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B.C.O.C.-132
Business Organisation and Management
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Note: Attempt all the questions.

Section-A
(This section contains five questions of 10 marks each)
Q. 1. What is technological innovation? Explain the various types of innovation.
Ans. Technology includes the use of materials, techniques etc. for making life easier, pleasant and productive It involves
the application of knowledge in production and marketing processes. Technological innovations form a part of the whole
innovation field and when technology and innovation join hands, there are technological innovations, which further lead to
providing new products and services and new opportunities for expanding businesses. Further, properly managing a technological
development is extremely important because when a new technology is developed, using it successfully in the organization to
have a competitive advantage requires contribution of many other functional areas of the organization such as production,
finance, marketing, etc. There has to be in place proper link between the technology and different functional areas of the
organization. Features of technological innovation are it brings a new idea or a solution or technology by scientific knowledge,
it develops a viable product from the idea, etc.
Process of Innovation: Following are the five stages of an innovation:
Generation and Mobilization of an idea which forms the starting line. This may be an altogether new idea or an
improvement over an existing process. After its inception, the idea is handed over to a separate location or department.
It must be ensured that the organization should extend just the required emphasis to it, neither over nor less and the
different stakeholders should be considered before the implementation.
Advocacy and Screening process considers whether the idea is worth to be implemented or not, that is, a decision is
taken about the future course of action about the new idea. After generating an idea, it has to be facilitated by the field
personnel and it should be properly screened.
At the experimentation stage, testing of the idea is done. Here, it is very important to give sufficient time for testing so
that further improvements, on account of the results of experimentations, could be accommodated.

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 The next step is commercialization, which aims to create market value for the idea and its potential effects.It tries to
establish specifi-cations of the idea and put forth the benefits that may be obtained from the innovation. After clarifying
the idea, the business plans may be developed to implement it.
During the stage of diffusion and implemen-tation, the idea is accepted in the organization and further steps are initiated
to implement it by putting in place the sest up needed to develop/produce the product. Plans have to be made to
generate enough resources needed for implementation and also to device strategies for ensuring its successful marketing
to prospective customers.
Innovation is of the following four types:
1. Incremental Innovation : It is the most common form of innovation which is concerned with using the existing technology
in order to provide enhanced value to the customers in respect of the design, features, etc. of the product. It may add some new
features to the products or remove any features in order to make it more useful for the customers.
2. Disruptive Innovation : Disruptive innovation involves application of some new technology/ processes for the present
market. It is also called stealth (secret innovation) because the new technology is inferior to the existing market technology and
is costlier. It is difficult to use the newer technology initially until the old technology gets surpassed and disrupts all the existing
companies. Thereby, the organization which goes for the new technology achieves a competitive advantage.
3. Architectural Innovation : Under this type, the technology is taken to different markets in order to increase the number
of customers. There is not much risk in this because the technology being taken to the new markets is already used and tested,
the product may just be changed a little to suit the requirements of new customers.
4. Radical Innovation : This type of innovation involves creating new technology. Radical innovation destroys or
supplements an existing business model, blows up the existing system with a completely new one. More risks and rewards are
generally associated with this innovation. Radical innovation is associated with creating new products and services and also
unknown business models that enable the organizations to look for long term growth.
Q. 2. Explain the features of an ideal form of business organisation. Which form can be considered to be an ideal in
all respects?
Ans. The main features of an ideal form of business organization are as follows:
Scope of raising capital: One can make the choice of organization by depending on the amount of capital needed to
start off the business. Amount of capital depends upon the nature of business and scale of operations. For example to
start a retail shop, less capital is required. But if someone wants to set up a factory, he may require a large amount.
Extent of liability: Normally, businessmen prefer limited liability. It is often said that a good form of organization has
got limited liability. Limited liability helps to curtail the risk factor. Risk is somewhat important for a business so as to
maintain initiative, drive and involvement in business.
Flexibility of operations: The organization should be a flexible one and should be able to meet all the requirements or
changing business conditions without much difficulty. For example if one wants to expand his business, organization
should be able to adapt itself to the changing business conditions.
Stability and continuity: Owners, employees and even customers always prefer a stable and continuous business.
Customers can get a regular supply of goods to meet their needs, if the business continues for a long time. Employees
like working in a stable and continuous firm. The owners can evens make future plans if they run a stable and continuous
business.and continuous business. Customers can get a regular supply of goods to meet their needs, if the business
continues for a long time. Employees like working in a stable and continuous firm. The owners can evens make future
plans if they run a stable and continuous business.
Effectiveness of management: If the management is efficient, the business can easily succeed. Skills, motivation,
flexibility etc, are very important in order to make management efficient. A single person cannot have all the qualities
mentioned above. That is why many people work together to run a business.

