Master of Business Administration - MBA Semester II MB0044 Production & Operations Management - 4 Credits (Book ID: B1133) Assignment Set- 1 (60 Marks)Q.1. Ans. Explain in brief the origins of Just in Time. Explain the different types of wastes that can be eliminated using JIT. Just in time were developed to minimize wastage across the organization. If a firm is optimistic about the demand, then that firm increases their planned inventories. On the other hand if the demand is weak when compared to the expectations, then that firms unplanned inventories are high. That means companies dont keep a lot of excess inventory, and then manufacture a product as an order comes in. It is management philosophy of continuous and forced problem solving. The seven types of wastes to be eliminated according to JIT are : 1. Over Production Over production is to manufacture products before it is actually needed. If the demand for that product decreases, the extra parts or products produced may not be useful or needed. Also over production results in high storage costs and is also difficult to detect defects. So, over productions is considered a waste. 2. Inventory Excess procurement or production builds up stock of materials which are not immediately use, this locking space and fund carrying heavy cost. 3. Waiting Time Waste of time happen when goods are not moving or being processed. The operator, the machine or the part will either be not working or be worked upon. The duration is can be said to be unproductive and may create more serious consequences. 4. Movement Any unnecessary movement is a waste of energy; it causes blockages, disrupting movements and delaying the flow of other items creating delays. 5. Effort The people, who work, do not make a study as to how the products on which they are makin

are utilized and do not realize the purpose for which they are made. This lack of education will lead to waste of resources. Finally, they end up in shortage of resources when needed. 6. Defective products The defective products lead to a tremendous loss to the company. This is because they use up the same equipments, workmen and the time that would be used to make good products. Thus defective products use up resources and result in losses. 7. Over Processing Some steps like unnecessary processing or production do not add value to the final output. As a result, it is waste of all the inputs that go into the process.

Q.2. What

is value engineering or value analysis ? Elucidate

five companies which have

incorporate VE with brief explanation. Ans. Value of engineering (VE) or Value Analysis is a methodology by which we try to find substitutes for a product or an operation. The concept of value engineering originated during the Second World War. It was developed by the General Electric corporations (GEC). Value Engineering has gained popularity due to its potential for gaining high Returns on investment (ROI). This methodology is widely used in business re-engineering, government projects, construction, assembling and machining processes, health care and environmental engineering, and many others. Value engineering process calls for a deep study of a product and the purpose for which it is used, such as the raw materials used; the processes of transformation; the equipment needed, and many others. It is also questions whether what is being used is the most appropriate and economical. This applies to all aspects of the products.

1. General Electrical Corporation (GEC) The concepts of value engineering originated in 1947 in General Electricals corporation (GEC) When a substitute for asbestos for flooring had to be found. Specialized dealers could provide an equally good material at a lesser price. Initially, the practioners were the people in charge of purchasing who tried to locate substitute material which would be equally good, if not better, at a lower price. approach to value engineering. The concept percolated to the manufacturing departments, engineers applied the same principles and found that, they could use alternate materials, which were cheaper giving the same This is the first and basic

performance. It was also fund that dimensions and tolerance could be altered wit hout affecting the performance of the part or the product. The investigations took them on the path of eliminating some operations. The focus was on the value of each bit materials, each operation. This approach led to the design stage.

2. Ashok Leyland In implementation of VA, Ashok Leyland changed gear material from phosphor bronze to a less expensive cast iron and eliminated frequent field complaint of gear seizure in trucks. 3. TVS T.V. Sundaram Lyenger (TVS) Limited is one of the largest automobile distribution companies in India. During the mid 1940 to 1960s, TVS based in Madurai was ranked as the best bus transportation system in India. It could manage to run the fleets for about 96% of the time. TVS used the VE approach to restore the mobility of buses that had broken down. They stocked their garage with some critical assemblies of a bus. Whenever, a part or an assembly failed of a bus, they replaced it immediately with a new one, thus restoring mobility within a couple of hours. When compared to the traditional method, this approach has gained much more benefits to the company, it helped to save time, reduce cost, efficient, quicker, and competitive. 4. MODI Xerox Modi Xerox designed the VE-d low cost copier 1025 ST, which uses a single tray. The advantage of new design is that it is easy to operate and the cost is also very low. 5. TITAN Titan watches introduced new designs adopting a strategy of innovation.

Q.3. Ans.

Explain different types of quantitative models. Differentiate between work study and motion study. There are different quantitative models.

1. Linear Programming: Linear programming technique is often used for optimizing a given objective like; profit or revenue maximization, or cost outgo minimization. Distribution of the revenues is the critical issue, when there are limited resources and they have to meet competing demands. 2. Transportation Model: Transportation model is concerned with goods from manufacturing center or warehouses which have to be supplied to depots or retails outlets. The demand and supply position of the places

where they are required or produced and the cost of transportation are considered in the model. We use this model to economize. 3. Assignment Model: Allocating jobs or persons to machines, awarding different projects to contractors is done so that maximum returns occur or less expenses are incurred. Hence, calls for the use of this model. 4. Inventory Control Model: Inventory control model considers the: a. Frequency of placing orders. b. Quantities per order considering the cost of placing an order. c. Number of pieces that are to be kept in reserve. d. Rate of consumption. e. Lead time required for the supplier. f. Cost involved in storage. We have different models which give solutions to optimization depending upon the probabilities of consumption and supply. 5. Waiting Line Models: Queues are formed when the rate of services is at a variance with the rate of arrival. They are formed when the rate of production is less at particular points compared to the previous one. Sometimes we see multiple service points and a single queue are formed for feeding them. Number of items which includes the following is studied with some special techniques. a. People to be serviced. b. Rate of service c. Type of queue discipline that is intended to be followed. d. Policy of priority. e. Tolerable amounts of waiting f. Others.

6. Simulation Models: Simulation models are used when we will not be able to formulate mathematical model. So, we develop a model which resembles a real life situation. Based on this pattern, we predict and plan our procurement, production, delivery and other actions.

7. PERT (Project Evaluation And Review Technique) And CPM (Critical Path Method) Models: When projects are undertaken with a number of activities, some happens in sequence, with gaps of weeks or months and some happens simultaneously. It is important to estimate the time required for completion of the project. A lot of coordination is needed while supplying the resources. It is also equally important to identify the bottlenecks and smoothen resources so that time schedules are maintained. Delayed completion may entail penalties. In this model, we adopt special methods to make the system.

Difference between Work Study and Motion Study

Work study 1. We can say that work study is being conducted when analysis of work methods is conducted during the period when a job is done on a machine or equipment. 2. The study helps in designing the optimum work method and standardization of the work method.

Motions study 1. Method study is on studying the method currentlybeing used and developing a new method of performing the task in a better way. 2. Operation flow charts, motion charts, flow process charts, which are the elements of the task are studied to find the purpose of each activity, the sequences in which they are done, and the effect of these on the work. 3. The study may help in changing some of them and even eliminate some of them to effect improvements. 4. The new method should result in saving of time, reduced motions and simpler activities.

3. The study enables the methods engineer to search for better methods for higher utilization of man and machine and accomplishment of higher productivity. 4. The study gives an opportunity to the workmen to learn the process of study thus making them able to offer suggestions for improved methods.

