Assignment Code: BTMC-132/2021-22

Course Code: BTMC-132

Assignment Name: Fundamentals of Management

Year: 2021-2022

Verification Status: Verified by Professor

Assignment A

Answer the following in about 500 words each.

Q1) Define ‘commerce’ in business terminology? Briefly explain the classification of commerce with suitable examples. 20

Ans) Commerce is the exchange of goods and services. Trading of goods, services, or something valuable between businesses or entities is called commerce. Globally, nations strive to manage commerce in a way that benefits citizens by creating jobs and producing beneficial goods and services.

Main Points

1. Humans have traded goods since the dawn of civilization, and trade routes and corporations have grown in complexity.

2. Today, commerce refers to corporate purchases and sales of goods and services.

3. Commerce is a subset of business that focuses on distribution rather than production.

4. A transaction is the buying or selling of a single item, while commerce is the buying or selling of that item in an economy.

5. Unchecked or unregulated commerce can lead to negative externalities that harm nations and people.

6. E-commerce is a type of online commerce where goods are sold electronically.

Commerce includes all activities that directly or indirectly assist in the distribution of goods to the final consumer. Producing goods is futile until they reach the final consumer. Produced goods are dispersed among consumers. Commerce can be classified into two broad categories:

1. Trade

Trade is an integral part of commerce. It includes buying & selling of goods & services. The trade segment of commerce brings together the manufacturer & the consumer, i.e., it is a link between the manufacturer & the consumer.

Trade can be classified into two types:

Internal Trade: It refers to buying & selling of goods or services within the geographical boundaries of a country. It is also known as home trade or domestic trade. Under internal trade, goods & services are bought & sold in the home currency only. The internal trade can be two types:

1. Wholesale trade

2. Retail trade.

External Trade: When the buying & selling of goods & services is beyond the geographical limits of the country it is called external trade. It is also known as trade between two or more countries. In external trade, the market is very wide. External trade is of the following types:

1. Export trade

2. Import trade

3. Entrepot trade

2. Aids to Trade

The activities which help in the smooth flow of trade are known as aids to trade. These activities make buying & selling of goods easier. These help in removing various hindrances of trade which arises in production & distribution of goods. The common aids to trade are:

1. Transport & communication

2. Banking & finance

3. Insurance

4. Warehousing

5. Advertising

:

Types of various business activity

Various business activities may be classified into two broad categories-

Industry: Viewed collectively, or one of these individually, enterprises which manufacture or are technically productive in a particular field, country, region, or economy is an industry. Such as the tourist industry or the entertainment industry can be isolated from others in any general business or commercial enterprise.

Commerce: Commerce is a branch of business. All those activities, which directly or indirectly facilitate the exchange of goods and services are included in commerce.

Internal and External Trade

Internal Trade: Buying and selling of goods within the nation is called internal trade. The internal trade can be two types:

1. Wholesale trade

2. Retail trade

External Trade: Beyond the geographical limits of the country, buying and selling of goods and services is called external trade. It is also known as trade between two or more countries. In external trade, the market is very wide.

Q2) What are the various forms of business organisations? Explain the merits and limitation of each form of business organisation. 20

Ans) When starting a business, you can choose from a variety of business structures. Depending on your situation, certain business entities may be preferable to others.

The Sole Proprietorship

Single, small business owners often choose this type of business organization. It is not a legal entity separate from the business owner.

Merits of a sole proprietorship include:

1. Easiest, simplest, and least costly business entity to form and operate.

2. Complete control and flexibility.

3. You can register your name, obtain a business license, and begin conducting business.

4. The business does not pay separate taxes. All income passes directly to the owner and is taxed at the owner’s personal tax rate.

Limitations of a sole proprietorship include:

A sole proprietorship has the major disadvantage of unlimited personal liability for all business debts. Liability for the business falls on the owner. Thus, the owner's personal assets may be at risk. Another disadvantage is that when the owner dies, the company ceases to exist.

A Partnership

A partnership is a legal entity formed by two or more people who want to do business together. A comprehensive partnership agreement should define each partner's interest, liability, and role within the partnership.

Merits of a partnership include:

1. Limited partnerships and limited liability partnerships offer some degree of liability protection for partners.

2. Partnerships are easy to maintain because they do not require annual meetings or minutes of meetings.

3. Partnerships do not pay corporate taxes. The profits and losses pass through the business to each partner, according to the partner’s interest in the business.