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 Business secrets: Competitors should not come to know your business secrets. Businessmen prefer that form of orga-
nization where business secrets can be preserved easily and not revealed to the competitors.
Tax burden: That form of organization is said to be ideal which attracts minimum amount of tax liability. Businessmen
have to pay taxes like sales tax, excise duty, customs duty etc. on certain products and services. Company form of
organization is best suited for this purpose because it enjoys a number of tax reliefs which are not present in other forms
of organization.
Extent of government control and regulations: 'Businessmen are usually not in favour of those forms of organization
which involve too much of government's interference. It is so because interference can hamper the working of their
business and can even lower down their initiative. Other than entrepreneurs, creditors, customers, investors trust those
organizations which are controlled and regulated by the government. So, an ideal form of business organization is one
which is free from the control and regulations of the government.
No single form of organisation has all the ideal features. Each form of organisation is good in some aspects and not good in
other respects. For instance, sole proprietorship and partnership forms of organisations are considered good from the point of
view of ease of formation, freedom from governmental regulations, ownership interest, retention of business secrets, etc. But the
same features are not prevalent much in company form and cooperative form of organisations. Company form and cooperative
form are ideal from the point of view of limited liability, scope of raising capital, professionalised management, continuity of life,
etc. So, it is difficult to treat any one form as ideal in all respects and suitable in all situations.
Q. 3. What do you mean by span of control? Discuss factors affecting span of control.
Ans. Span of Control: It means the number of individuals which a manager can effectively supervise. According to span
of control, the number of subordinates who report directly to a superior should be limited so that there is effective supervision
and control. Such control should neither be very wide nor very narrow, the number of subordinates should not be too large or
too small. It is difficult to fix the number of subordinates because of the nature of different jobs and capacity of different
individuals. An ideal span depends on the factors such as when the work to be supervised is simple and repetitive, the span of
control can be wider and when work requires close supervision the span of control is narrow, span of control depends upon the
capability of the manager, an organisation in which there are efficient systems and competent people, there can be a larger span,
by employing staff assistants, the span of control can be widened, at the higher management levels, span of control is narrow
because maximum time is used in doing important function such as planning, organising, and controlling, when subordinates
are experienced, they need less guidance and as such span of control can be wider, span of control can be narrower if the
executives have to take a number of decisions themselves and when there is decentralization, span can be wider.
Span of control means the number of individuals which a manager can effectively supervise. According to span of control,
the number of subordinates who report directly to a superior should be limited so that there is effective supervision and control.
Such control should neither be very wide nor very narrow, the number of subordinates should not be too large or too small. It
is difficult to fix the number of subordinates because of the nature of different jobs and capacity of different individuals. When
the Span of Supervision is wide, there would be lesser levels of supervision. A narrow span needs many levels of supervision
which takes longer time, is expensive and complicates the process of communication.
Factors Affecting Span of Control: An ideal span depends on a number of factors, given here under:
When the work to be supervised is simple and repetitive, the span of control can be wider and when work requires close
supervision the span of control is narrow.
Span of control depends upon the capability of the manager, some can supervise a large number than others.
An organisation in which there are efficient systems and competent people, there can be a larger span.
By employing staff assistants, the span of control can be widened.