Q.4. What is rapid prototyping? Explain the difference between Automated flow line and Automated assembly line with examples. Ans. Prototyping is a process by which a new product is developed in small numbers. Prototyping is helpful to: Determine the suitability of the materials Study the various methods of manufacture Determine type of machinery required Develop techniques to overcome problems that may be encountered when full scale manufacturing is undertaken. Prototypes do meet the specification of the components that enter a product and performance can be measured on those. It helps in confirming the design and any shortcomings can be rectified at low cost. If serious defects or problems arise during manufacturing, a thorough change in design or even its

replacement may be considered. Toa arrive at decisions and to make use of the advantageous stated above, it is important that the prototypes are made within the shortest possible time, Rapid prototyping facilities this. The advanced Rapid Prototype Modeling Processes are: 1. Computer Aided Design (CAD) 2. Selective Laser Sintering (SLS) 3. Fused Deposition Modeling (FDM) 4. Lamination Object Manufacturing (LOM) 5. Electronic Beam Melting (EBM)

Different between Automated Flow lines and Assembly Flow line.

Automated Flow Lines 1. Several Automated machines are linked by a transfer system. 2. Handling machine have main role to move semi finished product to the next stage. 3. Semi-finished products are the main core activities. 4. Here raw materials are achieving to get required shapes and acquire special properties. 5. The materials are needed to be moved, held, rotated, fitted and positioned for completing different operations.

Assembly Flow Lines 1. All equipments are needed to in automated Assembly line 2. All equipments make role of making sub-assemblies put fitted. 3. Here Sub-assemblies products are the core activities. 4. Here intermediated products are together and

achieving to get finished product. 5. Here All parts or sub-assemblies are fitted to enables the product to be in readiness to perform the function it was designed to. This process is called assembly.

6. Human intervention may be needed to verify that the operations are taking place according to standards.

6. No human intervention is needed, methodologies achieve ensure the are final framed result, so that to basic the

principle is to fit parts together and linkages functions are integrated and give out the desired output.

Q.5.Explain Break even Analysis and centre of gravity methods. Explain product layout and process layout with examples. Ans. Break Even Analysis Every manufacturing company will have three major contributors to cost; 1. Investments made for land, plant and machinery resulting in interest and depreciation. 2. Recurring expenses, which are not proportional to the quantity of production. 3. Variable costs, which are directly proportional to the quantity produced. For our calculations, we combine the first two costs together and call them fixed costs. We call costs that depend on the quantity of production as variable costs. We compare the total costs for different locations on estimated amounts per annum and select whichever locations costs the least. However we will have to consider the possible variations in production levels during the foreseeable time spans and take decision. those

COMPANIES

CONTRIBUTING

TO THE COST

Centre Of Gravity Method. Centre of gravity method is used mainly when; Transportation costs, either for distribution of products or collection of materials from different suppliers is the main criterion. Production rates are high. The volume and weights of materials that have to be moved are huge. Time taken either to receive materials from suppliers or delivery to customers is critical. It is better to locate the facility at such a place, which caters to the different points most optimally. The vital factor is the load, that is, number of items, or the weights that need to be moved from the central location to the existing or demanding point. We use this method when, both distance and load

have to be considered for optimality in terms of costs.

PRODUCT LAYOUT Product layout is also called as production lines or assembly lines. They are designed and laid out in such a way that only few products are capable of being manufactured or assembled. Materials flow through the various facilities. These use special machines to perform specific operations to produce only one product at one time. So, companies should set different set of machines for different products. Workers perform a narrow range of activities to complete the operations on the product as it moves in a flow line. The operation times, the sequence of movements and routing procedures are highly standardized to meet production requirements which are synchronized with many such products to complete finished goods to meets demands. Using special machines and implementing standardization in operations have many advantages which are listed below: The skill required of the workers is low Supervision is minimal Training needs are small Precautions to be taken are: Constant check on the processes needs to be performed so that quality is assured. Corrective measures have to be implemented to avoid rejections, since, the quantities that get manufactured will be continuous. Check for the behavioral of the worker. As jobs are repetitive, workers tend to be bored and lose concentration. This may affect productivity and quality. Example: Let us consider an example of a stainless steel manufacturing industry, in which the operations turning, milling and drilling happen in a sequence. Testing is performed in each process to assure the quality. The items are then sent to the assembly block. The items that arrive for assembly are either bought out items or made item components from elsewhere in the plant. The final product inspections are made and send to the packing dispatch.

TURNING OPERATION PACKING DISPATCH

MILLING MACHINES INSPECTION

DRILLING MACHINES ASSSEMBLY

PROCESS LAYOUT Design of Process Layout: The analysis involved in the design of production lines and assembly lines relates primarily to timing, coordination, and balance among individual stages in the process. For process layouts, the relative arrangement of departments and machines is the critical factor because of the large amount of

transportation and handling involved. Procedure For Designing Process Layouts: Process layout design determines the best relative locations of functional work centers. Work centers that interact frequently, with movement of material or people, should be located close together, whereas those that have little interaction can be spatially separated. One approach of designing an efficient functional layout is described below. 1. List and describe each functional work centre. 2. Obtain a drawing and description of the facility being designed. 3. Identify and estimate the amount of material and personnel flow among work centers. 4. Use structured analytical methods to obtain a good general layout. 5. Evaluate and modify the layout, incorporating details such as machine orientation, storage area location, and equipment access. The first step in the layout process is to identify and describe each work centre. The description should include the primary function of the work centre; drilling, new accounts, or cashier; its major components, including equipment and number of personnel; and the space required. The description should also include any special access needs (such as access to running water or an elevator) or restrictions (it must be in a clean area or away from heat). For a new facility, the spatial configuration of the work centers and the size and shape of the facility are determined simultaneously. Determining the locations of special structures and becomes part of the layout process. However, in many cases the facility and its characteristics are a given. In these situations, it is necessary to obtain a drawing of the facility being designed, including shape and dimensions, locations of fixed structures, and restrictions on activities, such as weight limits on certain parts of a floor or foundation. fixtures such as elevators, loading docks, and bathrooms

Relationship flow diagram

a)

To minimize transport times and material-handling costs, we would like to place close together those work centers that have the greatest flow of materials and people between them.

b)

To estimate the flows between work centers, it is helpful to begin by drawing relationship diagram as shown in Fig.

c) For manufacturing systems, material flows and transporting costs can be estimated reasonably well using historical routings for products or through work sampling techniques applied to workers or jobs. The flow of people, especially in a service system such as a business office or a university administration building, may be difficult to estimate precisely, although work sampling can be used to obtain rough estimates. The amounts and/or costs of flows among work centers are usually presented using a flow matrix, a flow-cost matrix, or a proximity chart.

Q.6. Ans.

Explain Jurans Quality Trilogy and Crosbys absolutes of quality. List out the pillars of total productive maintenance. JURANs Quality Triology Juran uses h i s famous universal Breakthrough Sequence to implement quality

programmes. The universal break through sequences are ; Proof of need: there should be a compelling need to make changes. Project identification: here what is to be changed is identified. Specific projects with time frames and the resource allocation are decided. Top management commitment: Commitment of the top management is to assign people and fix responsibilities to complete the project. Diagnostic journey: Each team will determine whether the problems result from systemic causes or are random or are deliberately caused. Root causes are ascertained with utmost certainty. Remedial Action: This is the stage when changes are introduced. Inspection, testing, and validation are also included at this point. Holding on to the gains: the above steps results in beneficiary results. Having records or all actions and consequences will help in further improvements. The actions that results in the benefits derived should be the norm for establishing standards.

JURAN has categorised cost of quality in to four categories: 1. Failure CostsInternal: These are cost of rejections, repairs in terms of materials, labour, machine time and loss of morale. 2. Failure Costs-External: These are cost of replacement, on-site rework including spare parts and expenses of the personnel, warranty costs and loss of goodwill. 3. Appraisal Costs: These 4. are cost inspection, including maintenance of records, certification, segregation costs, and others. Prevention costs: Prevention cost is the sequence of three sets of activities, Quality planning, Quality control, and Quality improvement, forming the triology to achieve TOTAL QUALITY MANAGEMENT.

