Business Studies 3 Marks Question

1. The concepts of management involved in the above situation are outlined below :
   • Planning: ” One suggested to take help of local residents, another suggested that they may involve school going children in their venture. One more suggestion was to take the help of the unemployed youth. On evaluation of different ways, it was decided to take help of the local residents.”
   • Organising: ” To achieve the desired goal, various activities are identified like
     • Purchase of necessary items like dustbins, garbage bags, brooms etc.
     • Collection of garbage
     • Disposal of garbage, etc.
       After identification of different activities, the work was allocated to different members.”
2. The values which the company wants to communicate to society are:
   • Cleanliness
   • Responsibility

1. Formal organisation is the type of organisation mentioned in the above paragraph. Formal organisation refers to the organisation structure which is deliberately created by the management to accomplish a particular task. It clearly defines the boundaries of authority and responsibility and facilitates systematic coordination among the various activities to achieve organisational goals.
2. One feature of formal organisation is that it clarifies who has to report to whom by specifying the relationships among various job positions and the nature of their interrelationship.
3. The purpose behind the formulation of rules for the employees that restricted their personal communication with the employees of other departments is to ensure discipline at workplace and avoid wastage of time. This is help to curb the emergence of informal organisation to a certain extend and increase work efficiency.
4. The two values violated by Mr. Raghav are :
   • Liberty to employees
   • Fulfilment of emotional needs

1. The step of organizing process which has not been carried out properly and contributed to this problem is Assignment of duties.
   Assignment of Duties: Once departments have been created each of them is placed under the charge of an individual and then jobs are allocated to the members as per their job positions.
2. The two steps of the organizing process which have been taken by Kanaputti to respond to the complaint of Ramdas are listed below:
   • Assigning the duties
   • Establishing reporting relationship.
3. The two points of importance of organizing as reflected in the above case are described below:
   • Optimum utilization of resources: Organising ensures best possible use of all forms of resources i.e. physical, financial and human resource. It ensures systematic assignment of jobs thereby curbing overlapping of work and avoiding possibilities of duplication of work. This helps in preventing confusion and minimising the wastage of resources and efforts.
   • Adaptation to change: The process of organising provides stability to the enterprise as it can then continue to survive and grow inspite of changes in the business environment. It enables the organisation structure to be suitably modified and the revision of inter-relationships amongst managerial levels to pave the way for a smooth transition.

1. Divisional structure should be adopted by the diversified organisation to enable it to cope with the emerging complexity.
   Reason: It leads to faster decision making, promotes flexibility and initiative because each division functions as an autonomous unit.
2. The two limitations of divisional structure are as follows :
   • There may be conflicts among the different divisions heads as in pursuit of higher profits, each of them may seek maximum allocation of resources at the cost of other divisions.
   • The cost is high as each division is provided with separate set of similar functions.

1. The organisation can overcome the problem faced by it by adopting informal organisation. Informal organisation emerges from within the formal organisation when people interact beyond their officially defined roles.
2. The two benefits of informal organisation are as follows:
   • It helps to fulfill the social needs of the members by giving them a sense of belongingness in the organisation and enhances their job satisfaction .
   • It contributes towards the fulfillment of organisational objectives by compensating for inadequacies in the formal organisation.

1. An informal organisation originates from within the formal organization as a result of personal interaction among employees.
2. Independent channels of communication without specified direction of flow of information are developed by group members.
3. The standards of behaviour evolve from group norms rather than officially laid down rules and regulations.

1. It leads to faster spread of information as well as a quick feedback.
2. It fulfills the social needs of the members.
3. It contributes towards fulfillment of organisational objectives by compensating for inadequacies in the formal organisation.

1. It is easier to fix responsibility since mutual relationships are clearly defined.
2. It avoids duplication of effort since there is no ambiguity in the role that each member has to play.
3. It maintains unity of command through an established chain of command.
4. It leads to accomplishment of goals by providing a framework for the operations to be performed.
5. It provides stability to the organisation because there are specific rules to guide behaviour of employees.

1. Develops initiative among subordinates: Decentralisation helps to promote self-reliance and confidence amongst the subordinates. A decentralisation policy helps to identify those executives who have the necessary potential to become dynamic leaders.
2. Develops managerial talent for the future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation but equally important is the experience gained by handling assignments independently.
3. Facilitates growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and fosters a sense of competition amongst the departments.

1. When an informal organization spreads rumours, it becomes a destructive force and goes against the interest of the formal organisation.
2. The management may not be successful in implementing changes if the informal organization opposes them. Such resistance to change may delay or restrict growth.
3. It pressurises members to conform to group expectations. This can be harmful to the organisation if the norms set by the group are against organisational interests.