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 At the higher management levels, span of control is narrow because maximum time is used in doing important function
such as planning, organising and controlling.
When subordinates are experienced, they need less guidance and as such span of control can be wider.
Span of control can be narrower if the executives have to take a number of decisions themselves and when there is
decentralization, span can be wider.
Q. 4. What is the meaning of lease financing? Explain its advantages and limitations.
Ans. Lease in an agreement by which the owner of an asset grants a user the right to use the asset for a particular period.
Lessor is the person or a company who is the owner of the asset and to be used by the lessee for a periodic payment called lease
rental. Leasing offers an alternative to purchasing an asset from own funds/borrowings. In this case, lessor has the right to claim
depreciation as deductible item from tax payments. Also, the lessee gets the advantage of income tax deductions for the amount
of the lease rent paid by him. Lease term is the non-cancellable duration for which the lease rights have been granted to the
lessee, the contract is signed and its terms/conditions are specified. The asset leased goes back to the lessor after the specified
period. A lease is called Finance Lease when it gives substantially all risks/rewards relating to the ownership of the asset leased.
This lease is not cancellable and all risks in it are borne by the lessee A lease may be called Operating Lease when it is not a
Finance Lease, i.e the period is generally short term, is cancellable, its maintenance is borne by the lessor unless otherwise
provided in the agreement.
Advantages of Leasing: Leasing offers following advantages:
(i) Regular income: Lessor gets assured rental income during the period of lease without transferring the ownership of the
asset to the lessee.
(ii) High profitability: Leasing is highly profitable since the rate of return is the lease rental which is higher than the interest
payable on financing the asset.
(iii) Growth and expansion: An entrepreneur will not have to spend a lot of money acquiring the asset. He can utilize the
funds for further growth of the business.
(iv) Tax benefit: Lease rental is deductible from the taxable income of the lessee. The lessor has the benefit of depreciation
in respect of leased assets.
(v) Economical: Leasing as a source of financing is cheaper than many other sources of finance. The lessee can use the asset
and earn profits without investing money in the asset.
Disadvantages of Leasing: Some of the disadvantages of leasing are as follows:
1. Deprivation of Equipment: The apparent disadvantage of lease to the lessee is that he does not become the owner of the
leased property unless the lease contract contains any purchase option.
2. Consequences of Default: The lessee in the case of default of installment payment may have to terminate the lease. The
lessor may take over the property at his own will. In case of finance leases, the lessor may in addition require the lessee to pay for
damages and accelerated rental payments.
3. Inadequate Protection against Loss: In the case of finance lease, the lessee is not entitled to the same protection of
express or implied warranties that would be available to the purchaser. As the lessor is the purchaser for the property he is entitled
to all such protection. In operating lease this disadvantage is minimized with lessor's responsibilities towards maintenance and
upkeep of the property.
4. Fixed Commitment: The lessee in a finance lease is normally required to make an absolute and unconditional commit-
ment to pay rent to the lessor despite loss, destruction or defects in the leased property. The purchaser might be entitled to offset
his payment obligation in the event of supplier's breach. The lessee is generally required to make his rent payments in all
circumstances.

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 5. Loss of Terminal Value: Lessee remains at a loss of terminal values after the end of lease. Appreciation of land and
increases in values caused by inflation and improvements done by the lessee will not provide him any benefit at the end.
6. Lack of Freedom to Make Changes: The lessee has no freedom to make changes and additions to the leased property
and has to do so with the formal approval of the lessor.
7. High Interest Cost: The cost of leasing is generally higher than the cost of debt. The lessor charges, not only for debt, but
for inventory costs, overhead costs, and a passing on the risk of obsolescence back to the lessee.
8. Not Suitable for Project Finance: Leasing is not a suitable mode of project finance as the rentals are payable soon after
entering into the lease agreement. However, in new projects cash generations may start only after a fairly long gestation period.
Borrowing allows a long gestation period for repayment and by that time the project starts generating cash flows in the firm.
9. No Special Consideration: Debt finance is available on concessional rate of interest and other relaxations for setting up
projects in selected backward areas, but these concessions are not available on leased equipment.
10. Heavy Penalties: The lessee, particularly in the cases of finance lease, cannot terminate the contract at his will except by
paying heavy penalties. This may prove to be a handicap for those lessee firms who discontinue a particular type of manufactur-
ing or business.
11. Tax Benefits Challengeable: The tax benefits will be challenged when the lessee is given an option to purchase at other
than interest value at the time of purchase. Some leases have been constructed as sales or have been ignored for tax purposes if
they were held to be mere devices for charging off undue amounts against taxable income for depreciation under the guise of
rentals.
Besides, the lessee is put to disadvantage for paying sales tax twice on the leased assets once the asset is purchased and again
when it is leased out.
Q. 5. What is wealth maximization? Why is wealth maximisation preferred over profit maximisation.
Ans. Wealth Maximisation Approach is based on the net present value, which is the difference between the present value of
its benefits and the present value of its costs. The approach gives importance to the timing of the expected benefits. An action
which brings in a positive Net Present Value (NPV) increases the wealth, should be accepted and the financial action which
gives negative NPV should not be accepted. So, a project which may give the highest expected NPV should be undertaken. For
arriving at the NPV, an appropriate discounting rate for the expected future benefits is taken and the benefits are measured in
terms of cash flows. Market value of the shares of the company show the wealth created by the actions of the company. The
objective of every financial action should be:
While computing the value of a financial action, the value of asset is determined in terms of returns (returns less cost).
Here, importance has to be given to the exactness of benefits from the action and the focus is on the precise cash inflows
and outflows and not on accounting profit.
Wealth maximization should take into account the quality and quantity of benefits and time value of money. Quality is
concerned with the certainty or receipt of future benefits, the more is certainty, the better is the quality. Since money has
time value, the benefits received earlier should be valued higher than benefits received later. So, it is important that the
cash flows are adjusted in terms of the risk and the time of receipt. That is how the NPV maximization appears better
than the profit maximisation approach and when the discounted value of an action is greater than its cost, it creates value
and it should be selected. But when the discounted value of an action is less than its cost, it should be rejected because
it reduces wealth.
Profit Maximisation Vs. Wealth Maxi-misation: Main focus of profit maximisation is on improving profitability, reducing
losses and inefficiencies, but it may create unhealthy trends, which are harmful to the society and may also lead to unhealthy
competition and exploitation. Since profit maximization may be considered in terms of the owners and also in terms of others,