JURANs argument says that; Quality is the result of good planning consideration the needs of both internal and external customers and develops processes to meet them. The processes are also planned to meet them. Quality is built into the system of manufacture, inputs and processes that are on stream like raw material, spare parts, labour, machine maintenance, training, warehousing, inspection procedures, packaging, and other. All these have to follow standards and control exercises to make sure that mistake do not occur often and that if mistakes do occur then they are corrected at the source. Quality improvement measures are essential to keep the quality culture alive. Newer methods will be found, some operations can be eliminated, improved technology available. In short, as experience is gained things can always be done better. IT is for the management to take the initiative and encourage the employees to be on lookout for opportunities for improvement. CROSBYS Absolutes of Quality Like Deming, Crosby also lays emphasis on top management commitment and responsibility for designing the system so that defects are not inevitable. He urged that there be no restriction o n spending for achieving quality. In the long run, maintaining quality is more economical than compromising on its achievement. His absolutes can be listed as under: Quality is conformance to requirements, not goodness Prevention, not appraisal, is the path to quality. Quality is measured as the price Paid for non-conformance and as indices

Quality originates in all factors. There are no quality problems. It is the people designs and processes that create problems. Crosby also has given 14 points similar to those of Deming. His approach emphasizes on measurement of quality, increasing awareness, corrective action, error cause removal and continuously reinforcing the system, so that advantages derived are not lost over time. He opined that the qualit y management regimen should improve that overall health of the organization and prescribed a vaccine. The ingredients are. 1. Integrity: Honesty and commitment help in producing everything right first time, every time. 2. Communication: Flow of information between departments, suppliers, customers helps in indentifying opportunities. 3. Systems and operations: These should bring in a quality environment so that nobody is comfortable with anything less than the best. Total Production Maintenance (TPM) Maintenance is a function in any operations system. Maintenance keeps the equipments in good condition. Generally equipments deteriorate because usage wear to the parts introducing inaccuracies on the products made on them. When the deterioration produces a component which exceeds the permitted deviations rendering them unacceptable, maintenance is undertaken to bring back the machine to produce acceptable components. Sometimes the failure is sudden and serious and the equipment stops working. Disruption of production and emergency repairs works are costly and schedules are missed causing delays in supplies and consequent losses. These breakdowns occur because the equipment was carrying hidden defects which were not apparent. All theses are attended to by the maintenances department. Historical records indicate the probability of failures over different periods thus enabling us to plan to attend to them. With progress in automation, we have costly equipments. We have flow lines and any one machine breaking down causes a series of machine to be idle. So, we have to move towards zero breakdowns like we want to move towards zero defects by implementing TQM Tools. TPM puts the responsibility of maintenance where it belongs to and the operator who uses the equipment. It is a companywide activity which involves all the people. The main thrust is eliminating all break downs. The focus is on the operating personnel because they would know about malfunctioning earlier and more than anybody else. They work on the machine and are aware of the slightest variations that occur and thus should be able to plan to remove the cause before it becomes serious. So every planned maintenance activity reduces the probability of a breakdown, Ownership of the operation and machine increases the commitment of the workmen. Autonomy is the starting point for learning and excellence. The worker can suggest better ways of improving quality, productivity, and design. This help in continuous improvement, Team work and participation improves the quality culture. The principles of 5S- the housekeeping activities which improve efficiency at workplace is

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

Master of Business Administration - MBA Semester 2 MB0045 Financial Management - 4 Credits(Book ID: B1134)

Q1.Ans.

What are the 4 finance decisions taken by a finance manager?A firm performs finance functions simultaneously and continuously in the normal course of the

business. They do not necessarily occur in a sequence. Finance functions call for skilful planning, control and execution of a firms activities. Let us note at the outset that shareholders are made better off by a financial decision that increases the value of their shares, Thus while performing the finance function, the financial manager should strive to maximize the market value of shares. Whatever decision does a manger takes need to result in wealth maximization of a shareholder.

1. Investment Decision Investment decision or capital budgeting involves the decision of allocation of capital or commitment of funds to long-term assets that would yield benefits in the future. Two important aspects of the investment decision are: a) The evaluation of the prospective profitability of new investments, and b) The measurement of a cut-off rate against that the prospective return of new investments could be compared. Future benefits of investments are difficult to measure and cannot be predicted with certainty. Because of the uncertain future, investment decisions involve risk. Investment proposals should, therefore, be evaluated in terms of both expected return and risk. Besides the decision for investment managers do see where to commit funds when an asset becomes less productive or nonprofitable. There is a broad agreement that the correct cut-off rate is the required rate of return or the opportunity cost of capital. However, there are problems in computing the opportunity cost of capital in practice from the available data and information. A decision maker should be aware of capital in practice from the available data and information. A decision maker should be aware of these problems. 2. Financing Decision Financing decision is the second important function to be performed by the financial manager. Broadly, her or she must decide when, where and how to acquire funds to meet the firms investment needs. The central issue before him or her is to determine the proportion of equity and debt. The mix of debt and equity is known as the firms capital structure. The financial manager must strive to obtain the best financing mix or the optimum capital structure for his or her firm. The firms

capital structure is considered to be optimum when the market value of shares is maximized. The use of debt affects the return and risk of shareholders; it may increase the return on equity funds but it always increases risk. A proper balance will have to be struck between return and risk. When the shareholders return is maximized with minimum risk, the market value per share will be maximized and the firms capital structure would be considered optimum. Once the financial manager is able to determine the best combination of debt and equity, he or she must raise the appropriate amount through the best available sources. In practice, a firm considers many other factors such as control, flexibility loan convenience, legal aspects etc. in deciding its capital structure.

3. Dividend Decision Dividend decision is the third major financial decision. The financial manager must decide whether the firm should distribute all profits, or retain them, or distribute a portion and retain the balance. Like the debt policy, the dividend policy should be determined in terms of its impact on the shareholders value. The optimum dividend policy is one that maximizes the market value of the firms shares. Thus if shareholders are not indifferent to the firms dividend policy, the financial manager must determine the optimum dividend payout ratio. The payout ratio is equal to the percentage of dividends to earnings available to shareholders. The financial manager should also consider the questions of dividend stability, bonus shares and cash dividends in practice. Most profitable companies pay cash dividends regularly. Periodically, additional shares, called bonus share (or stock dividend), are also issued to the existing shareholders in addition to the cash dividend.

4. Liquidity Decision Current assets management that affects a firms liquidity is yet another important finances function, in addition to the management of long-term assets. Current assets should be managed efficiently for safeguarding the firm against the dangers of illiquidity and insolvency. Investment in current assets affects the firms profitability. Liquidity and risk. A conflict exists between profitability and liquidity while managing current assets. If the firm does not invest sufficient funds in current assets, it may become illiquid. But it would lose profitability, as idle current assets would not earn anything. Thus, a proper trade-off must be achieved between profitability and liquidity. In order to ensure that neither insufficient nor unnecessary funds are invested in current assets, the

financial manager should develop sound techniques of managing current assets. He or she should estimate firms needs for current assets and make sure that funds would be made available when needed. It would thus be clear that financial decisions directly concern the firms decision to acquire or dispose off assets and require commitment or recommitment of funds on a continuous basis. It is in this context that finance functions are said to influence production, marketing and other functions of the firm. This, in consequence, finance functions may affect the size, growth, profitability and risk of the firm, and ultimately, the value of the firm. To quote Ezra Solomon The function of financial management is to review and control decisions to commit or recommit funds to new or ongoing uses. Thus, in addition to raising funds, financial management is directly concerned with production, marketing and other functions, within an enterprise whenever decisions are about the acquisition or distribution of assets. Various financial functions are intimately connected with each other. For instance, decision pertaining to the proportion in which fixed assets and current assets are mixed determines the risk complexion of the firm. Costs of various methods of financing are affected by this risk. Likewise, dividend decisions influence financing decisions and are themselves influenced by investment decisions. In view of this, finance manager is expected to call upon the expertise of other functional managers of the firm particularly in regard to investment of funds. Decisions pertaining to kinds of fixed assets to be acquired for the firm, level of inventories to be kept in hand, type of customers to be granted credit facilities, terms of credit should be made after consulting production and marketing executives. However, in the management of income finance manager has to act on his own. The determination of dividend policies is almost exclusively a finance function. A finance manager has a final say in decisions on dividends than in asset management decisions. Financial management is looked on as cutting across functional even disciplinary boundaries. It is in such an environment that finances manager works as a part of total management. In principle, a finance manager is held responsible to handle all such problem: that involve money matters. But in actual practice, as noted above, he has to call on the expertise of those in other functional areas to discharge his responsibilities effectively.

