shift in the supply
curve. The vertical distance between the pre-tax and the post-tax supply
curve shows the tax per unit. With an indirect tax, the supplier may be able
to pass on some or all of this tax onto the consumer through a higher price.
This is known as shifting the burden of the tax and the ability of businesses
to do this depends on the price elasticity of demand and supply.
Consider the two charts above. In the left hand diagram, the demand curve is
drawn as price elastic. The producer must absorb the majority of the tax itself
(i.e. accept a lower profit margin on each unit sold). When demand is elastic,
the effect of a tax is still to raise the price but we see a bigger fall in
equilibrium quantity. Output has fallen from Q to Q1 due to a contraction in
demand. In the right hand diagram, demand is drawn as price inelastic (i.e.
Ped <1 over most of the range of this demand curve) and therefore the
producer is able to pass on most of the tax to the consumer through a higher
price without losing too much in the way of sales. The price rises from P1 to
P2 but a large rise in price leads only to a small contraction in demand from
Q1 to Q2.
The usefulness of price elasticity for producers
Firms can use price elasticity of demand (PED) estimates to predict:
The effect of a change in price on the total revenue & expenditure on a
product.
The likely price volatility in a market following unexpected changes in supply

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this is important for commodity producers who may suffer big price
movements from time to time.
The effect of a change in a government indirect tax on price and quantity
demanded and also whether the business is able to pass on some or all of
the tax onto the consumer.
Information on the price elasticity of demand can be used by a business
as part of a policy of price discrimination (also known as yield
management). This is where a monopoly supplier decides to charge
different prices for the same product to different segments of the market
e.g. peak and off peak rail travel or yield management by many of our
domestic and international airlines.