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there is ambiguity leading to its mis-interpretation. Also, since profit is calculated in terms of money, it ignores efficiency,
skills, manufacturing process and wastages, etc. which have a bearing on the profits. Further, during inflationary conditions, the
value of money decreases with the passage of time, the figures of profits are not really comparable in a long period.
An action which has discounted value shows both risk and the time, so, the action is selected if it creates value, i.e. the
discounted value exceeds costs. So, the NPV maximization method seems more superior to the profit maximization.
Section-B
(This section contains five short questions of 6 marks each)
Q. 6 “A manager can be more effective if he is a good leader.” Comment.
Ans. The effectiveness of manager leader depends upon the leadership style adopted by him. The leadership may be:
Employee-centered–having a concern for the people.
Production centered or task oriented - concern for production.
Joint concern for people and production with different degrees of emphasis on each.
The combined concern for people and for production was developed in the form of Managerial Grid by Blake and Muton.
The managerial grid is a diagrammatic representation of possible combinations of concern for people and concern for production
reflected in the style of leadership.
Effective and ineffective styles of leadership: Effectiveness of the manager depends on the situational demands of a
specific environment, when leadership style is appropriate to a given situation, it is effective and when it is not effective to the
situation, the leadership is ineffective.
The following are some styles that are regarded as more effective styles:
Executive Style: Giving maximum attention to the work and the people in order to have good results.
Developer Style: Manager gives maximum attention to people development and less to work.
Benevolent Autocrat Style: A benevolent autocrat is more concerned about the work and has less concern for people but
even then he achieves goals without causing any resentment.
Bureaucratic Style: This manager is able to control the work-situation and achieve goals by laying more concern for rules
and procedures and has minimum concern for people.
Less effective or ineffective styles of leadership are:
Compromiser Style: In this style, the manager is equally concerned with the people and the work in a situation that
requires emphasis on one of these. He is thus a poor decision-maker and ineffective manager leader.
Missionary Style: A manager aims at harmonious relations among workers, but is little concerned with the work even
when situation requires greater emphasis on work. He is ineffective and unable to get results.
Autocratic Style: This type of leader manager is interested only in work and its results when the situation requires relation
orientation. He lacks confidence in subordinates and leads by his authority. So, his leadership cannot succeed in the long-run.
Deserter Style: The manager who is neither concerned about the people, nor for the work, is an escapist and reflects a
passive attitude.
Factors influencing leadership effectiveness:
The culture and policies of the organisation.
Experience, own personality and qualities of the manager.
Expectations and behaviour of superiors.
Trust, expectations and behaviour of subordinates.
Requirements of the task to be performed.
Expectations of the peer group.