4. Can be used by professionals who may not be able to create an LLC.

Demerits of a partnership include:

1. Individual partners may bear the liability for the actions of other partners.

2. Partners may have unlimited personal liability for debts and losses, except in the case of limited liability partnerships and limited partnerships.

3. If a partnership is created without a written agreement or a partnership agreement is poorly drafted, there could be significant disputes that may lead to costly litigation.

The Corporation

It is the formal business entity. It is a separate legal entity from its owners (shareholders). A corporation is a legal person under the law. The shareholders elect a Board of Directors. The directors appoint officers to run the company's day-to-day operations and make strategic decisions.

Merits of a corporation include:

1. Corporations have an unlimited life span. Shares may be transferred, purchased, and sold.

2. Owners are protected from personal liability for the company’s obligations and debts.

3. Corporations have several options for raising capital.

4. Corporations are the preferred business entity for public companies.

Demerits of a corporation include:

1. Corporations are subject to double taxation. A corporation must file a corporate tax return and pay taxes based on its profits based on the corporate tax rate. Distributions to shareholders are taxed at the shareholder’s personal tax rate.

2. Setting up and managing a corporation is more difficult and expensive. Corporations require annual meetings, minutes of meetings, and other formalities.

3. The periodic filings and annual fees for corporations can be burdensome and costly for some businesses.

4. Much less flexibility because of regulations governing corporations.

A Joint Stock Company

It has perpetual succession, limited liability, a common seal, and usually a joint capital divided into transferable shares of a fixed value.

Merits of Company Organisation:

1. Limited Liability:

2. 2. Large Financial Resources:

3. Continuity:

4. Transferability of Shares:

Demerits of Company:

1. Difficulty of Formation

2. Excessive Government Control

3. Lack of Motivation and Personal Touch

4. Delay in Decisions

5. Conflict of Interests.

Assignment B

Answer the following questions in about 250 words each.

Q3) Discuss the various methods of raising finance for a business. 10

Ans) In the case of companies, there are several methods of raising finance. To raise long-term and medium-term capital, companies have the following options:

1. Issue of Shares: Issue of shares is the most important method of raising long-term capital for companies. In the case of share, the liability of shareholders is limited to the face value of shares, and also, they are easily transferable.

2. Issue of Debentures: Companies generally have powers to borrow and raise loans by issuing debentures as securities of specified face value. Debentures are mostly issued to finance the long-term requirements of business.

3. Loans from Financial Institutions: The most important advantage of this method of raising finance is that the rate of interest payable is lower than market rate. But there is a close security of the investment project before loans is sanctioned.

4. Loans from Commercial Banks: Medium-term loans can be raised by companies from commercial banks against the security of properties and assets. Thus, funds required for modernisation and renovation of assets can be borrowed from banks.

5. Public Deposits: Companies often find it convenient and necessary to raise funds by inviting their shareholders, employees, and the general public to deposit their saving with the company. It is a simple method of raising finance for which the company has only to advertise in the newspapers giving particulars about its financial position as prescribed by the Companies Act.

6. Retention of Profits: Retention of profit is a sort of self-financing of business. In short, more than 10% of current profits can be retained only after declaring a minimum rate of dividend consistent with the dividend distributed in the past.

Q4) Write short notes on the following: 4x 2.5 =10

a) Difference between ‘winding up’ and ‘dissolution’ of a company

Ans) Winding up and dissolution of the company are not the same thing. A company is not dissolved immediately on the commencement of winding up proceedings. Winding up is the prior stage and dissolution is the next, on dissolution, the name of the company is struck off by the Registrar from the Register of Companies i.e., it ceases to exist. While on winding up, the Company’s name is not struck off from the register. The legal entity of a company remains even after the commencement of winding up and it can be sued in a court of law. Dissolution is the final stage of the Company’s winding up process. But a company can be dissolved without winding up under certain circumstances such as when it merges with another company.

b) Meaning and purpose of doctrine of ultra vires

Ans) The Ultra Vires Doctrine is a fundamental rule of business law. It states that a company's objects, as stated in its Memorandum of Association, can only be deviated from to the extent allowed by the Act. As a result, if the company does something or enters into a contract that is beyond the powers of the directors and/or the company itself, the act/contract is null and void. 'Beyond Powers' is the meaning of the term Ultra Vires. In legal terms, it only applies to acts carried out beyond the scope of the doer's legal authority. This assumes that natural powers are limited. Because the Doctrine of Ultra Vires restricts the company's activities to the items listed in the memorandum, it can be: Restricted from using funds for purposes other than those stated in the Memorandum Restricted from engaging in trade that is not authorised

c) Distinction between memorandum and articles

Ans) Difference between Memorandum of Association and Articles of Association

MOA is a subsidiary of the company’s Act, while AOA is subsidiary to the company’s Act and MOA.

