CBSE XII · 2018-03-17 · BUSINESS STUDIES CBSE In accordance with the latest syllabus prescribed by the Central Board of Secondary Education, New Delhi. (Including Project Work)

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OSWAL pubLiSherSC

BS

E B

usiness Studies X

IICBSE

XIIBhakti Joshi

Roopak Pande

CBSE

BUSINESS STUDIES(Including Project Work)

BUSINESS STUDIESBUSINESS STUDIESBUSINESS STUDIESCBSECBSECBSE

In accordance with the latest syllabus prescribed by the Central Board of SecondaryEducation, New Delhi.

(Including Project Work)

Class XII

Bhakti JoshiFormer Visiting Faculty

Department of BMSSt. Xavier’s College, Mumbai

Roopak PandePGT Commerce

Mayo College, Ajmer

OSWAL PUBLISHERS A1/12, Sahitya Kunj, M. G. Road, Agra-282 002

No part of this book can be reproduced in any form or by any means without the priorwritten permission of the publishers.

Edition : 2017

Price : 362/-

ISBN : 978-93-86299-32-1

OSWAL PUBLISHERSHead office : 1/12, Sahitya Kunj, M.G. Road, Agra–282 002Phone : (0562) 2527771– 4

Website : www.oswalpublishers.comOrder at : [email protected], [email protected]

Facebook link : https://www.facebook.com/oswalpublishersPrinted at : Repro India Limited, Mumbai

PrefaceThe book on “Business Studies” is important to understand the environment in

which a business operates. This book attempts to provide basic knowledge on theimportance of entrepreneurship towards growth and development of an economy. Theexamples and application of business concepts are explained in the context of IndianEconomy and their contribution towards India’s overall development. All businessesencompass various aspects of our daily lives and these aspects are presented throughreal-life examples of various Indian companies. Though Indian businesses have a longway ahead to create drastic changes, the emergence of small businesses along withprudent policies and regulations can enable systematic and gradual development of arobust economy.

Business Studies as a subject is important for 12th graders of Central Board ofSecondary Education (CBSE) as it aims to shape young minds towards a better under-standing of working in a business. This book will enable students to recognise andrealise how businesses are formed and managed by people from diverse fields,qualifications and experiences. Accordingly, this book attempts to trigger intuitive andreasoning capabilities among 12th graders, who plan to pursue suitable careers in nearfuture.

A brief introduction about the authors :Ms. Joshi has two post-graduate degrees in Economics from University of Mumbai, India and

Claremont Graduate University, United States. Her studies in both the countries emphasized onusage of research methods and inter-disciplinary approaches to solve research problems. She has 6and 12 years of experience in corporate set-ups. In past few years, she has taught business subjectslike Productivity and Quality Management, Business Statistics, etc. to undergraduate studentsof BMS at renowned colleges in Mumbai. As an educator, she has mentored students byimparting practical knowledge on subjects related to Business and Economics.

Mr. Roopak Pande has completed his Masters in Commerce and Bachelors in Education. Heis a Alumnus of Birla Vidya Mandir, Nanital. Since past few years he has served variousrenowned schools in India teaching the commerce subjects. In 2011 he joined Mayo College,Ajmer one of the best boarding school in India as a faculty of Commerce.

We have tried to put across the content of the subject in the most simple language,citing references from various books, journal papers, articles from newspapers and theInternet. The content presented in the book is as per the new syllabus prescribed by theCBSE and we believe it is authentic and reliable to the best of our knowledge.

—Publishers

SyllabusskraM 001sruoH 3repaP enO

skraMsdoirePstinUPart A Principles and Functions of Management

41tnemeganaM fo ecnacifingiS dna erutaN.16141tnemeganaM fo selpicnirP.2

21tnemnorivnE ssenisuB.341gninnalP.4

4181gnisinagrO.561gniffatS.6

0281gnitceriD.741gnillortnoC.8

120 50Part B Business Finance and Marketing

22tnemeganaM laicnaniF.95102tekraM laicnaniF.01

23tnemeganaM gnitekraM.115161noitcetorP remusnoC.21

Part C Project Work 30 20120 50

sdoireP 021tnemeganaM fo snoitcnuF dna selpicnirP : A traPsdoireP 41tnemeganaM fo ecnacifingiS dna erutaN : 1 tinU

Management–concept, objectives and impor-tance

Concept includes meaning and features

After going through this unit, the student/learner would be able to :

Understand the concept of management.Explain the meaning of ‘Effectiveness andEfficiency’.Discuss the objectives of management.Describe the importance of management.

Management as Science, Art and Profession Examine the nature of management as ascience, art and profession.

Levels of Management Understand the role of top, middle andlower levels of management.

Management functions–planning, organising,staffing, directing and controlling

Explain the functions of management.

Coordination–concept and importance Discuss the concept and characteristics ofcoordination.Explain the importance of coordination.

sdoireP 41tnemeganaM fo selpicnirP : 2 tinUPrinciples of Management–concept and signifi-cance


Understand the concept of principles ofmanagement.Explain the significance of managementprinciples.

Fayol’s principles of management Discuss the principles of managementdeveloped by Fayol.

Taylor’s Scientific Management–principles andtechniques

Explain the principles and techniques of‘Scientific Management’.Compare the contributions of Fayol andTaylor.

sdoireP 21tnemnorivnE ssenisuB dna tnemeganaM : 3 tinUBusiness Environment–concept and impor-tance


Understand the concept of ‘BusinessEnvironment’.Appreciate the importance of businessenvironment.

Dimensions of Business Environment–Econo-mic, Social, Technological, Political and Legal

Describe the various dimensions of‘Business Environment’.

Impact of Government policy changes onbusiness with special reference to liberalisa-tion, privatisation and globalisation in India

Examine the impact of government policychanges on business and industry withspecial reference to liberalisation andglobalisation since 1991.Appreciate the managerial response tochanges in business environment.

sdoireP 41gninnalP : 4 tinUConcept, importance and limitations After going through this unit, the student/

learner would be able to :Understand the concept of planning.Appreciate the importance of planning.Understand the limitations of planning.

Planning process Describe the steps in the process of plann-ing.

Single use and standing plans. Objectives,Strategy, Policy, Procedure, Method, Rule,Budget and Programme.

Develop an understanding of single useand standing plans.Describe objectives, policies, strategy, pro-cedure, method, rule, budget and pro-gramme as types of plans.

sdoireP 81gnisinagrO : 5 tinUConcept and importance After going through this unit, the student/

learner would be able to :Understand the concept of organising as astructure and as a process.Explain the importance of organising.

Organising process Describe the steps in the process of organis-ing.

Structure of organisation–functional anddivisional concept. Formal and informalorganisation–concept

Describe functional and divisional struc-tures of organisation.Explain the advantages, disadvantages andsuitability of functional and divisionalstructure.Understand the concept of formal andinformal organisation.Discuss the advantages, disadvantages offormal and informal organisation.

Delegation : concept, elements and importance Understand the concept of delegation.Describe the elements of delegation.Appreciate the importance of delegation.