Q.2. Ans.

What are the factors that affect the financial plan of a company? To help your organization succeed, you should develop a plan that needs to be followed. This starting the company, developing new product, creating a new department or any

applies to

undertaking that affects the companys future. There are several factors that affect planning in an organization. To create an efficient plan, you need to understand the factors involved in the planning process. Organizational planning is affected by many factors. Priorities In most companies, the priority is generating revenue, and this priority can sometimes interfere with the planning process of any project. For example, if you are in the process of planning a large expansion

project and your largest customer suddenly threatens to take their business to your competitor, then you might have to shelve the expansion planning until the customer issue is resolved. When you start the planning process for any project, you need to assign each of the issues facing the company a priority rating. That priority rating will determine what issues will sidetrack you from the planning of your project, and which issues can wait until the process is complete. Company Resources Having an idea and developing a plan for your company can help your company to grow and succeed, but if the company does not have the resources to make the plan come together, it can stall progress. One of the first steps to any planning process should be an evaluation of the resources necessary to complete the project, compared to the resources the company has available. Some of the resources to consider are finances, personnel, space requirements, access to materials and vendor relationships. Forecasting A company constantly should be forecasting to help prepare for changes in the marketplace. Forecasting sales revenues, materials costs, personnel costs and overhead costs can help a company plan for upcoming projects. Without accurate forecasting, it can be difficult to tell if the plan has any chance of success, if the company has the capabilities to pull off the plan and if the plan will help to strengthen the companys standing within the industry. For example, if your forecasting for the cost of goods has changed due to a sudden increase in material costs, then that can affect elements of your product roll-out plan, including projected profit and the long-term commitment you might need to make to a supplier to try to get the lowest price possible. Contingency Planning To successfully plan, an organization needs to have a contingency plan in place. If the company has decided to pursue a new product line, there needs to be a part of the plan that addresses the possibility that the product line will fail. The reallocation of company resources, the acceptable financial losses and the potential public relations problems that a failed product can cause all need to be part of the organizational planning process from the beginning.

Q.3. Ans.

Show the relationship between required rate of return and coupon rate on the value of a bond. It is important for prospective bond buyers to know how to determine the price of a bond

because it will indicate the yield received should the bond be purchased. In this section, we will run through some bond price calculations for various types of bond instruments. Bonds can be priced at a premium, discount, or at par. If the bonds price is higher than its par value, it will sell at a premium because its interest rate is higher than current prevailing rates. If the bonds price is lower than its par value, the bond will sell at a discount because its interest rate is lower than

current prevailing interest rates. When you calculate the price of a bond, you are calculating the maximum price you would want to pay for the bond, given the bonds coupon rate in comparison to the average rate most investors are currently receiving in the bond market. Required yield or required rate of return is the interest rate that a security needs to offer in order to encourage investors to purchase it. Usually the required yield on a bond is equal to or greater than the current prevailing interest rates. Fundamentally, however, the price of a bond is the sum of the present values of all expected coupon payments plus the present value of the par value at maturity. Calculating bond price is simple: all we are doing is discounting the known future cash flows. Remember that to calculate present value (PV) which is based on the assumption that each payment is re-invested at some interest rate once it is receivedwe have to know the interest rate that would earn us a known future value. For bond pricing, this interest rate is the required yield. Here is the formula for calculating a bonds price, which uses the basic present value (PV) Formula: C = coupon payment n = number of payments i = interest rate, or required yield M = value at maturity, or par value The succession of coupon payments to be received in the future is referred to as an ordinary annuity, which is a series of fixed payments at set intervals over a fixed period of time. (Coupons on a straight bond are paid at ordinary annuity.) The first payment of an ordinary annuity occurs one interval from the time at which the debt security is acquired. The calculation assumes this time is the present. You may have guessed that the bond pricing formula shown above may be tedious to calculate, as it requires adding the present value of each future coupon payment. Because these payments are paid at an ordinary annuity, however, we can use the shorter PV-of-ordinary-annuity formula that is mathematically equivalent to the summation of all the PVs of future cash flows. This PV-of-ordinaryannuity formula replaces the need to add all the present values of the future coupon. The following diagram illustrates how present value is calculated for an ordinary annuity: Each full moneybag on the top right represents the fixed coupon payments (future value) received in periods one, two and three. Notice how the present value decreases for those coupon payments that are further into the future the present value of the second coupon payment is worth less than the first coupon and the third coupon is worth the lowest amount today. The farther into the future a payment is to be received, the less it is worth today is the fundamental concept for which the PV- ofordinary-annuity formula accounts. It calculates the sum of the present values of all future cash flows, but unlike the bond-pricing formula we saw earlier, it doesnt require that we add the value of each coupon payment. By incorporating the annuity model into the bond pricing formula, which requires us to also include the present value of the par value received at maturity, we arrive at the following formula: Lets go through a basic example to find the price of a plain vanilla bond.

Example 1: Calculate the price of a bond with a par value of $1,000 to be paid in ten years, a coupon rate of 10%, and a required yield of 12%. In our example well assume that coupon payments are made semi-annually to bond holders and that the next coupon payment is expected in six months. Here are the steps we have to take to calculate the price: 1. Determine the Number of Coupon Payments: Because two coupon payments will be made each year for ten years, we will have a total of 20 coupon payments. 2. Determine the Value of Each Coupon Payment: Because the coupon payments are semiannual, divide the coupon rate in half. The coupon rate is the percentage off the bonds par value. As a result, each semi-annual coupon payment will be $50 ($1,000 x 0.05). 3. Determine the Semi-Annual Yield: Like the coupon rate, the required yield of 12% must be divided by two because the number of periods used in the calculation has doubled. If we left the required yield at 12%, our bond price would be very low and inaccurate. Therefore, the required semiannual yield is 6% (0.12/2). 4. Plug the Amounts into the Formula: From the above calculation, we have determined that the bond is selling at a discount; the bond price is less than its par value because the required yield of the bond is greater than the coupon rate. The bond must sell at a discount to attract investors, who could find higher interest elsewhere in the prevailing rates. In other words, because investors can make a larger return in the market, they need an extra incentive to invest in the bonds.

Accounting for Different Payment Frequencies In the example above coupons were paid semi-annually, so we divided the interest rate and coupon payments in half to represent the two payments per year. You may be now wondering whether there is a formula that does not require steps two and three outlined above, which are required if the coupon payments occur more than once a year. A simple modification of the above formula will allow you to adjust interest rates and coupon payments to calculate a bond price for any payment frequency: Notice that the only modification to the original formula is the addition of F, which represents the frequency of coupon payments, or the number of times a year the coupon is paid. Therefore, for bonds paying annual coupons, F would have a value of one. Should a bond pay quarterly payments, F would equal four, and if the bond paid semi-annual coupons, F would be two.