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 Qualities of an Effective Leader: Every successful manager must possess certain qualities that make him an effective
manager leader. These qualities are given as under:
Good mental and physical health is a pre requisite of an effective manager leader. He should bear pressures of leadership.
An effective manager leader must appreciate others and the capacity to look at things from the viewpoint of his
subordinates so as to motivate them.
He must possess self-confidence in his thoughts and actions and should have the capacity to analyze and face different
situations and adopt a suitable style.
An effective leader must be aware of his strengths and weaknesses in relation to his subordinates.
The effective leader must have good communication skills to achieve the desired results and coordination of efforts in
the group.
An effective leader manager must have clarity of purpose and the responsibility to motivate subordinates.
Q. 7. Distinguish between equity shares and preference shares.
Ans. Equity Shares: Equity capital of a company is raised by issuing shares. A share is a share in the share capital of a
company. It is also called common stock. At the time of issuing shares, the company does not give any guaranteed payment of
dividend every year and therefore, the return is uncertain. An equity share does not have the right to receive dividend and
repayment of capital as is the case with a preference share. These shares get equity dividend only when there are distributable
profits.
Merits : Merits of raising funds by issuing equity shares are:
Suits investors who can to take risk for reaping higher returns.
Dividend payment is not compulsory and there is no burden on the company.
It acts as a cushion for creditors in case of winding-up of company.
Company gets credit worthiness by equity capital, which gives confidence to lenders.
There is no charge created on the assets of the company by issuing equity shares.
Democratic control is exercised by equity shareholders on management of the company.
Demerits to the Shareholders
There is no certainty about payment of dividend to equity shareholders.
Payment of high dividend may lead to speculation about price of shares in the market.
When excess funds are raised by a company by issue of equity shares, it may lead to over-capitalization and consequent
low price of shares in the security market.
Equity shareholders are considered to be owners of the company, but in practice, a small group of shareholders holding
voting rights may control the entire affairs of the company.
Maximum risk about investment is borne by the equity shareholders who do not get any dividend in case of loss. When
the company is to be wound up, they get their money refunded only after all payments, if funds are available.
Demerits to Management
Trading on equity is the capacity of company to raise money by issuing preference shares, debentures and bank loans, all
of which have a fixed rate of payment. So, when the company earns huge profits, equity shareholders get high dividend.
The company may get advantage of trading on equity if a company has only equity shares and does not have either
preference shares, debentures or loans.
Equity shareholders have voting rights, so, groups of shareholders may be formed to take control of the company and
there may be conflict of interests which is harmful for the running of the company.

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Preference Shares
Preference shares have some special rights, but they do not have right to vote. These shares have a preferential right to
payment of dividend at a fixed rate and for repayment of capital at the time of its winding up or at the agreed period. Dividends
on such shares can be cumulative when it accumulates year after year if not paid. Unpaid dividends get precedence over
dividends on equity shares.
Merits of Preference Shares:
Preference shares are suitable for investors who want safety of their capital and fixed/regular return on their investment.
In case of loss in a year, it may not pay dividend on preference shares. It may postpone dividend payment on cumulative
preference shares.
Since the preference shareholders do not have voting rights, they cannot intervene in company’ management.
Since a fixed dividend is payable to preference shares, equity shareholders get the benefit of trading on equity in case
the company earns higher profits.
Since no charge on the assets is created by issuing preference shares, the company can use its fixed assets for raising
funds from other sources.
Repayment of redeemable preference shares may be made by the company after the decided period. It gives flexibility
to the capital structure and avoids over-capitalization.
Demerits
The company is required to pay dividend on preference shares at a fixed rate before making any payment to equity
shareholders.
The investors who prefer risk for higher returns may not be inclined to invest in preference shares and those who want
to avoid risk may prefer debentures/government securities. So, the company has to offer a high rate of dividend issue
preference shares.
If the company is a high profit earning one, investors may not be inclined to invest in fixed dividend preference shares.
Since no voting rights are available to preference share holders, they cannot take part in the management of the company.
Q. 8. Write a short note on job enrichment.
Ans. Herzberg attached great importance to job enrichment in his two factor theory. Job enrichment involves enriching job
contents/deliberate upgrading of responsibility, scope and challenge in work. Job enrichment is a motivational technique of
providing challenging and interesting work. Job enrichment involves vertical loading and additions in job enrichment need
better skills and competence. For example: Giving freedom of operation to the workers, consulting workers and seeking their
suggestions, providing opportunity to learn and specialize, recognizing good performance, etc. Job enrichment is different
from job enlargement in the sense that the later makes the job varied by removing its dullness/ repetitiveness and job enrichment
tries add into the job a higher importance or higher challenge that need higher levels of skill/competence.
Advantages
It puts more interest in the job.
Decreases absenteeism/turnover rates.
It motivates by providing opportunities of growth.
Helps in improving skills.
Provides greater job satisfaction to workers.
Leads to quantitative/qualitative improvement in production and satisfaction of workers.
Limitations
Job enrichment is not possible while using specialized machines.