Decentralisation : concept and importance Understand the concept of decentralisation.Explain the importance of decentralisation.Differentiate between delegation anddecentralisation.

sdoireP 61gniffatS : 6 tinU

Concept and importance After going through this unit, the student/learner would be able to :

Understand the concept of staffing.Explain the importance of staffing.

Staffing as a part of Human Resource Manage-ment–concept

Understand how staffing is a part ofHuman Resource Management.

Staffing process Describe the steps in the process of staffing.Recruitment process Understand the meaning of recruitment.

Discuss the sources of recruitment.Explain the merits and demerits of internaland external sources of recruitment.

Selection process Understand the meaning of selection.Describe the steps involved in the processof selection.

Training and Development–Concept andimportance, Methods of training–on the joband off the job–Induction training, vestibuletraining, apprenticeship training and intern-ship training

Understand the concept of training anddevelopment.Appreciate the importance of training tothe organisation and to the employees.Discuss the meaning of induction training,vestibule training, apprenticeship trainingand internship training.Differentiate between training and deve-lopment.Discuss on the job and off the job methodsof training.

sdoireP 81gnitceriD : 7 tinU


Describe the concept of directing.Explain the importance of directing.

Elements of Directing Describe the four elements of directing.Supervision–concept, functions of a supervisor Understand the concept of supervision.

Describe the functions performed by asupervisor.

Motivation–concept, Maslow’s hierarchy ofneeds; Financial and non-financial incentives

Understand the concept of motivation.Develop an understanding of Maslow’sHierarchy of needs.Discuss the various financial and non-financial incentives.

Leadership–concept, styles–authoritative,democratic and laissez faire

Understand the concept of leadership.Understand the various styles of leader-ship.

Communication–concept, formal and informalcommunication; barriers to effective commu-nication, how to overcome the barriers

Understand the concept of communication.Understand the elements of the commu-nication process.Discuss the concept, merits and demerits offormal and informal communication.Understand the various types of networksof formal and informal communication.Discuss the various barriers to effectivecommunication.Suggest measures to overcome barriers tocommunication.

sdoireP 41gnillortnoC : 8 tinU


Describe the concept of controlling.Explain the importance of controlling.

Relationship between planning and controlling Describe the relationship between planningand controlling.

Steps in process of control Discuss the steps in the process of control-ling.

sdoireP 021gnitekraM dna ecnaniF ssenisuB : B traPsdoireP 22tnemeganaM laicnaniF : 9 tinU

Concept and objectives of Financial Manage-ment


Understand the concept of financialmanagement.

Explain the role of financial management inan organisation.Discuss the objectives of financial manage-ment.

Financial Decisions : investment, financing anddivided–meaning and factors affecting

Discuss the three financial decisions andthe factors affecting them.

Financial Planning–concept and importance Describe the concept of financial planningand its objectives.Explain the importance of financialplanning.

Capital Structure–concept Understand the concept of capitalstructure.Describe the factors determining the choiceof an appropriate capital structure of acompany.

Fixed and Working Capital–concept andfactors affecting their requirements

Understand the concept of fixed andworking capital.Describe the factors determining therequirements of fixed and working capital.

sdoireP 02tekraM laicnaniF : 01 tinUFinancial Markets–concept, functions andtypes


Understand the concept of financialmarket.Explain the functions of financial market.Understand capital market and moneymarket as types of financial markets.

Money market and its instruments Understand the concept of money market.Describe the various money marketinstruments.Differentiate between capital market andmoney market.

Capital market and its types (primary andsecondary)

Discuss the concept of capital market.Explain primary and secondary markets astypes of capital market.Discuss the methods of floating new issuesin the primary market.Distinguish between primary and secon-dary markets.

Stock Exchange–functions and trading proce-dure

Give the meaning of a stock exchange.Explain the functions of a stock exchange.Discuss the trading procedure in a stockexchange.

Securities and Exchange Board of India (SEBI)–objectives and functions

Give the meaning of depository servicesand demat account as used in the tradingprocedure of securities.

State the objectives of SEBI.Explain the functions of SEBI.

sdoireP 23tnemeganaM gnitekraM : 11 tinU

Selling and Marketing–concept After going through this unit, the student/learner would be able to :

Understand the concept of selling, market-ing.Explain the features of marketing.Distinguish between marketing and selling.

Marketing Management–concept Describe the concept of marketing manage-ment.

Marketing Functions Discuss the functions of marketing.Marketing management philosophies Explain marketing management philoso-

phies.Marketing Mix–concept and elements Understand the concept of marketing mix.

Describe the elements of marketing mix.Product–concept, branding, labelling andpackaging

Understand the concept of product as anelement of marketing mix.Describe the concept of branding, labellingand packaging.

Price–concept, factors determining price Understand the concept of price as anelement of marketing mix.Describe the factors determining price of aproduct.

Physical Distribution–concept and compo-nents, channels of distribution : types, choiceof channels

Understand the concept of physical distri-bution.Explain the components of physical distri-bution.Describe the various channels of distri-bution.Discuss the factors determining the choiceof channels of distribution.

Promotion–concept and elements; advertis-ing–concept, role, objections against advertis-ing; personal selling–concept and qualities of agood salesman; sales promotion–concept andtechniques; public relations–concept and role

Understand the concept of promotion as anelement of marketing mix.Describe the elements of promotion mix.Understand the concept and features ofadvertising.Describe the role of advertising.Examine the objections to advertising.Understand the concept of personal selling.Discuss the qualities of a good salesman.Understand the concept of sales promotion.

Explain the commonly used techniques ofsales promotion.Discuss the concept and role of publicrelations.

sdoireP 61noitcetorP remusnoC : 21 tinU

Concept and importance of consumerprotection


Understand the concept of consumer pro-tection.Describe the importance of consumer pro-tection.

Consumer Protection Act, 1986 :Meaning of consumer and consumer pro-tectionRights and responsibilities of consumersWho can file a complaint against whom ?Redressal machineryRemedies available

Understand the concept of a consumeraccording to the Consumer Protection Act,1986.Explain the consumer rights.Understand the responsibilities of consu-mers.Understand who can file a complaint andagainst whom ?Discuss the legal redressal machineryunder Consumer Protection Act, 1986.Examine the remedies available to theconsumer under Consumer Protection Act,1986.