Q.4. Ans.

Discuss the implication of financial leverage for a firm. The financial leverage implies the employment of source of funds, involving fixed return so as to

cause more than a proportionate change in earnings per share (EPS) due to change in operating profits. Like the operating leverage, financial leverage can be positive when operating profits are increasing and can be negative in the situation of decrease in such profits. In view of these, financial leverage will affect the financial risk of the firm. An important analytical tool for financial leverage is the

indifference point at which the EPS/market price is the same for different consideration.

financial plans under

The objective of this study was to provide additional evidence on the relationship between financial leverage and the market value of common stock. Numerous empirical studies have been done in this area, and, concurrently, many theories have been developed to explain the relationship between financial leverage and the market value of common stock. Because of the methodological weaknesses of past studies, however, no conclusions can be drawn as to the validity of the theories. Theories on financial leverage may be classified into three categories: irrelevance theorem, rising from value indefinitely with increase in financial leverage, and optimal financial leverage. Empirical implicat ions of these categories along with the consequences of serious confounding effects are analyzed. The implications are then compared with evidence from actual events involving financial leverage changes, and distinguished from each other as finely as possible, using simple and multiple regression analyses, normal Z-test, and a simulation technique. The evidence shows that changes in the market value of common stock are positively related to changes in financial leverage for some firms and negatively related for other firms. This evidence is consistent with the existence of an optimal financial leverage for each firm, assuming that financial leverages of firms with a positive relationship are below the optimum and those of firms with a negative relationship are above the optimum. The results of the study do not depend upon the definition of the market portfolio, the definition of the event period, or the choice of financial leverage measure. Betas estimated from equally weighted market portfolios were generally higher than those estimated from value weighted market portfolios during 1981-1982. However, the results of the study were the same for both portfolios. Abnormal returns were computed for seven and two day event periods, and the results were the same for both periods. Seven different definitions of financial leverage were tested, and the results were the same for all measures.

Q.5

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

b) Benefit cost ratio for 10% cost of capital

Ans. a) Payback period: The cash flows and the cumulative cash flows of the projects is shown under in table Table Cash flows and cumulative cash flows Year Cash flows (Rs.) 1 2 3 4 5 25,000 40,000 50,000 40,000 30,000 Project Cumulative Cash flows 25,000 65,000 115,000 155,000 185,000 nd

From the cumulative cash flow column the initial cash outlay of Rs. 1,00,000 lies between 2 year and 3 rd year in respect of project.

Therefore, payback period for project is: = 2 100,000 65,000 65,000

= 2.54 years

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

b) Benefit cost ratio for 10% cost of capital Table: Present Value (PV) of Cash inflows Year 1 2 3 4 Cash in flows PV factor at 15% 25,000 40,000 50,000 40,000 0.909 0.826 0.751 0.683 PV of Cash in flows 22,725 33,040 37,550 27,320

5

30,000

0.621 PV of Cash inflow Initial Cash out lay NPV

18,630 139,265 1,00,000 39,265

Benefit cost ratio

=

PV of Cash inflow -----------------------Initial Cash outlay

1,39,265 = -------------1,00,000 = 1.39 (Ans)

Q6.

A companys earnings and dividends are growing at the rate of 18% pa. The growth rate is expected to continue for 4 years. After 4 years, from year 5 onwards, the growth rate will be 6% forever. If the dividend per share last year was Rs. 2 and the investors required rate of return is 10% pa, what is the intrinsic price per share or the worth of one share.

Ans. : P = Intrinsic price per share E = Earnings per share = 18%, D = Dividend per share = 2 r = Rate of return = 10%

P

=

1 2 2 3 3 [2(1.18)/(1.10) ] + [2(1.18) /(1.10) ] + [2(1.18) /(1.10) ] 4 4 4 5 4 2 6 + [2(1.18) /(1.10) ] + [2(1.18) (1.06)/(1.10) ] + [2(1.18) (1.06) /(1.10) ] + = 2.15 + 2.30 + 2.47 + 2.65 + 2.55 + 2.46

Intrinsic price per share = 14.58

Master of Business Administration - MBA Semester 2 MB0046 Marketing Management - 4 Credits Assignment Set- 1 (60Q.1 What is M a r k e t i n g Information System? Explain its characteristics, benefits and information types.Ans. A Marketing Information System can be defined as a system in which marketing information is formally gathered, stored, analysed and distributed to managers in accord with their informational needs on a regular basis. Set of procedures and practices employed in analyzing and assessing marketing information, gathered continuously from sources inside and outside of a firm. Timely marketing information provides basis for decisions such as product development or improvement, pricing, packaging, distribution, media selection, and promotion.

Characteristics of MIS Philip Kotler defines MIS as a system that consists of people, equipment and procedures to gather, sort, analyze, evaluate and distribute needed, timely and accurate information to marketing decision makers. Its characteristics are as follows: 1. It is a planned system developed to facilitate smooth and continuous flow of information. 2. It provides pertinent information, collected from sources both internal and external to the company, for use as the basis of marketing decision making. 3. It provides right information at the right time to the right person. A well designed MIS serves as a companys nerve centre, continuously monitoring the market environment both inside and outside the organization. In the process, it collects lot of data and stores in the form of a database which is maintained in an organized manner. Marketers classify and analyze this data from the database as needed.

Benefits of MIS (Marketing Information System) Various benefits of having a MIS and resultant flow of marketing information are given below It allows marketing managers to carry out their analysis, planning implementation and control

1.

responsibilities more effectively. 2. It ensures effective tapping of marketing opportunities and enables the company to develop effective safeguard against emerging marketing threats. 3. It provides marketing intelligence to the firm and helps in early spotting of changing trends. 4. It helps the firm adapt its products and services to the needs and tastes of the customers.

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

Types of Marketing Informations A Marketing Information System supplies three types of information. 1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly, quarterly, or annual interval. This includes data such as sales, Market Share, sales call reports, inventory levels, payables, and receivables etc. which are made available regularly. Information on customer awareness of companys brands, provided. advertising campaigns and similar data on close competitors can also be

2. Monitoring Information is the data obtained from regular scanning of certain sources such as trade journals and other publications. Here relevant data from external environment is captured to monitor changes and trends related to marketing situation. Data about competitors can also be part of this category. Some of these data can be purchased at a price from commercial sources such as Market Research agencies or from Government sources.

3. Problem related or customized information is developed in response to some specific requirement related to a marketing problem or any particular data requested by a manager. Primary Data or Secondary Data (or both) are collected through survey Research in response to specific need. For example, if the company has developed a new product, the marketing manager may want to find out the opinion of the target customers before launching the product in the market. Such data is generated by conducting a market research study with adequate sample size, and the findings obtained are used to help decide whether the product is accepted and can be launched.

Q.2

a. Examine how a firms macro environment operates.b. Mention the key points in Psychoanalytic model of consumer behavior.

Ans.