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 Increase in productivity by job enrichment may be less than the expenditure involved.
Challenging elements in the jobs of professional employees does not necessarily imply that they are more efficient.
Many workers shirk responsibility and are more concerned about job security/salary. So, it cannot be certain that
workers want challenging jobs.
Workers who prefer job enrichment may not be capable of discharging the responsibilities.
Q. 9. “None of the four forms of business organisations has all the features of an ideal form of organisation.”
Comment.
Ans. Out of the four forms of business organisations, none has all the features of an ideal form of organisation. For
instance, Sole proprietorship and partnership are better forms from the point of view of control, secrecy and ease of formation
but they have limited resources/limited managerial abilities along with unlimited liability and the Joint Stock Company form
has more resources, limited liability and professional management. Company form and cooperative forms are ideal from the
point of view of limited liability, scope of raising capital, professio-nalised management, continuity of life, etc., but these have
no secrecy, difficult to form, difficult to close/windup, etc. The form which is suitable in one situation may not be suitable in
other situations because no single form of organisation is ideal in all respects and every form has good/bad points.
Out of the four forms of business organisations, none has all the features of an ideal form of organisation. For instance,
Sole proprietorship and partnership are better forms from the point of view of control, secrecy and ease of formation but they
have limited resources/limited managerial abilities along with unlimited liability and the Joint Stock Company form has more
resources, limited liability and professional management. Company form and cooperative forms are ideal from the point of
view of limited liability, scope of raising capital, professio-nalised management, continuity of life, etc. but these have no
secrecy, difficult to form, difficult to close/windup, etc. The form which is suitable in one situation may not be suitable in other
situations because no single form of organisation is ideal in all respects and every form has good/bad points.
Q. 10. Enumerate the principal characteristics of managerial leadership.
Ans. Managerial leadership is a dynamic and continuous process for improving individual, team and organizational
performance. Every manager has to be a leader in his/her operations by guiding , instructing and motivating employees to work
effectively and efficiently to achieve organizational goals. Managers have to acquire leadership characteristics such as:
1. Motivate: A manager has to learn how to motivate team members to achieve their and organizational goals. Leadership is
about influencing and inspiring people to perform efficiently.
2. Develop common interests: Managers and team members have to be aligned and have the same organizational interests
for greater cooperation and achievement.
3. Seek support: Managers as leaders have to recognize that having the support of all stakeholders is critical to succeed.
4. Assume responsibility: Managers know that they are ultimately responsible for results. Managerial leaders set a good
example.
5. Develop a situational style: Managerial leaders have to study the situation to provide team members with the appropriate
leadership style to achieve success.
6. Facilitates Integration of Organisational and Personal Goals: A leader is one who is visionary, deciding the destina-
tion to be reached. Vision is the source of organisational objectives. Vision requires synchronisation of goals through integration
of personal and organisational goals.
7. Maintains Discipline: By turning subordinates into followers, the job of securing order and compliance, becomes easy.
He motivates the employees with economic and non-economic rewards and thereby gets the work from the subordinates volun-
tarily. It is this willingness on the part of subordinates which leads to maintenance of discipline.