Consumer Awareness–Role of consumer orga-nisations and Non-Government Organisations(NGOs)

Describe the role of consumer organi-sations and NGOs in protecting consumers’interests.

sdoireP 03kroW tcejorP : 31 tinU

ContentsPART A : Principles and Functions of Management

1. Nature and Significance of Management ……………………………………… 15–401.1 Meaning and Definition of Management1.2 Characteristics of Management1.3 Objectives of Management1.4 Importance of Management1.5 Nature of Management1.6 Levels of Management1.7 Functions of Management1.8 Coordination – Essence of Management1.9 Management in the 21st Century

2. Principles of Management ………………………………………………………… 41–672.1 Evolution of Management Theories2.2 Principles of Management – Concept2.3 Significance of Principles of Management2.4 Scientific Management Developed by Taylor2.5 Fayol’s Principles of Management2.6 Fayol V/s Taylor

3. Business Environment …………………………………………………………… 68–873.1 Meaning of Business Environment3.2 Features of Business Environment3.3 Importance of Business Environment3.4 Dimensions of Business Environment3.5 Economic Reforms since 1991 or New Economic Policy

4. Planning …………………………………………………………………………… 88–1094.1 Meaning and Definitions of Planning4.2 Importance of Planning4.3 Limitations of Planning4.4 Steps in Planning4.5 Types of Plans

5. Organising ……………………………………………………………………… 110–1395.1 Meaning of Organising5.2 Steps in the Organising Process5.3 Importance of Organising5.4 Organisational Structure5.5 Factors Affecting Organisational Structure5.6 Types of Organisational Structure5.7 Formal and Informal Organisation5.8 Centralisation and Decentralisation5.9 Delegation of Authority

6. Staffing ………………………………………………………………………… 140–1726.1 Definition and Implications of Staffing6.2 Importance of Staffing

6.3 Staffing and Human Resource Management6.4 Evolution of Human Resource Management6.5 Steps in Staffing6.6 Aspects of Staffing

7. Directing ………………………………………………………………………… 173–2207.1 Meaning and Characteristics7.2 Importance of Directing7.3 Principles of Directing7.4 Elements of Directing

8. Controlling ……………………………………………………………………… 221–2378.1 Meaning and Definition of Controlling8.2 Importance of Controlling8.3 Limitations of Controlling8.4 Relationship between Planning and Controlling8.5 Steps in Controlling

PART B : Business Finance and Marketing9. Financial Management ………………………………………………………… 238–263

9.1 Meaning of Financial Management9.2 Objectives of Financial Management9.3 Financial Decisions9.4 Financial Planning9.5 Capital Structure – Concept

10. Financial Market ………………………………………………………………… 264–29410.1 Concept of Financial System10.2 Functions of Financial Markets10.3 Types of Financial Markets10.4 Stock Exchange10.5 SEBI

11. Marketing Management …………………………………………………………295–34311.1 Market11.2 Customers11.3 Sellers or Marketer11.4 Marketing11.5 Marketing Management11.6 Marketing Management Philosophies11.7 Marketing Mix

12. Consumer Protection …………………………………………………………… 344–36712.1 Concept and Meaning12.2 Importance of Consumer Protection12.3 Legal Protection to Consumers12.4 Consumer Protection Act, 198612.5 Consumer Awareness

Project Work …………………………………………………………………………… 368–376Bibliography …………………………………………………………………………… 377–389CBSE Specimen Paper (Solved) …………………………………………………… 390–400

1 Nature and Significance ofManagement

CHAPTER OBJECTIVESAfter studying this chapter, you should be able to :

Explain the nature and purpose of management.Recognise the objectives of management.Explain the concepts of productivity, efficiency and effectiveness.Determine the importance of management.Realise the importance of art and science in development of management theories.Define the managerial functions : Planning, Organising, Staffing, Directing andControlling.

The prerequisite for managing an organisation is to understand the key participantsor stakeholders who have led the creation of this dynamic environment. Managementmust have humans or managers to function as the management who communicate andindulge in positive ventures that aim at improving one’s life and relationships.Management as an act of managing is believed to focus on profit-making for businessesto sustain by building significant relationships with stakeholders. Stakeholders arealways considered synonymous with shareholders but this is not completely true.Stakeholders are those entities (individuals/businesses) that directly and indirectlyinfluence the working of a business. These entities can affect or are in turn affected bythe actions, decisions, policies practices or goals of a business. For example, a mobilephone manufacturer’s stakeholders who can directly affect or are affected by theoperations for mobile phone production are owners, creditors, workers, raw materialsuppliers, distributors, warehousing entities, retailers and customers. The mobile phonemanufacturer manages to build relevant relationships with all these stakeholders toenable smooth and fair operations during manufacturing and distribution to the end-customer. Through management, the manufacturer also communicates about theirsuccessful operations and utility of their product/service across all stakeholders tocreate an enduring image and reputation leading to profits. Profits are thus a result ofcommitment and continuing associations with stakeholders facilitated by an effectivemanagement process.1.1. MEANING AND DEFINITION OF MANAGEMENT

Management is an act of managing. To manage means to have control over some-thing, or to take care of or make decisions about someone’s time, money, etc. (Merriam-Webster, 2014). To manage can also mean to handle or to direct with a degree of skill orto succeed in accomplishing or to work upon something or try to alter for a purpose. Allthese meanings imply that there is some unaccomplished work or requirements, whichcan be achieved only if the work or requirements can be handled, directed or controlled

16 | CBSE Business Studies–XII

appropriately. Some definitions in the context of institutional set ups for managementare summarised below :

“Management can be defined as the process of designing and maintaining an environmentin which individuals, working together in groups, efficiently accomplish selected aims.”

—Harold Koontz and Heinz Weihrich“Management is a multipurpose organ that manages business, manages managers and

—”.krow dna srekrow seganam Peter Drucker“Management is an art in the complete work on other people.” —Mary Parker Follett

—”.seod reganam a tahw si tnemeganaM“ Louis Allen“To manage is to forecast and plan, to organise, to command, to coordinate and to

—”.lortnoc Henri Fayol

The above mentioned definitions however explain management in the context of abusiness (small, medium or large) which is also called as an organisation. Anorganisation or business involves work or efforts connected with each other throughmanagement to achieve a common goal with maximum results from minimum efforts. Abroad definition of management can be a process that facilitates operational efficiency inan organisation through effective decision-making and directing (or making) people towork through suitable functions like planning, organising, staffing, directing andcontrolling to achieve a common goal. This definition implies that management needs tobe efficient and effective and also promote efficiency and effectiveness within allprocesses in an organisation.

Difference between Efficiency and EffectivenessBasis Efficiency Effectiveness

Meaning How well resources are utilised. The degree of accomplishing theobjectives.

Alternative meaning Doing things the right way. Doing right things.Goals Aims to achieve short-term

goals.Aims to achieve long-term goals.

Working conditions Requires rigour and discipline. Can be adaptable.Requirements Documentation. Innovation.Operationaldevelopments

Avoids mistakes. Gains success.

Efficiency is the result of the question – How is something utilised or used appropriately?Effectiveness is the answer to the question–How has something been useful? Efficiency andeffectiveness are two different terms such that efficiency indicates how well theresources are utilised to accomplish a result (doing the right thing). Alternatively,effectiveness refers to the degree of accomplishing the objectives (doing things the rightway). Management needs to ensure efficiency and effectiveness which work towardsachieving an organisation’s short-term and long-term goals. For example, a hotelmanager generates a huge customer base from corporates in the form of businesstravellers, thus keeping hotel rooms occupied on a regular basis, is efficiency. Effective-ness is when the hotel manager ensures that vacant rooms are clean, hygienic and

Nature and Significance of Management | 17

equipped with relevant comforts (water, tea/coffee packets, etc.) whenever new busi-ness travellers check-in.

