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Wednesday 31 July 2019

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Business Communication

Multiple choice:
I.The most important goal of business communication is_________. (1)
a) favorable relationship between sender and receiver
b) organizational goodwill
c) receiver response
d) receiver understanding
II. Down ward communication flows from_________ to_________. (1)
e) Upper to lower
f) Lower to upper
g) Horizontal
h) Diagonal
III. Horizontal communication takes place
between_________. (1)
a. superior to subordinate
b. subordinate to superior
c. employees with same status
d. none of these
IV. The study of communication through touch is_________. (1)
a. chronemics
b. haptics
c. proxemics
d. semantic
V._____________ channel of communication is known as grapevine (1)
a. Formal
b. Informal
c. Horizontal
d. Vertical
VI. The following is (are) the most effective ways of communication. (1) a. Verbal b. Non verbal c. Written d. All of the above

END OF SECTION A
• This section consists of Caselets.
• Answer all the questions.
• Each Caselet carries 20marks.
• Detailed information should form the part of your answer (Word limit 150 to 200 words).
VII. The handshake that conveys confidence is (1)
a. Limp
b. Firm
c. Loose
d. Double
VIII. ________ of the letter consists of main message. (1)
a. Heading
b. Body
c. Greeting
d. Closing
IX. Body of a letter is divided into ________
parts. (1)
a. 1
b. 2
c. 3
d. 4
X. X. A persuasive message will fail if_____ (1)
a. it does not focus on what is in it for the reader
b. it only lists facts
c. it moves too slowly
d. all of the above
Part Two:
1. Brief Grapevine communication? (5)
2. List the 7 C’s of Communication? (5)
3. Describe the various barriers of communication? (5)
4. Write the negotiation process. (5)
Section B: Caselets (40 marks)
Caselet 1
Barry and Communication Barriers Effective Communication as a Motivator One common complaint employees voice about supervisors is inconsistent messages – meaning one supervisor tells them one thing and another tells them something different. Imagine you are the supervisor/manager for each of the employees described below. As you read their case, give
Examination Paper of Business Communication
IIBM Institute of Business Management
consideration to how you might help communicate with the employee to remedy the conflict. Answer the critical thinking questions at the end of the case then compare your answers to the Notes to Supplement Answers section. Barry is a 27-year old who is a foodservice manager at a casual dining restaurant. Barry is responsible for supervising and managing all employees in the back of the house. Employees working in the back of the house range in age from 16 years old to 55 years old. In addition, the employees come from diverse cultural and ethnic backgrounds. For many, English is not their primary language. Barry is Serv Safe® certified and tries his best to keep up with food safety issues in the kitchen but he admits it’s not easy. Employees receive “on the job training” about food safety basics (for example, appropriate hygiene and hand washing, time/temperature, and cleaning and sanitizing). But with high turnover of employees, training is often rushed and some new employees are put right into the job without training if it is a busy day. Eventually, most employees get some kind of food safety training. The owners of the restaurant are supportive of Barry in his food safety efforts because they know if a food safety outbreak were ever linked to their restaurant; it would likely put them out of business. Still, the owners note there are additional costs for training and making sure food is handled safely. One day Barry comes to work and is rather upset even before he steps into the restaurant. Things haven’t been going well at home and he was lucky to rummage through some of the dirty laundry and find a relatively clean outfit to wear for work. He admits he needs a haircut and a good hand scrubbing, especially after working on his car last evening. When he walks into the kitchen he notices several trays of uncooked meat sitting out in the kitchen area. It appears these have been sitting at room temperature for quite some time. Barry is frustrated and doesn’t know what to do. He feels like he is beating his head against a brick wall when it comes to getting employees to practice food safety. Barry has taken many efforts to get employees to be safe in how they handle food. He has huge signs posted all over the kitchen with these words: KEEP HOT FOOD HOT AND COLD FOOD COLD and WASH YOUR HANDS ALWAYS AND OFTEN. All employees are given a thermometer when they start so that they can temp food. Hand sinks, soap, and paper towels are available for employees so that they are encouraged to wash their hands frequently.
Questions
1. What are the communication challenges and barriers Barry faces? (10)
2. What solutions might Barry consider in addressing each of these challenges and barriers? (10)
Caselet 2
Mr. Dutta, newly appointed president of century Airlines, knew the company’s survival depended on customer service, which in turn depended on motivated employees. So he created the Century Spirit program to build team spirit by encouraging employee participation, individual initiative, and open communication. Among the program’s early successes was newspaper started by a group of flight attendants. The plane truth published information about benefits and work conditions as well as feature stories and humorous articles. It quickly became popular not only with flight attendant but with pilot, machinists, and baggage handlers.
As time went on, though, the plane truth began to run articles critical of the company. When management cut back worker’s hours, the, newspaper questioned what sacrifices the executive were making. When the technical services department releases figures showing long turnaround times, the paper questioned the machinist’s work ethic. Worried that customer might see the newspaper; Mr. Dutta wanted to cancel it. The president of the flight attendants union also wanted to see it was stirring up trouble with the machinists.
Examination Paper of Business Communication
IIBM Institute of Business Management
• This section consists of Applied Theory Questions.
• Answer all the questions.
• Each question carries 15marks.
• Detailed information should form the part of your answer (Word limit 200 to 250 words).
END OF SECTION C
Ms. Rachel, Century’s human resource director, was asked to stop the publication. But she hesitated. She knew the employee morale was on the brink, but she did not know whether the newspaper was venting worker’s frustrations and reinforcing team spirit or stirring up old animosities and bringing the whole company down. Was it creating more tension than unity or vice-versa?
Questions
1. What Communication issues are involved at Century Airlines? (10)
2. What Communication Channels are being Utilized (10)
Section C: Applied Theory (30 marks)
1. Explain the various non verbal communications with an example in business
Scenario? (15)
2. Delineate the types of parts of business report writing? (15)