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

which it can use in order to gain information that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the companys customers. The objective of marketing philosophy is to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a company has control in such a way as to optimise this objective. The variables are what Neil Borden has termed the marketing mix which is a combination of all the ingredients in a recipe that is designed to prove most attractive to customers. In this case the ingredients are individual elements that

marketing can manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target market the four Ps. Each of these is discussed in detail in later chapters, but a brief discussion now follows upon each of these elements of the marketing mix together with an explanation of how they fit into the overall notion of marketing. A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors: Political Economic Social Technological The acronym PEST (or sometimes rearranged as STEP) is used to describe a framework for the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental scan as shown in the following diagram:

Environmental Scan / \ External Analysis Internal Analysis / \ Macroenvironment Microenvironment | P.E.S.T. Political Factors Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include: Tax policy Employment laws Environmental regulations Trade restrictions and tariffs Political stability Economic Factors Economic factors affect the purchasing power of potential customers and the firms cost of capital. The following are examples of factors in the macro economy: Economic growth Interest rates Exchange rates Inflation rate

Social Factors Social factors include the demographic and cultural aspects of the external macro environment. These factors affect customer needs and the size of potential markets. Some social factors include: Health consciousness Population growth rate Age distribution Career attitudes Emphasis on safety

Technological Factors Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include: R&D activity Automation Technology incentives Rate of technological change

External Opportunities and Threats The PEST factors combined with external micro environmental factors can be classified as opportunities and threats in a SWOT analysis.

b)

The Psychoanalytical Model: The psychoanalytical model draws from Freudian Psychology. According to this model, the individual consumer has a complex set of deep-seated motives which

drive him towards certain buying decisions. The buyer has a private world with all his hidden fears, suppressed desires and totally subjective longings. His buying action can be influenced by appealing to these desires and longings. The psychoanalytical theory is attributed to the work of eminent is composed of three psychologist Sigmund Freud. Freud introduced personality as a motivating force in human behavior. According to this theory, the mental framework of a human being elements, namely, 1. The id or the instinctive, pleasure seeking element. It is the reservoir of the instinctive impulses that a man is born with and whose processes are entirely subconscious. It includes the aggressive, destructive and sexual impulses of man. 2. The superego or the internal filter that presents to the individual the behavioral expectations of society. It develops out of the id, dominates the ego and represents the inhibitions of instinct which is

characteristic of man. It represents the moral and ethical elements, the conscience. 3. The ego or the control device that maintains a balance between the id and the superego. It is the most superficial portion of the id. It is modified by the influence of the outside world. Its processes are entirely conscious because it is concerned with the perception of the outside world. The basic theme of the theory is the belief that a person is unable to satisfy all his needs within the bounds of society. Consequently, such unsatisfied needs create tension within an individual which have to be repressed. Such repressed tension is always said to exist in the subconscious and continues to influence consumer behavior. 4. The Sociological Model: According to the sociological model, the individual buyer is influenced by society or intimate groups as well as social classes. His buying decisions are not totally governed by utility; He has a desire to emulate, follow and fit in with his immediate environment.

5. The Nicosia Model: In recent years, some efforts have been made by marketing scholars to build buyer behavior models totally from the marketing mans standpo int. The Nicosia model and the Howard and Sheth model are two important models in this category. Both of them belong to the category called the systems model, where the human being is analyzed as a system with stimuli as the input to the system and behavior as the output of the system. Francesco Nicosia, an expert in consumer motivation and behavior put forward his model of buyer behavior in 1966. The model tries to establish the linkages between a firm and its consumer how the activities of the firm influence the consumer and result in his decision to buy. The messages from the firm first influence the predisposition of the consumer towards the product. Depending on the situation, he develops a certain attitude towards the product. It may lead to a search for the product or an evaluation of the product. If these steps have a positive impact on him, it may result in a decision to buy. This is the sum and substance of the activity explanations in the Nicosia Model. The Nicosia Model groups these activities into four basic fields. Field one has two subfields the firms attributes and the consumers attributes. An advertising message from the firm reaches the consumers attributes. Depending on the way the message is received by the consumer, a certain attribute may develop, and this becomes the input for Field Two. Field Two is the area of search and evaluation of the advertised product and other alternatives. If this process results in a motivation to buy, it becomes the input for Field Three. Field Three consists of the act of purchase. And Field Four consists of the use of the purchased item.

Q.3.

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

Ans. Point 1 Introduction. The need for an understanding of the organizational buying process has grown in recent years due to the many competitive challenges presented in business-to-business markets. Since 1980 there have been a number of key changes in this area, including the growth of outsourcing, the increasing power enjoyed by purchasing departments and the importance given to developing partnerships with suppliers. Point 2 The organizational buying behaviour process. The organizational buying behaviour process is well documented with many models depicting the various phases, the members involved, and the decisions made in each phase. The basic five phase model can be extended to eight; purchase initiation; evaluations criteria formation; information search; supplier definition for RFQ; evaluation of quotations; negotiations; suppliers choice; and choice implementation (Matbuy, 1986).

Point 3 The buying centre. The buying centre consists of those people in the organizational who are involved directly or indirectly in the buying process, i.e. the user, buyer influencer, decider and gatekeeper to who the role of initiator has also been added. The buyers in the process are subject to a wide variety and complexity of buying motives and rules of selection. The Matbuy model encourages marketers to focus their efforts on who is making what decisions based on which criteria.

Point 4 Risk and uncertainty The driving forces of organizational buying behaviour. This is concerned with the role of risk or uncertainty on buying behaviour. The level of risk depends upon the characteristics of the buying situation faced. The supplier can influence the degree of perceived uncertainty by the buyer and cause certain desired behavioural reactions by the use of information and the implementation of certain actions. The risks perceived by the customer can result from a combination of the characteristics of various factors: the transaction involved the relationship with the supplier, and his position vis-a-vis the supply market.

Point 5 Factors influencing organizational buying behaviour. Three key factors are shown to influence organizational buying behaviour, these are, types of buying situations and situational factors, geographical and cultural factors and time factors.

Point 6 Purchasing Strategy. The purchasing function is of great importance because its actions will impact directly on the organizations profitability. Purchasing strategy aims to evaluate and classify the various items purchased in order to be able to choose and manage suppliers accordingly. Classification is along two

dimensions: importance of items purchased and characteristics of the supply market. Actions can be taken to influence the supply market. Based on the type of items purchased and on its position in the buying matrix, a company will develop different relationships with suppliers depending upon the number of suppliers, the suppliers share, characteristics of selected suppliers, and the nature of customer-supplier relationships. The degree of centralization of buying activities and the missions and status of the buying function can help support purchasing strategy. The company will adapt its procedures to the type of items purchased which in turn will influence relationships with suppliers.

Point 7 The future. Two activities which will be crucial to the future development of organizational buying behaviour will be information technology and production technologies.

Point 8 Conclusion. Organizational buying behaviour is a very complex area, however, an understanding of the key factors are fundamental to marketing strategy and thus an organizations ability to compete effectively in the market place.

Q.4 Explain the different marketing philosophies and its approach. Ans. Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. According to the American Marketing Association, Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goods There are six competing philosophies under which organizations conduct marketing activities the production concept, product concept, selling concept, marketing concept, customer concept; and societal concept. 1) The Production Concept: The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs and mass distribution. They assume that consumers are primarily interested in products availability and low prices. This philosophy makes sense in developing countries, where consumers are more interested in obtaining the product than its features. It is also used when a company wants to expand the market. 2. The product Concept Product concept holds that consumer will favour these products that offer the

most quality, performance and innovative features. Managers in these organizations focus on making superior products and improving them over time. They assume that buyers admire well-made products and can evaluate quality and performance product oriented companies often trust that their engineers can design exceptional products. They get little or no customer input, and very often they will not even examine competitors products.

3. The Selling Concept: The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organizations products. The organization most, therefore, undertakes an aggressive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotion tools to stimulate money in order to make more profit Most firms practice the selling concept when they have over capacity. Their aim is to sell what they make rather then make what market wants. more buying. The selling concept is epitomized by the thinking that The purpose of marketing is to sell more stuff to more people for more

4. The Marketing Concept: The marketing concepts hold that the key to achieving its organizational goals consists of the company being more effective then competitors in creating, delivering and communicating superior customer value to its chosen target markets. The marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability. There is a contrast between selling and marketing concepts: Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the sellers need to convert his product into cash; marketing with the ideas of satisfying the needs of the customers by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.