The study of efficiency and effectiveness attempts to realise and acknowledgesuitable performance requirements or metrics that enables success for organisations.Organisations require a balance between efficiency and effectiveness to cater to theirstakeholders’ requirements as discussed earlier. Based on the definitions and subsequentdiscussions, the features or characteristics of management are identified in the followingsection 1.2.

Question to Discuss :Can any activity which is efficient be non-effective ? What can be the possible solutionsfor activities which are efficient but non-effective ?

1.2. CHARACTERISTICS OF MANAGEMENTManagement or people who perform the act of management or managerial activities

are donned with important characteristics or features. Following are such characteristicsof management (or a manager) explained below (Kumar & Sharma, 2000) :

1. Group activity–Management is a group activity that requires cooperation andcollaboration of various individuals with different capabilities, experiences and skills.An organisation cannot be operated without such individuals who facilitateachievement of organisational goals.

2. Multidisciplinary–Management uses multidisciplinary or several disciplines/subjects simultaneously to benefit and develop from the knowledge which these subjectscan offer. Various disciplines or subject, the management takes influences from arePsychology, Sociology, Economics, Statistics, Mathematics, etc. Management developsits own thoughts and principles after obtaining relevant knowledge from thesedisciplines and utilises them in relevant processes and functions like production,planning and control.

3. Goal oriented–An effective management aims at attaining goals of anorganisation. Accordingly, all functions and efforts by the management are directedtowards achieving these goals. For example, if the objective of a company is to sell 1,000baby diaper packets by the end of the week, the manager of the company will plancertain strategies, motivate employees to make sales and allocate relevant physicalresources (transportation, retailing infrastructure, etc.) to achieve the target of selling1,000 packets (or more) within a week.

4. Pervasive in character–Management is pervasive or universal across variousfacets of life. Anything in life, which involves human activity, also requires manage-ment. Its use is applicable among businesses for profit, non-profits, hospital, schools,and clubs or our own homes and households which are also required to be managed.Management is required to run a city, town, family, politics and army.

5. Needed at all levels–Every organisation consists of a hierarchy of individuals orgroup of individuals ranked in across various levels according to their status orresponsibility. Management is a part of the hierarchical system of most organisations

Fig. 1.1 Skills and Management Levels


that broadly has three levels–top management, middle management and lowermanagement (Refer to Fig. 1.1). The lower management is mainly involved in managingreal-time operations of a business, while the middle management links the lower withthe top management who are involved in making most pertinent decisions on attainingorganisational goals and objectives.

6. Continuous process–Management attempts to conduct distinguishable andspecific activities, techniques and procedures which cannot be performed at the sametime. These activities are performed as a continuous process across all functions of amanagement.

7. Dynamic function–Management is characterised by continuous changes,activities and vigour that creates energy among individuals/groups in an organisationto work suitably. A business is continuously subject to changing trends, tastes andpreferences, economic and political conditions, etc. Correspondingly, management as adynamic function, attempts to facilitate adaptability and adjustment for a business to thesurrounding environment.

8. Intangible factor–The effects of management cannot be seen and is intangible innature. The results of management can be realised and perceived at a certain period oftime either through positivity or negativity created among stakeholders. For example,goodwill and the reputation of a business can be a result of good management practices.

Question to Discuss :Identify which aspect or entity (family, household, school, college, club, etc.) in yoursurroundings matches to the characteristics of management. Give relevant examples tosupport your observations.

1.3. OBJECTIVES OF MANAGEMENTToday, businesses operate in large scale catering to different types of customers

producing a variety of products and services. A managerial structure or the manage-ment helps to deal with possible complexities with relevant solutions. Main objectives ofmanagement are as follows :

1.3.1. Organisational ObjectivesOrganisational objectives can be explained as follows :

1. Organisational objectives are overall goals, purpose and mission of a business thathave been established and communicated to the employees by the management.

2 Principles of Management


Describe the evolution of management and significant contributions to manage-ment theories.Understand various approaches to management, their contributions and theirlimitations.Recognise the development of principles of management.Study the techniques of scientific management.Compare various theories of management.

This chapter is an extension to the earlier chapter’s discussion on whether manage-ment can be an art or science. Accordingly, this chapter focuses on how managementtheory evolved from contribution to trade and commerce to replacing political powerinto today’s corporation power. During this time period, many different contributionswere made by writers and practitioners giving reason for management theory to exist inour daily lives. This chapter discusses many theories with specific emphasis onFrederick Taylor and Henri Fayol’s principles of management. Taylor’s and Fayol’stheories have intrigued and encouraged more writers and practitioners to recognise,replicate and redesign these principles according to changing times. In today’s worldmany businesses follow these principles but would seem to be influenced by greed andcorruption leading to violation of many principles that are revered and recognisedacross the globe. The study of these theories becomes pertinent to acknowledge manyproblems faced by businesses which were already foreseen by practitioners like Taylorand Fayol in the early 19th century.

2.1. EVOLUTION OF MANAGEMENT THEORIESThe earlier chapter had introduced management as an art, a science or a profession.

In reality, there is no one particular formula developed in a scientific laboratory thatdetermines the right way to manage. For some reason we believe that theories hold noimportance with our current times and do not see any significance in learning them. Thisbelief does not completely hold true as management theories particularly have evolvedin the same manner as humans have evolved with changing socio-economic, political,psychological, environmental and scientific innovations and situations around us.

Management theories are a systematic way of understanding events, behavioursand/or situations in the past that may have gone right or wrong. They have evolved asinterrelated concepts, definitions and propositions that explain and sometimes predict


certain events and situations in the future. It is thus, through theoretical knowledge thatwe can seek or obtain knowledge on approaches to put our wishes in action.

The evolution of management theories can be explained under three different timeperiods–(a) The Pre-industrial Revolution Era, prior to 18th century and before theindustrial revolution had occurred; (b) Industrial Revolution Era, from 18th century toWorld War II, (c) After World War II.

The pre-industrial revolution era had some interesting turn of events with the bartersystem gradually being replaced by money which was further replaced with landownership to form the major source of wealth. This period was marked by significantrise and spread of various denominations of religions. While religions focused on goodway of life, they were also misinterpreted to gain control and power over countries. Thisperiod is marked with rise of the profit-making concept, concerns related to feasiblephysical environment and human health and rise in socio-political control and conflicts.

The industrial revolution era consisted of a mix of events leading to occurrences ofdifferent events like the advent of colonization and slavery and the race for politicalpower (Nazism, Fascism, French revolution, Socialism, etc.). These events led toviolations of human lives and property and World War I. But this era also witnessed theinvention of the steam engine and emergence of industries like chemicals, paper, roads,railways and waterways for transportation. Industrial expansion influenced migration ofpopulations from rural area to factory-based areas feeding into becoming an urbanizedset up (Roth, 1998). Entrepreneurs had gradually become mass producers who aimed atlower costs and higher profits. Among all these events emerged theories on scientificmanagement and the proponents of this school were Frederick W. Taylor, Henry L. Gantt,Frank and Lillian Gilbreth. These proponents focused on improving productivity eitherby offering incentives/rewards, cooperation and harmony, identifying and determiningpersonalities and capabilities of workers (Koontz & Weihrich, 2012). This thought washowever characterised by master-slave environment, humans expected to be likemachines, repetitive tasks, focus on quantity but not quality.