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 Section-C
(This section contains four short questions of 5 marks each)
Q. 11. What are the most common barriers to effective communication?
Ans. To make a communication effective, it must be ensured that the barriers of communication are removed. Following
are the important barriers to effective communication:
Multiplicity of Organisational Layers: Act as barrier to effective communication because the message gets distorted
or changed. In case of upward communication, the message may be distorted as it passes through intermediate levels,
the information may be withheld if it is likely to have an unfavourable impression to higher levels. The downward flow
of communication may be distorted/filtered by intermediate levels.
Language Barrier: It is important that the interpretation of the communication is as perfect as the emotions of the
sender. The language used for communicating a message and its understanding creates barriers to effective communication
because of the difficulty of interpreting words or due to lack of clarity of expression. This problem is also known as the
problem of semantics.
Status Barrier: Status barrier includes the difficulties in communicating due to differences in the status of the superior
and his subordinate. The superior may have ego problems and the subordinates have fear problem. So, subordinates
often suppress or withhold information that the superiors may not like or pass on a distorted information to please
them.
Physical Distance: Physical distance between the sender and the receiver in large organisations may become a barrier
to effective communication because then it becomes difficult to evaluate whether the receiver has understood and acted
on the message sent to him.
Emotional and Psychological Barriers: When people have strong feelings, they are emotionally affected by messages
received which are not as per their attitudes and they either reject it or do not accept such messages. Sender may also
distort it if he feels strongly about it. Psychological barriers arise because of lack of mutual trust.
Q. 12. Distinguish between outsourcing and off shoring.
Ans. Outsourcing and offshoring, are generally interchanged in conversations and thought to be one and the same. But,
actually there are a number of basic differences between these two terms: Outsourcing means an agreement of contracting out
work to an outsider and offshoring means completing the work in a different country, by basing its processes or services
overseas to take advantage of lower costs. Therefore, while outsourcing can be offshored but offshoring may not include
outsourcing. Outsourcing is the act of contracting with another company to perform some functions of our business. It can be
done for reducing operating costs since outsourcing is cost effective than hiring in-house team. Outsourcing is the method to
use outside specialists in dealing with particular business assignments. Presently, companies of all sizes are being benefitted by
outsourcing its processes to other entities. Outsourcing has now become a need, not an enhancement procedure. Off-shoring is
relocating a business process to another country. It may include an operational process (manufacturing) or supporting processes
(accounting). Outsourcing and offshoring may be compared on the basis of the following points:

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 Basis Outsourcing Offshoring
Definition Contracting out work to an outsider Relocating a business process
to another country
Effect Work is done by a third party Only activities are shifted
to another country
Purpose Aim is to divert focus to the core Aim is to gain from
(important) functions of the company cost advantage
Who performs Non employees who may be employees By our own employees
functions? of the outsourced agency.
Location Within the same country or in another country In another country

Q. 13. Distinguish between marketing concept and societal concept.

Ans. According to the Marketing Concept, the success lies in the ability of the organisation to produce, deliver and
inform better value offer by effective marketing efforts as compared to its competitors. Companies realize that a satisfied
customer is their best advertiser. Instead of putting marketing efforts in a widely spread/mass market, now some organisations
concentrate on specific markets to increase sale and accordingly prepare marketing program suitable for the target market, by
understanding needs of the customers. Customer needs can be spelt or unspelt and it is always difficult to understand the unspelt
needs. Business needs an integrated approach and all the important marketing functions such as product designing, selecting
channels of distribution, sales promotion campaigns, marketing research, etc. should be integrated. Under this concept, marketing
begins with understanding the needs of customers and all the activities of the company are directed towards satisfaction of
customers.
Societal Concept: It states that every organization should understand and determine the needs of a particular market and
provide the expected satisfaction more efficiently than its competitors so as to promote the well being of the customers and the
society. As such, the concept combines marketing with social change and the objective of profit maximization is matched with
customer satisfaction and responsible corporate citizenship. So, this way marketing activities become relevant to the society
and it not only remains a business activity, but also considers social needs and desires. The concept is adopted for improving
company’s goodwill and also for ensuring its long run survival. Societal concept is virtually an extension of the marketing
concept which also covers the entire society along with customers.
Q. 14. Write a short note on employee engagement.
Ans. Employee Engagement means that the employees are psychologically involved in and committed to their respective
jobs. It is important in the sense that the behavior of employees shows the degree of their engagement in the work. According
to Kahn, employee engagement is ‘The harnessing of people’s selves to their work, such that they fully invest their physical,
cognitive, and emotional resources in their work roles.’ Indicators of engagement according to him are: meaningfulness, safety
and availability.
Employee engagement is very crucial for today’s organisations. This is because the behaviour of the employee gives an
idea about the degree of his engagement in the organisation. It is a well known fact that those companies in which employees’
engagement is high, they have better chances of having high productivity, revenues and profitability. Also, it has been observed
in surveys conducted at different places that the revenue earned per employee is higher in such companies.

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