MOA contains all the basic information about the company, while in AOA there will be information related to the rules and rights governed by the company. There is a 6 clause in the Memorandum of Association that the company must fill out. Articles of Association, on the other hand, can be prepared according to the company's preferences. The MOA is required of all companies, whereas the AOA is only required of private limited companies. While MOA is required at the time of company registration, there is no such requirement in AOA. If an activity is not mentioned in the MOA, it is considered null and void; however, in the case of the AOA, if the activity was approved by the shareholders, it can be carried out.

d) Meaning and importance of prospectus

Ans) When companies and others offer new shares of a security to the public, they must file a prospectus with the Securities and Exchange Commission. When a company makes an initial public offering, or when it sells stock for the first time, issuing a prospectus is one of the most common reasons. Because mutual funds regularly issue new shares, they issue a prospectus at regular intervals. You can learn about the investment company's goals and objectives by reading the prospectus. When deciding on a long-term investment strategy, this information can be useful. If you're looking for a mutual fund that can provide long-term growth, for example, you'll want to look for one that has this as a primary goal. If you don't, you might end up with a fund that provides regular income rather than long-term growth.

Q5) Define management and list out its features. Describe the hierarchy of managers and their skill requirements 10

Ans) Management is the process of planning and organising the resources and activities of a business to achieve specific goals in the most effective and efficient manner possible. Efficiency in management refers to the completion of tasks correctly and at minimal costs. Effectiveness in management relates to the completion of tasks within specific timelines to yield tangible results.

Features of Management

Management is the process of setting and reaching goals effectively and efficiently. Management process has some qualities or features:

1. Management is Associated with Group Efforts

2. Management is Purposeful

3. Management is Accomplished Through the Efforts of Others

4. Management is Goal-oriented

5. Management is Indispensable

6. Management is Intangible

7. Management can Ensure Better Life.

Hierarchical Classification of Managers

The vertical division of managerial work in the organisation leading to specialization in hierarchy is supported by three reasons viz., need for expertise in managerial decision making, need for coordination and need for accountability of operative employees.

Top Managers: The top management includes the Board of Directors, the Chief Executive and Senior Executives and in-charge of functional departments. They comprise a small group which is responsible for the overall management of the organisation. They make and communicate policies and strategies guiding the middle and lower-level managers. Their primary task is that of relating the organisation to the external environment.

Middle Managers: The middle level management consists of departmental managers and branch managers. These groups direct activities to implement the organisational plans and policies. This middle management balances the demand of top management with the capabilities of lower-level management.

Lower-level Managers: Supervisors and foremen belong to this category. They belong to the operating level of management and are responsible for the work of operative employees i.e., non-managers. They are directly responsible to produce goods and services.

Classification of Managerial Skills

We have discussed the classification of managers and the major activities each group performs. Now let us discuss about the skill required by the managers. At all levels, managers require three types of skills:

Technical Skill: It is the ability of a manager to use the equipment’s, methods and techniques involved in performing specific tasks. Technical skill is required more at the lower level of management i.e., at the supervisory level. At higher levels, the technical skill is less important as managers can rely upon others for technical information.

Human Skill: The ability of a manager to work with, understand, and motivate people in the organisation is known as human skill. It also involves the ability to build effective work teams. The human aspect of management requires individual as well as group relations to be maintained and developed for achieving maximum efficiency. Human skills are important at all levels of management.

Conceptual Skill: This consists of the manager’s ability to coordinate all organisational activities and varied interests involved in it. It involves viewing the organisation in its totality and understanding the interdependence of its individual parts. Of all the skills, this conceptual skill is the most difficult skill to acquire. Conceptual skill is very important for top management in formulating long-range plans, board policies and relating the business enterprise to the industry and economy.

Assignment C

Answer the following questions in about 100 words each.

Q6) Describe any two theories of Management. 6

Ans) It includes tools like frameworks and guidelines that can be used in modern businesses. Professionals generally mix and match concepts from various management theories to best suit their workforce and company culture.

Popular Management Theories

Scientific Management Theory: The scientific management theory primarily encompasses production floor tasks, which are distinct from other tasks performed within an organisation. Some of these repetitive tasks are divided into a large number of cyclical repetitions of the same or closely related tasks. Also, these tasks do not require the worker to solve complex problems. Thus, the scientific management theory placed emphasis on standardising working methods.