Henri Fayol advocated the Modern Operational Theory which promoted the manageras an administrator within a business environment who systematically divided allactivities and promoted unity of command and proactive initiatives and decisions.Fayol’s principles were extended to application of psychology and behavioural scienceswithin an industry, management, specific business activities like marketing, advertising,human resources, etc. This management thought also gave rise to the significance (andill-effects) of bureaucracy. Advocates of this school of thought were Hugo Munsterberg,Walter Dill Scott, Max Weber, Vilfredo Pareto, Mary Parker Follet, Elton Mayo and F. J.Roethlisberger. These theorists’ ideas were further reconnected with scientific manage-ment theories to form systems theory. The understanding and application of this theoryin today’s world is very limited and its potential benefits (or consequences) are yet to bediscovered. The key feature of this theory is that it reinforces the idea of cooperationwithin management that existed prior to the industrial revolution before or during themedieval period among small-scale businesses and operations. Chester Barnard is one ofthe most important advocates of Systems Theory.

Principles of Management | 43

After World War II, there were many theories which focused on general managementand quality control. This era witnessed peace for a certain time period with countriesexperiencing socio-economic and political freedom and technological advancements butalso experiencing corporate wars, low-cost and high-profit models, outsourcing models,consumerism, globalisation, etc. Accordingly, theories during this time period and eventoday are either an extension or solutions to problems associated with the theories oralternative approaches and practices to theories founded prior to the World War II.Promoters to such alternatives were Peter F. Drucker, Edward Deming, Laurence Peter,William Ouchi, Thomas Peters and Robert Waterman (Koontz & Weihrich, 2012).

Questions to Discuss :Does past reference to companies that exist today create the impression of goodwill orgood reputation ?Does it help knowing the past of a business ? Explain why with relevant examples.

2.2. PRINCIPLES OF MANAGEMENT – CONCEPTAs discussed in Chapter 1, management is anything that gets things done through

efforts of other people. Correspondingly, principles of management are the means bywhich one can actually manage to get things done from others, individually, in groupsor in organisations (Carpenter, Bauer, & Erdogan, 2014). Other definitions of principles ofmanagement are given in the following box :

“Principles of management are the guiding rules of laws for managerial action.”—Herbert Hicks

“Management principles are fundamental truth of general validity.”—Koontz and O’Donnell

“…the activities in management that plan, organise and control the operations of basicelements of people, materials, machines, methods, money and markets, providingdirection and coordination and giving leadership to human efforts, so as to achieve the

—”.esirpretne eht fo sevitcejbo thguos Henri Fayol

The definitions of principles of management attempt to recognise the nature andcharacteristics of management principles discussed below :

1. Universal application–Management principles can be universally applied inevery situation though it is subject to the conditions and requirements of the situation.For example, every business irrespective of the scale of operations (small, medium orlarge) needs to follow sales and marketing principles to sell their products/services.However, depending upon the nature of the product/service and the representativeindustry the approaches to sales and marketing will be different.

2. Group activity–The application of these principles involves group activitywhere everyone works towards utilising available resources optimally. For example,every business involves people to produce, to order raw materials, identify customers,identify means of transportation and delivery, etc. These activities involve a group ofpeople who align their work in accordance to the requirements of the business, thusleading all operations as a group.


Example : Managing Development of Two Indian CitiesGurgaon was little more than a village in 1979 and was largely barren, with no local government,

public utilities, or transportation. Following economic liberalisation in 1991, the Gurgaon district hadan urban population of 1,21,000 and by 2001 it had expanded to 8,70,000 and by 2011 to 1.5 million.As of 2013, the city contains half of the Fortune 500 companies like American Express, GeneralElectric, Motorola, Dell, Microsoft, IBM and Google, making it a leading destination for India’s young,middle-class workers in the tech industry. Gurgaon has forty-three shopping malls, many luxury-apartment towers, gleaming skyscrapers, seven golf courses and at least half a dozen large five-starhotels. However, Gurgaon’s development in terms of infrastructure is considered a failure. Thegovernment has failed to provide Gurgaon with large-scale infrastructure. In theory, water, sewage,roads and electricity could be provided at scale by private, natural monopolies albeit at potentially highprices. But instead of natural monopolies (corruption), Gurgaon has developed a competitive system ofprivate suppliers. Competition among private suppliers has produced two failures. First, prices ofwater, electricity, sewage and so forth are close to marginal cost but average cost is far too high becauseof the failure to exploit economies of scale. Second, competitive suppliers have produced negativeexternalities such as excess pollution, sewage dumping and ground water dissipation.

Alternatively, Jamshedpur is widely regarded as having some of the best urban infrastructure in allof India due to the presence of one private owning company, Jamshedpur Utilities and ServicesCompany Ltd. (JUSCO). JUSCO is a wholly owned subsidiary of Tata Steel, and was directed toservice the entire Jamshedpur region. Jamshedpur was rated the second best in the country by ORGMarg Nielsen on its quality-of-life index in 2008 and in 2010 ranked seventh of 441 cities and towns inIndia on sanitation and cleanliness by India’s Ministry of Urban Development. For example, water isdrinkable from the tap, which is unusual in India. Total water provision is well above Indian averages.Also, power availability in Jamshedpur is 99.42 percent, the highest in India, and comparable only toMumbai. In addition to a reliable supply of electricity, Jamshedpur has lower tariffs than other cities.The leasehold area of Jamshedpur remains the sole city in India where 100 percent of the sewage iscollected and treated before disposal.

Contrasting Jamshedpur with Gurgaon, Indian cities, like Gurgaon, are dysfunctional because theyare typically characterised by conflicts between multiple agencies and businesses who should provideroads, parks, water pipelines and sewage. But they lack authority and accountability with authoritiespassing the buck all the time. Jamshedpur, on the other hand, has succeeded, because through TataSteel, the city began with a single-owner and with the creation of JUSCO, it has a single provider withencompassing interests and accountability. The result is the provision of integrated and coordinatedworld-class utility services, including water supply, power supply, waste management, and civicservices.Source : "Lessons from Gurgaon, India’s Private City", by Shruti Rajagopalan and AlexanderTabarrok, George Mason University, Department of Economics, Working Paper No. 14 – 32.http ://ssrn.com/abstract=2514652

3. Dynamic guidelines–However, these principles are not static but dynamicguidelines as they change in accordance to changing trends, tastes and preferences,socio-economic and political stability/instability, etc. Management principles cannot betested under controlled laboratory conditions as they are concerned with humanbehaviour which also keeps changing.