1. An informal organisation permits the flow of communication in all the directions in My Car Ltd.
2. Another advantage of informal organisation is that it helps to fulfill the social needs of the members by giving them a sense of belongingness in the organisation and enhances their job satisfaction.
3. The two values that My Car Ltd. wants to communicate to the society are :
   • Trust
   • Social Responsibility

1. Conflicts may arise among different divisions with respect to allocationof funds.
2. It may increase the cost since there may be a duplication of activities.
3. Divisional heads may misuse the authority ignoring organisational interests.

1. Product specialisation helps in the development of varied skills.
2. It helps in the fixation of responsibility as divisional heads are accountable for profits, revenues and costs related to their departments.
3. It promotes flexibility, initiative and faster decision making as each division is an autonomous unit.
4. It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.

1. A functional structure leads to occupational specialisation since emphasis is placed on specific functions. This promotes efficiency in utilisation of manpower as employees perform similar tasks within a department and are able to improve performance.
2. It helps in increasing managerial and operational efficiency and this results in increased profit.

1. Effective management: By empowering the employees, the managers are able to function more efficiently as they get more time to concentrate on important matters.
2. Employee development: As a result of delegation, employees get more opportunities to utilize their talent and this may give rise to latent abilities in them. It allows them to develop those skills which will enable them to perform complex tasks and assume those responsibilities which will improve their career prospects.
3. Facilitation of growth: Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures. Trained and experienced employees are able to play significant roles in the launch of new projects by replicating the work ethos they have absorbed from existing units, in the newly set up branches.

1. The framework' is called organisational structure.
2. It is required:

1. When an organisation grows in size or complexity.
2. When an organisation is new, the structure is required after planning but before staffing.

1. Organisation structure is required because it helps in:

1. Clarity in working relationships.
2. Adaptation to change.
3. Effective administration.
4. Expansion and growth.
5. Optimum utilisation of resources.
6. Better co-ordination.
7. Smooth flow of communication.
8. Better control over the operations of the business.

1. It is easier to fix responsibility since mutual relationships are clearly defined.
2. There is no ambiguity in the role that each member has to play as duties are specified. This also helps in avoiding duplication of effort.
3. Unity of command is maintained through an established chain of command.

1. Delegation of authority is the concept used by Aman Chadha in the above case which helped him in focusing on objectives.
   Delegation of authority is the process of granting of authority to the subordinates to operate within prescribed limits.
2. The four points of importance of delegation of authority are described below:
   • Effective management: It helps the managers to function more efficiently as they get more time to concentrate on important matters. Freedom from doing routine work provides them with opportunities to excel in new areas.
   • Employee development: By empowering the employees, they are given more opportunities to utilise their talent and this may help them to become better leaders and decision makers in future.
   • Motivation of employees: Delegation also has psychological benefits as helps in building the self-esteem of an employee and improves his confidence and work performance. When a superior entrusts a subordinate with a task, it is not merely
     the sharing of work but involves trust on the superior’s part and commitment on the part of the subordinate. Thus, delegation may give rise to latent abilities in the subordinates.
   • Facilitation of growth: With the increase in the competence of the employees, an organisation tends to gain in many ways. The growth and expansion of the firm becomes easy as the capable workforce is ready to take greater responsibilities.

1. The concept used by Sameer Gupta/ Neeraj Gupta through which he is able to steer his company to greater heights is Decentralisation.
2. The three advantages of using decentralisation are as follows:
   • Decentralisation helps to promote self-reliance and confidence amongst the subordinates: When the subordinates are given freedom to take their own decisions they learn to depend on their own judgment and develop solutions for the various problems they encounter. Moreover, a decentralisation policy helps to identify those executives who have the necessary potential to become dynamic leaders.
   • Relief to top management: Decentralisation reduces the need of direct supervision and helps to save the time of top management for persuing other important work.
   • Quick decision-making: In a decentralised organisation, managers at all levels are allowed to take such decisions independently which lie within their area of jurisdiction. This makes the process of decision making much faster.

1. Delegation of authority: In the initial years of business, Jasraj’s role is restricted. He is granted limited authority to perform tasks on behalf of Kabir to reduce his workload and provide him with more time to concentrate on important matters.
   Decentralisation of authority: When Jasraj is given an independent charge of the new outlet, he is empowered to take decisions autonomously to ensure successful running of the outlet.
2. Karan needs to be careful while selecting those decisions related to the outlet which will be taken by Jasraj independently and those that will be retained with him. It is important to define the decision making powers as complete decentralisation would imply the delegation of all decision making functions to Jasraj and this would obviate Karan’s role as the owner of the business.