Systems Management Theory: Systems management is a new approach to organisational planning and management. According to the systems management theory, businesses, like the human body, have multiple components that work together to maximise overall performance. Organizational success is dependent on synergy, interdependence, and interrelationships between subsystems, according to theory.

Q7) What is the role of top management in the planning process? Explain the concept

and process of delegation of authority. 6

Ans) The role of the top management can be summarized as follows:

1. Top management lays down the objectives and broad policies of the enterprise.

2. It issues necessary instructions for preparation of department budgets, procedures, schedules etc.

3. It prepares strategic plans & policies for the enterprise.

4. It appoints the executive for middle level i.e., departmental managers.

5. It controls & coordinates the activities of all the departments.

6. It is also responsible for maintaining a contact with the outside world.

7. It provides guidance and direction.

8. The top management is also responsible towards the shareholders for the performance of the enterprise.

Delegation is the process that managers follow in dividing the work assigned to him so that he performs that part, which because of his position he can perform effectively. Delegation is legitimate authorization to a manager or employee to act in specified ways. It enables him to function independently without reference to the supervisor but within the limits set by the supervisor and the normal framework of organisational objectives, policies, rules and procedures.

Q8) Describe different sources of recruitment and explain different steps in the selection

process. 6

Ans) Recruitment is the process of searching for and securing applicants for the various job positions which arise from time to time in the organisation.

There are two sources of recruitment internal and external.

1. Internal Sources: Internal recruitment is the process of promoting and transferring employees within an organisation to fill vacancies. Many companies keep track of their employees' qualifications, skills, and experience to determine their promotability and transferability.

2. External Sources: A large number of skilled, semi-skilled, and unskilled people are recruited from outside the organisation. External requirements include public and private employment agencies, labour unions, educational institutions, professional associations, and former employees.

Selection Process:

Following are the steps in the selection process:

1. Filling in Application Form: This may be regarded as the first stage of the selection process. Candidates are supposed to provide complete information about themselves in a written form.

2. Preliminary Screening: The basic objective of preliminary screening is to eliminate the unsuitable candidates and to reduce the overall cost of selection.

3. Holding of Tests: Test is a means of evaluating their knowledge, skills, experience, attitudes, personality, and so on.

4. Interview: Interview enables the selectors to get a first-hand idea of the personality of candidates, their poises and poses, their communication, other related skills and their general behaviour.

Q9) Explain the importance of control in a business enterprise. What are the requirements of an effective control system? 6

Ans) For effectiveness, it is important to decide on the critical areas where control should be exercised. There are many advantages of identifying these areas of control (also known as types of control) to enable management to:

1. Delegate authority and fixing responsibility.

2. Reduce the burden of supervising each activity in detail; and

3. Secure means of achieving satisfactory results.

Controls are needed in every area where performance and results directly and vitally affect the survival and prosperity of the organisation. These areas need to be specially mentioned. In this connection, Peter Drucker has identified eight key result areas where objective should be set, and controls should be exercised. These are:

1. Market standing

2. Innovation

3. Productivity

4. Physical resources

5. Financial resources

6. Profitability

7. Manager performance and attitude

8. Public responsibility.

Q10) Define ‘leadership style’. What are the main differences between autocratic, democratic and free rein leadership styles? 6

Ans) Leadership style is the manner and approach of providing direction, implementing plans, and motivating people.

Autocratic leadership can be defined as a leadership style, wherein a clear line of demarcation between leader and follower exists, as the leader has got the absolute power of commanding and decision making. On the other hand, a leadership style in which the leader values the opinions and suggestions of the followers but retains the final decision-making power in his/her hands is known as democratic leadership.

Laissez faire leadership style is just the opposite of autocratic style. A manager, who adopts this style, completely gives up his leadership role. The subordinate group is allowed to make decisions and it is left to the members of the group to do as they like. The role of any leader is absent.

Ans) Leadership style is the manner and approach of providing direction, implementing plans, and motivating people.

Autocratic leadership can be defined as a leadership style, wherein a clear line of demarcation between leader and follower exists, as the leader has got the absolute power of commanding and decision making. On the other hand, a leadership style in which the leader values the opinions and suggestions of the followers but retains the final decision-making power in his/her hands is known as democratic leadership.

Laissez faire leadership style is just the opposite of autocratic style. A manager, who adopts this style, completely gives up his leadership role. The subordinate group is allowed to make decisions and it is left to the members of the group to do as they like. The role of any leader is absent.