7 Directing


Comprehend the meaning and importance of directing.Realise the relevance of direction vis-à-vis organisational goals and management.Recognise the need and principles of directing.Examine in-depth need and role of supervision.Study the importance and influence of motivation.Determine the foundation and qualities of a good leader.Understand the ways, means and barriers to effective communication.

How does anyone make things work around them ? Is it by force or cooperation orcoordination or delegation ? Can things work all by themselves ? As the American writerand Cartoonist, Dr. Seuss said, “You have brains in your head and feet in your shoes.You can steer yourself in any direction you choose.” These words also have significancein the context of an organisation. An entrepreneur or management can make thingswork as long as the vision and mission are at place and these are communicated tohuman resources allocated by the organisation. Organisational goals and objectivesformulated as per the vision and mission also should be in place with supporting rules,policies and procedures. Direction is a process which not only identifies humanresources with the right brains and right shoes but steers the organisation’s wheel toachieve those goals and objectives. Direction enables authorization and entitlement tohuman resources and makes them work in an organisation but without force. It iscourage, not fear that directs organisations towards growth and innovation. Directionmerely leads the management’s courage towards this growth and innovation. Providingdirection through directing function includes building an effective and a disciplinedworking environment through pertinent guidance and instruction.7.1. MEANING AND CHARACTERISTICS

The process of acquiring human resources and physical assets and placing themunder suitable roles and responsibilities should be directed towards achieving organisa-tional goals. Accordingly, the act of directing or direction can be defined as follows :

“Direction is the executive function of guiding and observing subordinates.”—Koontz and O’Donnell

“Direction is telling people what to do and seeing that they do it to the best of their ability.It includes making assignment, explaining procedures, seeing that mistakes are corrected,providing on-the-job instructions and of course, issuing orders.” —Ernest Dale“Direction consists of the processes and techniques utilised in issuing instructions andmaking certain that operations are carried out as originally planned.” —Haimann


The above mentioned definitions suggest that the act of directing or direction is theessence of all operations in an organisation that involves leading human and physicalresources together through motivation, collaboration, coordination and delegation(Anbuvelan, 2007). The characteristics or features of direction can be explained asfollows :

1. Related to human relations–Directing involves communicating with superiors,instructing subordinates and guiding human resources across all levels of managementin an organisation. Directing aims at productively utilising all resources throughappropriate means of communication.

2. Grouped function–Directing is not a single function but a group of variousfunctions like supervision, motivation, leadership and communication.

3. Harmonising of objectives–This implies that directing establishes consensualcoexistence of organisational and personal (individual) goals. This further implies thatdirecting aims at avoiding conflicts across all levels of management leading toorganisational success and employee satisfaction.

4. Requirement at all levels of management–Directing is required at all levels ofmanagement. This implies that the managers or management at the top-level of anorganisation direct their subordinates or managers at the middle-level. The middle-levelmanagement then in turn direct the supervisors or subordinates at the supervisory levelswho will further direct their subordinates or workers who work below them in thehierarchy. The workers who execute and do the real work are directed indirectly fromthe management at the top-level and directly from their supervisors.

5. Continuous process–As directing passes from a higher level to the lower level, itcontinuously requires supervision and review across all levels of the organisation.Superiors need to confirm their subordinates’ progress of work, guide them correctlyand motivate them from time to time. Corrective actions are also taken in case of anemergency or if an issue arises, which makes directing a continuous process.

6. Flow of direction–Directing involves a systematic flow of information andcommunication from top to bottom levels of the organisation. It provides the linkbetween different functions in an organisation.

Question to Discuss :Discuss about processes and techniques involved in your educational institute toidentify the directing process.

7.2. IMPORTANCE OF DIRECTINGDirecting is an important management tool just like planning, organising and

staffing. The importance of direction has been explored as follows :1. Initiates action–Direction initiates action based on the preconditions set under

planning, organising and staffing. This implies that managers stimulate actions bysupervising, motivating and leading their subordinates in the right way. Directionactivates employees to work for achieving organisational goals.

2. Integrates employees’ efforts–The work and activities of employees across alllevels are interrelated and direction attempts to integrate all individual efforts.

9 Financial Management


Understand the conceptual meaning of finance and its relevance to financialmanagement.Recognise the meaning and objectives of financial management.To study the meaning of financial decisions and factors affecting these decisions.To examine the definition, procedures and importance of financial planning.To understand capital structure and factors affecting its choice.

To understand the meaning of financial management, one needs to understand themeaning of finance whose foundation lies in the field of economics. Finance is the waymoney is used and handled or available to government, businesses or an individual. It isessential to conduct every business activity of an organisation in production/provisionof products/services. In the short-term, finance is required to perform all businessactivities with ease which in turn converts all liabilities related to a business’ factors ofproduction into revenues. In the long-run, businesses require finances for various futureventures and projects that essentially contributes to growth and development of allbusinesses, their representative industries, trade, agriculture and the overall economy.Management of these finances is imperative as the mere existence and success of anybusiness depends on the same.

9.1. MEANING OF FINANCIAL MANAGEMENTFinancial management is a function of finance that aims at allocating monetary

resources efficiently and effectively. Financial Management can be defined as follows :

“Financial management is a finance activity that involves acquiring and administering the—”.mrif a fo sdnuf Charles L. Panther

“Financial management is concerned with acquisition, financing and management of—”.dnim ni laog llarevo emos htiw stessa James C. Van Horne

“Financial management is an area of financial decision-making, harmonising individual—”.slaog esirpretne dna sevitom Weston and Brigham

“Financial management is the operational activity of a business that is responsible forobtaining and effectively utlising the funds necessary for efficient operations.”

—Joseph and Massie

The above mentioned definitions imply that financial management is managerialactivity focussing on raising and allocation of funds for smoothly and continuouslyoperating a business. These funds directly and indirectly works towards achieving the

Financial Management | 239

overall goals of an organisation. Broadly, financial management can be defined as theresponsibility of the management to plan, organise, allocate, direct and control a consis-tent flow of funds focussed on achieving an organisation’s goals that not only maximisesprofits in the short-run but also creates, maximises a business’ value in terms ofreputation and goodwill. Accordingly, the role of managers in financial managementinvolves :1. Assessing and estimating the financial requirements in terms of human and physical

capital.2. Determining sources of finances–internal (reserves or incomes of a business) or

external (money borrowed from investors).3. Exploring the types of finances such as cash, equity, debt, incomes, etc.4. Assessing the returns from investment of finances in business operations and future

ventures.5. Disposing surplus finances that enables redistribution and recreation of wealth in the

form of bonuses, innovation, diversification or expansion plans, etc.6. Managing and controlling cash flows for ensuring continuity of business operations.

9.1.1. Importance of Financial ManagementAccordingly, financial management has special significance in the origin and growth

of businesses today, which are discussed in this section.1. Smooth operations of a business–Proper administration of finance is required at

every stage of management, such as promotion, incorporation, development, expansionand administration of day-to-day activities. Proper financial administration impliesunderstanding requirements of the businesses, determining spending patterns in everybusiness unit, assessing financial needs of every business unit and allocating financesacross business unit for continuous and smooth operations of a business.