5. The customer Concept: Under customer concept, companies shape separate offers, services and messages to individual customers. These companies collect information on each customers past transactions, demographics, psychographics and media and distribution preferences. They hope to achieve profitable growth through capturing a larger share of each customers expenditures by building high customer loyalty and focusing on customer lifetime value. The ability of a company to deal with customers are at a time become practical as a result of advances in factory customization, computers, the internet and database marketing software.

6. The Societal Marketing Concept: The societal marketing concept desired satisfactions more

holds that

the

organizations goal is to determine the needs, wants and interests of target markets and to deliver the effectively and efficiently than competitors in a way that preserves or enhances the consumers and the societys well being. The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often-conflicting criteria of company profits, consumer want satisfaction and public interest. Companies see cause-related marketing as an opportunity to enhance their corporate reputation, raise brand awareness, increase customer loyalty, build sales and increase press coverage. They believe that consumers will increasingly look for signs of good corporate citizenship that go beyond supplying rational and emotional benefits.

Q.5.

What are the various stages involved in decision process when a consumer is buying new product? Also, explain the adoption process.

Ans. Stages of the Consumer Buying Process Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexitydiscussed next. The 6 stages are: 1. Problem Recognition (awareness of need)difference between the desired state and the actual condition. Deficit in assortment of products. HungerFood. Hunger stimulates your need to eat. Can be stimulated by the marketer through product informationdid not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes. 2. Information search o o Internal search, memory. External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is :

o o o o 3.

Chinese food Indian food Burger king Klondike kates etc

Evaluation of Alternativesneed to establish criteria for evaluation features the buyer wants or

does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, Indian gets highest rank etc. If not satisfied with your choice then returns to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by framing alternatives. 4. Purchase decisionChoose buying alternative, includes product, package, store, method of purchase etc. 5. PurchaseMay differ from decision, time lapse between 4 & 5, product availability. 6. Post-Purchase Evaluationoutcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a Chinese meal instead.

Adoption Process Adoption is an individual s decision to become a regular user of a product. How do potential customers learn about new products, try them, and adopt or reject them? The consumer adoption process is later followed by the consumer loyalty process, which is the concern of the established producer. Years ago, new product marketers used a mass market approach to launch products. This approach had two main drawbacks: It called for heavy marketing expenditures, and it involved many wasted exposures. These drawbacks led to a second approach, heavy user target marketing. This approach makes sense, provided that heavy users are identifiable and are early adopters. However, even within the heavy user group, many heavy users are loyal to existing brands new product marketers now aim at consumers who are early adopters. The theory of innovation diffusion and consumer adoption helps adopters. An innovation is any good, service, or idea that is perceived by someone as new. The idea may have a long History, but it is an innovation to the person who sees it as new. Innovations take time to spread through the social system. The Innovation diffusion process is defined as the spread of a new idea from its source of invention or creation to its ultimate users or adopters. The consumer marketers identify early

adoption process is the mental process through which an individual passes from first hearing about an innovation to final adoption. Adopters of new products have been observed to move through five stages: 1. 2. 3. 4. Awareness : The consumer becomes aware of the innovation but lacks information about it. Interest : The consumer is stimulated to seek information about the innovation. Evaluation: The consumer considers whether to try the innovation Trial: The consumer tries the innovation to improve his or her estimate of its value.

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

Q.6.

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

Ans. Marketing mix is the combination of elements that you will use to market your product. There are four elements: Product, Place, Price and Promotion. They are called the four Ps of the marketing mix. The objectives of this lesson about marketing mix are to give you: The tools you need for establishing your detailed marketing plan and forecasting your sales. 1. Challenge 2. Product 3. Place 4. Price 5. Promotion 6. Sales strategy 7. Do it yourself 8. Coaching

1.

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

your product. Of course, its far to be sufficient. Now, you must write your detailed planning. It means that brainstorming is ended and that you have to go to the specifics in examining and checking the entire hypothesis you had made in the preceding chapters. You will use the marketing mix.

Some people think that the four Ps are old fashionable and propose a new paradigm: The four Cs! Product becomes customer needs; Place becomes convenience, price is replaced by cost to the user, promotion becomes communication. It looks like a joke but the Cs is more customer-oriented.

2.

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

We can expect that you have right now a clear idea about the benefits your product can offer. Suppose now that the competitors products offer the same benefits, same quality, same price. You have then to differentiate your product with design, features, packaging, services, warranties, return and so on. In general, differentiation is mainly related to: a) The design: it can be a decisive advantage but it changes with fads. For example, a fun board must offer a good and fashionable design adapted to young people. b) The packaging: It must provide a better appearance and a convenient use. In food business, products often differ only by packaging. c) The safety: It does not concern fun board but it matters very much for products used by kids. d) The green: A friendly product to environment gets an advantage among some segments. In business to business and for expensive items, the best mean of differentiation are warranties, return policy, maintenance service, time payments and financial and insurance services linked to the product.

3.

PLACE-DISTRIBUTION A crucial decision in any marketing mix is to correctly identify the distribution channels. The

question how to reach the customer must always be in your mind. Definition: The place is where you can expect to find your customer and consequently, where the sale is realized. Knowing this place, you have to look for a distribution channel in order to reach your customer. In fact, instead of place it would be better to use the word distribution but the MBA lingo uses place to memorize the 4 Ps of the marketing mix. 4. PRICE Price means the pricing strategy you will use. You have already fixed, as an hypothesis a customer price fitted to your customer profile but you will have now to bargain it with the wholesalers and retailers. Do not be foolish: They know better the market than you and you have to listen their advices. 5. PROMOTION Advertising, public relations and so on are included in promotion and consequently in the

4Ps. Sometimes, packaging becomes a fifth P. As promotion is closely linked to the sales, I will mention here the most common features about the sale strategy. Definition: The function of promotion is to affect the customer behavior in order to close a sale. Of course, it must be consistent with the buying process described in the consumer analysis.Promotion includes mainly three topics: advertisement, public relations, and sales promotions. a) Advertisement: It takes many forms: TV, radio, internet, newspapers, yellow pages, and so on. You have to take notice about three important notions: i) affected. ii) Frequency is the number of time a person is exposed to your message. It is said that a person must be exposed seven times to the message before to be aware of it. Reach & frequency gives the gross rating point. You have to evaluate it before any advertisement campaign. iii) b) Message: Sometimes, it is called a creative. Anyway, the message must: get attraction, Public relations: Public relations are more subtle and rely mainly on your own personality. For example, you can deliver public speeches on subjects such as economics, geo-economics, futurology to several organizations (civic groups, political groups, fraternal organizations, professional associations) 6. SALES STRATEGY Sales bring in the money. Salesmen are directly exposed to the pressure of finding prospects, making deals, beating competition and bringing money. capture interest, create desire and finally require action that is to say close the sale. Reach is the percentage of the target market which is affected by your advertisement. For example, if you advertise on radio you must know how many people belonging to your segment can be

Master of Business Administration-MBA Semester II MB0047 Management Information Systems 4 Credits(Book ID: B1136) Assignment Set- 1 (60 Marks)

Q.1. What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give some Disadvantage of MIS? Ans.: MIS systems are extensively used in generating statistical report of any organization which can be used to study management by behavior. They set objectives to their employees using ratio analysis. Management also uses MIS for decision making from the low level management to top level management. In order to perform task using Information systems use of technical support is required. So it is the combination of 3 components i.e. organization, technology and management.