1. The approach followed by ‘Home Creations Ltd.’ to run their stores successfully is Decentralisation. Decentralisation refers to systematic effort to delegate to the lowest level all authority except that which can be exercised at central points.
2. The importance of decentralisation is highlighted through the following points:
   • Develops initiative among subordinates: Decentralisation helps to promote self reliance and confidence amongst the subordinates. The lower managerial levels are empowered to take their own decisions and they learn to depend on their own judgment. This helps to identify those executives who have the necessary potential to become dynamic leaders.
   • Develops managerial talent for the future: Decentralisation is an effective means for training employees to use their talent in real life situations as it provides them many opportunities to prove their abilities. Thus, it helps to create a pool of qualified employees who may be considered to fill up challenging job positions internally through promotions. At the same alsoit so helps to identify those employees who may not be successful in assuming greater responsibility.
   • Quick decision making: Decentralisation facilitates quick decision making as the employees are allowed to act independently within their area of jurisdiction.
3. The two values that ‘Home Creations Ltd.’ wants to communicate to its employees are:
   • Initiative
   • Trust

1. Rakesh has used the concept of decentralisation keeping in mind the competence and experience of the other librarians.
2. The three advantages of using decentralisation are as follows:
   • Decentralisation helps to promote self-reliance and confidence amongst the subordinates: When the subordinates are given freedom to take their own decisions, they learn to depend on their own judgment and develop solutions for the various problems they encounter. Moreover, a decentralisation policy helps to identify those executives who have the necessary potential to become dynamic leaders.
   • Relief to top management: Decentralisation reduces the need of direct supervision and helps to save the time of top management for persuing other important work.
   • Quick decision making: In a decentralised organisation managers at all levels are allowed to take such decisions independently which lie within their area of jurisdiction. This makes the process of decision making much faster.

1. Formal organisation and Informal organisation are the two types of organisations which have been discussed.
   Formal organisation is the structure of authority relationships created deliberately by the management to achieve its objectives.
   Informal organisation is a network of social relationships arising out of the interaction among employees within an organisation.
2. The difference between Formal organisation and Informal organisation is as follows:

1. Manik is supposed to give regular feedback about work to Atul as he has been granted authority and entrusted responsibility, so he remains answerable for the outcome.
2. Yes, the authority granted to a subordinate can be taken back and re-delegated to another person.
3. Yes, Manik can be held responsible for not meeting the work related expectations of Atul as it is the obligation of a subordinate to perform the assigned duty to the best of his ability and skill.

   S.No.	Basis	Authority	Responsibility	Accountability
   1.	Origin	Arises from formal position in the organisation.	Arises from delegated authority.	Arises from responsibility.
   2.	Flow	Flows downward from superior to subordinate.	Flows upward from subordinate to superior.	Flows upward from subordinate to superior.

1. Informal organisation is the type of organisation that Rahunath is desirous of promoting in the company.
2. The three advantages of informal organisation are stated below:
   • It leads to faster spread of information as well as facilitates quick feedback.
   • It helps to fulfill the social needs of the members by giving them a sense of belongingness in the organisation and enhances their job satisfaction.
   • It contributes towards the fulfillment of organisational objectives by compensating for inadequacies in the formal organisation.

1. The Organising function of management is being described in the above lines.
2. Organisational structure is the framework created by Karan within which all managerial and operating tasks are to be performed in his organisation.
3. Karan has created a functional structure as job positions are divided into four departments on the basis of functions namely, front office department including online queries, reservations department for airways, railways and roadways, accommodation booking department, and securing payments department.
   The two advantages of functional structure are as follows :
   • A functional structure promotes work-related specialisation since it places emphasis on specific functions. This helps to increase efficiency in utilisation of manpower as employees perform similar tasks within a department and are able to improve performance.
   • It facilitates control and coordination within a department because of similarity in the tasks being performed.

1. The Organising function of management is being performed by Ishita.
2. The steps involved in the process of organizing are as follows:
   • Identification and Division of Work: The first step in the process of organising relates to identification and division of the work that has to be performed in accordance with predetermined plans. This helps to avoid duplication of activities and makes the work manageable. It also ensures that the burden of work is being shared among the employees.
   • Departmentalisation: The next step in the process involves grouping of similar activities into departments, units, sections etc. using several criteria as a basis. This facilitates specialization.
   • Assignment of Duties: Once departments have been created each of them is placed under the charge of an individual and then jobs are allocated to the members as per their job positions.
   • Establishing Reporting Relationship: While assigning jobs each member is told that from whom he /she has to take orders and to whom he/she will be accountable. The establishment of such clear reporting relationships help to create a well defined hierarchical structure. It also facilitates coordination amongst various departments.