2. Facilitates coordination–Financial management facilitates coordination betweenvarious functional areas of a business. For example, a production unit has scheduled aproduction plan requiring raw materials for the purchasing unit to order. Thepurchasing unit is able to cater to the production unit’s requirement for raw materials iffinances are aligned instantly and directed towards the suppliers of raw materials whoimmediately comply to send the raw materials following payment through the purchaseunit.

3. Evaluation of profits–Financial management helps top management to evaluatethe profitability of operational activities of a business. It involves planning, budgetingand analysis of business operations vis-à-vis changes in the environment for reflectingthe financial reality of the situation. The financial reality is presented in the form ofcosts, volume and profits from current projects and future venture.

4. Decision-making–The evaluation of profits also enables decision-making by themanagement at all levels in the business. Evaluation of profits is supported by scientificfacts and figures through various financial tools like financial statements, budgets, etc.These tools broadly depict the effectiveness of a project or business activity in terms ofcosts and profits possibly associated with minimal risks which further influencedecision-making.

12 Consumer Protection


Determine the concept and meaning of consumer protection.Study the importance of consumer protection.Examine the statutory measures and development of public sector.Understand the Consumer Protection Act, 1986 in detail.Study the redressal machinery developed under the Act.Examine the remedial measures under the Act.Recognise the rights and responsibilities of a consumer.Understand the role of consumer organisations and NGOs for creating consumerawareness.

All human beings are consumers of products and services irrespective of theireconomic, social, religious or political roles each of them play in an economy.Consumers’ test, taste, spend, experience and/or validate whether the final products/services caters to their demand, expectations and/or satisfaction. Business owners andmanagers are also human beings who consume products and services traded and/orexchanged in the same market where consumers obtain products and services. It ispertinent for a business owner to acknowledge that factors or environment which isharmful for them can also be harmful for others or situations that cause destruction orlosses for them can cause the same to others and vice-versa. Despite this acknowledg-ment business owners transpire as ignorant, selfish, greedy or helpless through theiractions only to save on costs and obtain more than normal profits. However, on dailybasis (or in the short-run) it’s the consumers’ prerogative as humans being to beprotected from the possible harm and losses caused merely by greed and ignorance ofcertain businesses that may also have long-term effects (Refer to Chapter 1’s case studyon Union Carbide’s actions in Bhopal). This necessitates a legitimate and reasonableframework on protection of consumers that governs and protects the consumptionpatterns and behaviours in our daily lives.

12.1. CONCEPT AND MEANINGConsumers need protection from possible exploitation or fraudulent businesses

practices that possibly leads to loss and destruction to life and property. Consumerprotection is a regulation or a law designed to protect consumers against improperlydescribed, damaged, faulty and dangerous products and services. This law is alsodesigned to protect consumers from unfair trade and credit practices. Consumers can beexposed to the exploitations and fraudulent practices because of illiteracy, lack of

Consumer Protection | 345

education, lack of information, ignorance or unawareness about their legal rights toobtain quality-based products and services (Goyal & Goyal, 2010). Some cases ofexploitation are summarised below :

1. Unfair trade practices–These practices involve false advertisements indicatingfraudulent behaviour by a business. Examples include false statement in advertisementsabout a products quality, ingredients, or effectiveness, fake testimonials and endorse-ments, using prices in advertisements that are not the real prices of the merchandisedescribed or pictured, etc.

Example : Spring Meadows Hospital V/s Harjol AhluwaliaA minor boy was admitted to a renowned hospital in Delhi as in-patient with diagnosis of typhoid.

The nurse asked the child's father to purchase the injection Inj. Lariago recommended by the SeniorPaediatrician to be administered intravenously. When the nurse administered the injection, the childcollapsed immediately. After half an hour, the Anaesthetist also reached the scene and started theprocedure of manual respiration and the Senior Paediatrician also followed but here was noimprovement in the child's condition. On advice, the child was shifted to the All India Institute ofMedical Sciences (AIIMS). The doctors at the AIIMS informed the parents that the child was in acritical condition and even if he survived he would live only in a vegetative state having sufferedirreparable damage to the brain. Based on the evidence, National Consumer Disputes RedressalCommission concluded that the child had suffered cardiac arrest because of intravenous injection ofan excessive dose of the injection and that due to considerable delay in measures to revive the heart, thechild's brain had been damaged. The Consumer Protection Commission concluded negligence on thepart of the nurse, negligence of the hospital for employing an unqualified person as nurse andentrusting the child to her care. The Commission also held the resident doctor to be negligent since hefailed to follow the instruction of the Senior Paediatrician that the injection should be administered bya doctor. The Commission held that since the resident doctor and nurse were employees of the hospital,the hospital was held liable and were made to award compensation of 12·5 lakh to the child and of

5 lakh to the parents for acute mental agony.Source : http ://www.legalserviceindia.com/laws/National_commission/medical_neg.htm

2. Spiralling prices–Businesses unjustifiably increase the prices of their productsby hoarding products, black marketing and creating artificial scarcity.

3. Adulteration–Adulterated products can be harmful and hazardous for healthand/or life. Examples include, mixing dirty water in milk, adding sawdust to chillipowder, adding artificial colouring agents to food products, etc.

4. Poor quality products–Consumers can be exploited due to poor quality ofproducts. Most packaged products are expected to indicate safety logos like ISI,AGMARK or FPO that suggest that businesses have undertaken or followed qualitychecks and norms.

5. Underweight supplies–Many manufacturers sell certain products in containers,including quantities not permitted by the standardised weight rules, exploitingconsumers by giving them under-weight products.

6. Deficiency in service–Deficiency in service include delays in delivery ofproducts/services, wrong billing by telephone or mobile phone companies, delays insettling insurance claims or medical claims, etc.

``

Project Work

INTRODUCTIONThe course in Business Studies is introduced at Senior School level to provide

students with a sound understanding of the principles and practices bearing in business(trade and industry) as well as their relationship with the society. Business is a dynamicprocess that brings together technology, natural resources and human initiative in aconstantly changing global environment. With the purpose to help them understand theframework within which a business operates, and its interaction with the social,economic, technological and legal environment, the CBSE has introduced Project Workin the Business Studies Syllabus for Classes XI and XII. The projects have been designedto allow students to appreciate that business is an integral component of society andhelp them develop an understanding of the social and ethical issues concerning them.

The project work also aims to empower the teacher to relate all the concepts withwhat is happening around the world and the student’s surroundings, making themappear more clear and contextual. This will enable the student to enjoy studies and usehis free time effectively in observing what’s happening around.