MIS characteristics It supports transaction handling and record keeping. It is also called as integrated database Management System which supports in major functional areas. It provides operational, tactical, and strategic level managers with east access to timely It supports decision making function which is a vital role of MIS. It is flexible which is needed to adapt to the changing needs of the organization. It promotes security system by providing only access to authorized users. MIS not only provides statistical and data analysis but also works on the basis on MBO (management by objectives). MIS is successfully used for measuring performance and making necessary change in the organizational plans and procedures. It helps to build relevant and measurable objectives, monitor results, and send alerts.

Function of MIS The main functions of MIS are: Data Processing: Gathering, storage, transmission, processing and getting output of the data. Making the data into information is a major task.

Prediction: Prediction is based on the historical data by applying the prior knowledge methodology by using modern mathematics, statistics or simulation. Prior knowledge varies on the application and with different departments. Planning: Planning reports are produced based on the enterprise restriction on the companies and helps in planning each functional department to work reasonably. Control: MIS helps in monitoring the operations and inspects the plans. It consists of differences between operation and plan with respect to data belonging to different functional department. It controls the timely action of the plans and analyzes the reasons for the differences between the operations and plan. Thereby helps managers to accomplish their decision making task successfully. Assistance: It stores the related problems and frequently used information to apply them for relative economic benefits. Through this it can derive instant answers of the related problem.

Disadvantages of MIS The following are some of the disadvantages of MIS: MIS is highly sensitive: MIS is very helpful in maintaining logging information of an authorized user. This needs to monitor constantly. Quality of outputs is governed by quality of inputs. MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing the actual cost needs to have an accrual system having true costs of outputs which is extremely difficult. It has been difficult to establish definite findings. MIS is not flexible to update itself for the changes. The changes in the decision of top level management decrease its effectiveness. Information accountability is based on the qualitative factors and the factors like morality, confidence or attitude will not have any base.

Q.2. Ans.:

Explain Knowledge based system? Explain DSS and OLAP with example?

Knowledge Based System (KBS) : KBS are the systems based on knowledge base. Knowledge base is the database maintained for knowledge management which provides the means of data collections, organization and retrieval oknowledge. The knowledge management manages the domain where it creates and enables organization for adoption of insights and experiences. There are two types of knowledge bases.

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

through. It makes the data in the computer readable code which makes the operator to perform easier. Such informations are used by semantic web. Semantic web is a web that will make a description of the system that a system can understand. b) Human Readable Knowledge Bases: They are designed to help people to retrieve knowledge. The information need to be processed by the reader. The reader can access the information and synthesize their own.

Online Analytical Processing (OLAP) OLAP refers to a system in which there are predefined multiple instances of various modules used in business applications. Any input to such a system results in verification of the facts with respect to the available instances. A nearest match is found analytically and the results displayed form the database. The output is sent only after thorough verification of the input facts fed to the system. The system goes through a series of multiple checks of the various parameters used in business decision making. OLAP is also referred to as a multi dimensional analytical model. Many big companies use OLAP to get good returns in business. The querying process of the OLAP is very strong. It helps the management take decisions like which month would be appropriate to launch a product in the market, what should be the production quantity to maximize the returns, what should be the stocking policy in order to minimize the wastage etc. A model of OLAP may be well represented in the form of a 3D box. There are six faces of the box. Each adjoining faces with common vertex may be considered to represent the various parameter of the business situation under consideration. E.g.: Region, Sales & demand, Product etc.

Decision Support Systems (DSS) DSS is an interactive computer based system designed to help the decision makers to use all l the resources available and make use in the decision making. In management many a time problems arise out of situations for which simple solution may not be possible. To solve such problems you may have to use complex theories. The models that would be required to solve such problems may have to be identified. DSS requires a lot of managerial abilities and managers judgment. You may gather and present the following information by using decision support application: Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts Comparative sales figures between one week and the next Projected revenue figures based on new product sales assumptions The consequences of different decision alternatives, given past experience in a context that is described.

Q.3.

What are Value Chain Analysis & describe its significance in MIS? Explain what is meant by BPR? What is its significance? How Data warehousing & Data Mining is useful in terms of MIS?

Ans.: BPR The existing system in the organization is totally reexamined and radically modified for incorporating the latest technology. This process of change for the betterment of the organization is called as Business process re-engineering. This process is mainly used to modernize and make the organizations efficient. BPR directly affects the performance. It is used to gain an understanding the process of business and to understand the process to make it better and re-designing and thereby improving the system. BPR is mainly used for change in the work process. Latest software is used and accordingly the business procedures are modified, so that documents are worked upon more easily and efficiently. This is known as workflow management.

Signification of BPR Business process are a group of activities performed by various departments, various organizations or between individuals that is mainly used for transactions in business. There may be people who do this transaction or tools. We all do them at one point or another either as a supplier or customer. You will really appreciate the need of process improvement or change in the organizations conduct with business if you have ever waited in the queue for a longer time to purchase 1 kilo of rice from a Public Distribution Shop (PDS-ration shop). The process is called the check-out process. It is called process because uniform standard system has been maintained to undertake such a task. The system starts with forming a queue, receiving the needed item form the shop, getting it billed, payment which involves billing, paying amount and receiving the receipt of purchase and the process ends up with the exit from the store. It is the transaction between customer and supplier. Data Warehousing Data Warehouse is defined as collection of database which is referred as relational database for the purpose of querying and analysis rather than just transaction processing. Data warehouse is usually maintained to store heuristic data for future use. Data warehousing is usually used to generate reports. Integration and separation of data are the two basic features need to be kept in mind while creating a data warehousing. The main output from data warehouse systems are; either tabular listings (queries) with minimal formatting or highly formatted "formal" reports on business activities. This becomes a convenient way to handle the information being generated by various processes. Data warehouse is an archive of information collected from wide multiple sources, stored under a unified scheme, at a single site. This data is stored for a long time permitting the user an access to archived data for years. The data stored and the subsequent report generated out of a querying

process enables decision making quickly. This concept is useful for big companies having plenty of data on their business processes. Big companies have bigger problems and complex problems. Decision makers require access to information from all sources. Setting up queries processes may be tedious and inefficient. on individual

Data Mining Data mining is primarily used as a part of information system today, by companies with a strong consumer focus - retail, financial, communication, and marketing organizations. It enables these companies to determine relationships among "internal" factors such as price, product positioning, or staff skills, and "external" factors such as economic indicators, competition, and customer demographics. And, it enables them to determine the impact on sales, customer satisfaction, and corporate profits. Finally, it enables them to "drill down" into summary information to view detail transactional data. With data mining, a retailer could use point-of-sale records of customer purchases to send targeted promotions based on an individual's purchase history. By mining demographic data from comment or warranty cards, the retailer could develop products and promotions to appeal to specific customer segments.

Q.4.

Explain DFD & Data Dictionary? Explain in detail how the information requirement is determined for an organization?

Ans.: Data flow diagrams represent the logical flow of data within the system. DFD do not explain how the processes convert the input data into output. They do not explain how the processing takes place. DFD uses few symbols like circles and rectangles connected by arrows to represent data flows. DFD can easily illustrate relationships among data, flows, external entities an stores. DFD can also be drawn in increasing levels of detail, starting with a summary high level view and proceeding more detailed lower level views. Rounded rectangles represent processes that transform flow of data or work to be done. Rectangle represents external agents- the boundary of the system. It is source or destination of data. The open-ended boxes represent data stores, sometimes called files or databases. These data stores correspond to all instances of a single entity in a data model. Arrow represents data flows, inputs and outputs to end from the processes.

A number of guideline should be used in DFD Choose meaningful names for the symbols on the diagram. Number the processes consistently. The numbers do not imply the sequence. Avoid over complex DFD.

Make sure the diagrams are balanced

Data Dictionary The data dictionary is used to create and store definitions of data, location, format for storage and other characteristics. The da