1. Specialization : As the Organization is divided into various departments on the basis of the functions to be performed like Production, Finance, Personnel, and Marketing, the employees working under these departments attain specialization in terms of the nature of the job performed.
2. It Promotes Control and Coordination : Functional structure plays important role in promoting control and coordination within a department because workers perform similar jobs.
3. Increasing managerial efficiency : Functional structure increases managerial and operational efficiency and thus leads to increase in profits.
4. Reduction in cost : Functional structure helps in reducing the cost because it ensures that there is no overlapping of activities and minimal duplication of effort.

(2) The importance of decentralisation is highlighted through the following points :

1. Develops initiative among subordinates : Decentralisation helps the managers at the lower levels to take all those decisions, which are for the betterment of organisation, on their own and to develop solutions for solving the various problems they face. This helps in enhancing confidence and self-reliance among the employees.
2. Develops managerial talent for the future : Decentralisation provides a chance to the employees to prove their abilities by handling various assignments independently. Such opportunities to take decisions increase their knowledge & experience at all levels. It also provides qualified manpower for fulfilling the top positions through promotions.
3. Quick decision making : Decentralization promotes independent and quick decision making by subordinates as they are close to the operations and are in constant touch with all activities of their departments. Approval from various levels being not required, decisions can be taken much faster on their own.

1. Identification and Division of Work: Organising process begins with identifying and division of total work into small units.
2. Departmentalisation: After dividing the work, related and similar jobs are grouped together and put under one department.
3. Assignment of Duties: After departmentalisation, the work is assigned according to the ability of individuals.
4. Establishing Reporting Relationship: Assigning duties is not enough. Each individual should also know, who he has to take orders and to whom he is accountable. Thus, reporting relationship helps in co-ordination among various departments.

1. She will diversify her unit now into varied product lines.
2. Such a structure would enable her to know the profit margins from each product line and accordingly, she can plan and select the specific product for future diversification.
3. It will facilitate further expansion without disturbing the existing units.

1. Organising.
2.  

1. They identified the following main activities which they have to perform'.
2. 'In order to facilitate the work, they thought that four managers should be appointed to look after production, finance, marketing and personnel'. These lines depict the 'Identification and division of work' step of organising process.

3. The steps involved in organising are:

1. Identification and division of work.
2. Departmentalisation.
3. Assignment of duties.
4. Establishing reporting relationships.

1. Effective Communication: In the absence of any definite course, it is an effective system of communication. Messages can be quickly conveyed from one place to another with the help of this system.
2. Fulfills Social Needs: In the informal organisation, people having similarity of thoughts and ideas form a group of their own. All the people in the group stand by one another in all the organisational or personal matters.
3. Fulfills Organisational Objectives: In the informal organisation, the subordinates put their ideas before the superiors without any fear or hesitation. It helps the superiors to understand their difficulties and immediate solution of the problem is sought out. Since the problems are easily solved it becomes easier to achieve the objectives of the organisation.

1. It is an expanded version of delegation of authority.
2. It increases the significance of the role of subordinates.
3. It is a process which is applicable to the organisation as a whole.

1. Conflicts between Divisional Heads: Every divisional head wants to become a divisional empire. To satisfy their ego, each demands maximum resources for their division. This situation leads to conflicts among the various divisional heads.
2. Duplicity of Functions: The entire set of functions (e.g., production, marketing, finance, personnel, etc.) is required for all divisions. It gives rise to duplicity of efforts among divisions. Hence, resources are misused and cost of operations is unnecessarily increased.
3. Selfish Attitude: Every division tries to display better performance sometimes even at the cost of other divisions. This shows their selfish attitude. Consequently, it hits the interest of the concern as a whole.

1. It is difficult to hold a single department responsible for any problem.
2. As departments grow in number, coordination become difficult.
3. Conflicts may arise between departments.

1. Effective Management: Delegation leads to effective management through empowerment of employees.
2. Employee Development: Delegation helps in employee development by providing them with the chance to use their skills and experience.
3. Motivation of Employees: Delegation motivates employees by giving them responsibility which builds their self-esteem.

1. It brings a feeling of belonging, status, self-respect and satisfaction.
2. It satisfies social and cultural needs of the members.
3. It provides useful channels of communication.
4. It helps in maintaining the personality of the individual against certain effects of formal organisation which tends to disintegrate personality.
5. It makes the organisational structure flexible and workable.

1. Where the size of the business unit is large.
2. Where specialisation is required.
3. Where there is only one product that is sold.