By means of Project Work the students are exposed to life beyond textbooks givingthem opportunities to refer materials, gather information, analyse it further to obtainrelevant information and decide what matter to keep.OBJECTIVES

After doing the Project Work in Business Studies, the students will be able to do thefollowing :1. develop a practical approach by using modern technologies in the field of business

and management;2. get an opportunity for exposure to the operational environment in the field of

business management and related services;3. inculcate important skills of team work, problem solving, time management,

information collection, processing, analysing and synthesizing relevant informationto derive meaningful conclusions;

4. get involved in the process of research work;5. demonstrate his or her capabilities while working independently; and6. make studies an enjoyable experience to cherish.GUIDELINES FOR TEACHERS1. Help students to select any TWO Topics for the entire year.2. The topic should be assigned after discussion with the students in the class and

should then be discussed at every stage of the submission of the project.3. The teacher should play the role of a facilitator and should closely supervise the

process of project completion. The teachers must ensure that the project work

Project Work | 369

assigned to the students whether individually or in group are discussed at differentstages right from assignment to drafts review and finalisation. Students should befacilitated in terms of providing relevant materials or suggesting websites, orobtaining required permissions from business houses, malls, etc. for their project.The 30 periods assigned to the Project Work should be suitably spaced throughoutthe academic session which is to be divided between the two projects as per theneed. The teachers MUST ensure that the students actually go through the rigors andenjoy the process of doing the project rather than depending on any readymadematerial available outside.

4. The students must make a presentation of the project before the class.5. The teachers must ensure that the student’s self-esteem and creativity is enhanced

and both the teacher and the student enjoy this process.6. The teachers should feel pride in the fact that they have explored the different

dimensions of the project in an innovative way and their students have put ingenuine work.

7. The teachers must also ensure that at least one project should be finished beforesummer holidays.

I. PROJECT ONE : ELEMENTS OF BUSINESS ENVIRONMENTThe teachers should help the students in selecting any one element of the following :

1. Changes witnessed over the last few years on mode of packaging and its economicimpact. The teacher may guide the students to identify the following changes :(a) The changes in transportation of fruits and vegetables such as cardboard crates

being used in place of wooden crates, etc. Reasons for above changes.(b) Milk being supplied in glass bottles, later in plastic bags and now in tetra pack

and through vending machines.(c) Plastic furniture (doors and stools) gaining preference over wooden furniture.(d) The origin of cardboard and the various stages of changes and growth.(e) Brown paper bags packing to recycled paper bags to plastic bags and cloth bags.(f) Reuse of packaging (bottles, jars and tins) to attract customers for their products.(g) The concept of pyramid packaging for milk.(h) Cost being borne by the consumer/manufacturer.(i) Packaging used as means of advertisements.

2. The reasons behind changes in the following :Coca Cola and Fanta in the seventies to Thums up and Campa Cola in the eighties toPepsi and Coke in nineties.The teacher may guide the students to the times when India sold Coca Cola andFanta which were being manufactured in India by the foreign companies.The students may be asked to enquire about :(a) Reasons of stopping the manufacturing of the above mentioned drinks in India

THEN.(b) The introduction of Thums up and Campa Cola range.

CBSE Specimen Paper (Solved)Class XII

Business StudiestinUskraMsrewsnA dna snoitseuQ.oN .S

Q.1. State any one characteristic of coordination ?Ans. Any one characteristic.

1. Coordination integrates unrelated group efforts into pur-poseful work activity.

2. Coordination ensures unity of action in the realisation of acommon purpose.

3. Coordination is not a one-time function but it is a continuousfunction beginning with planning stage and continues tillcontrolling.

4. Coordination is a pervasive function needed at all levels ofmanagement.

5. Coordination is the function of every manager in the organi-sation.

6. Coordination is a function performed in a deliberate andconscious manner.

1 mark forthe

statement

I

Q.2. How does management help in increasing efficiency ?Ans. A manager reduces cost and increase productivity through better

planning, organising, directing, staffing and controlling theactivities of the organisation.

1 mark I

Q.3. What is meant by ‘‘single use plan’’ ?Ans. A single use plan is developed for a onetime event. Such a course

of action is not likely to be repeated in future.1 mark II

Q.4. Laxmi Chemicals Ltd., a soap manufacturing company wantedto increase its market share from 30% to 55% in the long run. Arecent report submitted by the Reasearch & DevelopmentDepartment of the company had predicted a growing trend ofherbal and organic products. On the basis of this report thecompany decided to diversify into new variety of soaps withnatural ingredients having benefits and fragrances of Jasmine,Rose, Lavendear, Mogra, Lemon Grass, Green Apple, Straw-berry, etc. The Unique Selling Proposition (USP) was to promoteeco-friendly living in the contemporary life style. The companydecided to allocate 30 crores to achieve the objective.Identify the type of one of the functions of managementmentioned above which will help the company to acquiredominant position in the market.

Ans. IIkram 1.ygetartS

CBSE Specimen Paper (Solved) | 391

Q.5. Reshu's father has gifted her shares of a large cement company,with which he had been working. The securities were in physicalform. She already has a bank account and does not possess anyother forms of securities.She wished to sell the shares and approached a registered brokerfor the purpose. Mention one mandatory detail which she willhave to provide with the broker.

Ans. VIkram 1.)NAP( rebmuN tnuoccA tnenamrePQ.6. How do rising prices affect the requirement of working capital of

an organisation ?Ans. With rising prices larger amounts are required to maintain a

constant volume of production and sales. Thus, working capitalrequirement of a business will be high.

1 mark IV

Q.7. Good Living Ltd. manufactures mosquito repellent tablets. Thesetablets are packed in strips of 12 tablets each. Each of these stripsare packed in a cardboard box, 48 such boxes are then placed in abig corrugated box and delivered to various retailers for sale.State the purpose of packaging the tablets in a corrugated box.

Ans. The packaging of tablets in a corrugated box is necessary for thepurpose of storage, identification and transportation.

1 mark forthe

statement

V

Q.8. Shreemaya Hotel in Indore was facing a problem of low demandfor its rooms due to off season. The Managing Director (MD) ofthe hotel, Mrs. Sakina was very worried. She called upon theMarketing Manager, Mr. Kapoor for his advice. He suggested,that the hotel should announce an offer of ‘3 Days and 2 Nightshotel stay packaged with free breakfast and one day religiousvisit to Omkareshwar and Mahakaleshwar Temples’. The MDliked the suggestion very much. Identify the promotional tool,which can be used by the hotel, through which large number ofprospective pilgrimage tourists, all over the country and alsoabroad, can be reached, informed and persuaded to use theincentive.

Ans. Vkram 1.gnisitrevdAQ.9. State any three points which highlight the importance of

delegation for an organisation.Ans. Importance of delegation (any three) :

1. Delegation leads to effective management through empower-ment of employees.

2. Delegation helps in employee development by providingthem with the chance to use their skills and experience.

3. Delegation motivates employees by giving them responsi-bility which builds their self-esteem.

4. Delegation facilitates growth by providing ready workforceto take up any expansion program.

1 mark forthe

statement(1 × 3 = 3)

II

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CBSE XII · 2018-03-17 · BUSINESS STUDIES CBSE In accordance with the latest syllabus prescribed by the Central Board of Secondary Education, New Delhi. (Including Project Work)