Thursday 25 July 2019

BUSINESS ENVIRONMENT IIBMS ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558

CONTACT:

DR. PRASANTH BE BBA MBA PH.D. MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com

Attempt Any Four Case Study

Case Study 1 : Structuring global companies

As the chapter illustrates, to carry out their activities in pursuit of their objectives, virtually all organisations adopt some form of organisational structure. One traditional method of organisation is to group individuals by function or purpose, using a departmental structure to allocate individuals to their specialist areas (e.g. Marketing, HRM and so on ). Another is to group activities by product or service, with each product group normally responsible for providing its own functional requirements. A third is to combine the two in the form of a matrix structure with its vertical and horizontal flows of responsibility and authority, a method of organisation much favoured in university Business Schools.

What of companies with a global reach: how do they usually organise them-
selves?

Writing in the Financial Times in November 2000 Julian Birkinshaw, Associate Professor of Strategic and International Management at London Business School, identifies four basic models of global company structure:

The International Division - an arrangement in which the company establishes a
separate division to deal with business outside its own country. The
International Division would typically be concerned with tariff and trade issues,
foreign agents/partners and other aspects involved in selling overseas. Normally
the division does not make anything itself, it is simply responsible for interna-
tional sales. This arrangement tends to be found in medium-sized companies
with limited international sales.

The Global Product Division - a product-based structure with managers responsible
for their product line globally. The company is split into a number of global busi-
nesses arranged by product (or service) and usually overseen by their own
president. It has been a favoured structure among large global companies such as
BP, Siemens and 3M.

The Area Division - a geographically based structure in which the major line of
authority lies with the country (e.g. Germany) or regional (e.g. Europe) manager who
is responsible for the different product offerings within her/his geographical area.
● The Global Matrix - as the name suggests a hybrid of the two previous structural
types. In the global matrix each business manager reports to two bosses, one
responsible for the global product and one for the country/region. As we indi-
cated in the previous edition of this book, this type of structure tends to come
into and go out of fashion. Ford, for example, adopted a matrix structure in the
later 1990s, while a number of other global companies were either streamlining
or dismantling theirs (e.g. Shell, BP, IBM).

As Professor Birkinshaw indicates, ultimately there is no perfect structure and organisations tend to change their approach over time according to changing circumstances, fads, the perceived needs of the senior executives or the predispositions of powerful individuals. This observation is no less true of universities than it is of traditional businesses.

Case study questions

Professor Birkinshaw’s article identifies the advantages and disadvantages of being a global business. What are his major arguments?

In your opinion what are likely to be the key factors determining how a global company will organise itself?

Case 2 : Resource prices

As we saw in Chapter 1, resources such as labour, technology and raw materials
constitute inputs into the production process that are utilised by organisations to
produce outputs. Apart from concerns over the quality, quantity and availability of
the different factors of production, businesses are also interested in the issue of
input prices since these represent costs to the organisation which ultimately have
to be met from revenues if the business is to survive. As in any other market, the
prices of economic resources can change over time for a variety of reasons, most, if
not all, of which are outside the direct control of business organisations. Such fluc-
tuations in input prices can be illustrated by the following examples:

Rising labour costs - e.g. rises in wages or salaries and other labour-related costs
(such as pension contributions or healthcare schemes) that are not offset by
increases in productivity or changes in working practices. Labour costs could rise
for a variety of reasons including skills shortages, demographic pressures, the
introduction of a national minimum wage or workers seeking to maintain their
living standards in an inflationary period.
Rising raw material costs - e.g. caused by increases in the demand for certain raw
materials and/or shortages (or bottlenecks) in supply. It can also be the result of
the need to switch to more expensive raw material sources because of customer
pressure, environmental considerations or lack of availability.
Rising energy costs - e.g. caused by demand and/or supply problems as in the oil
market in recent years, with growth in India and China helping to push up
demand and coinciding with supply difficulties linked to events such as the war
in Iraq, hurricanes in the Gulf of Mexico or decisions by OPEC.
● Increases in the cost of purchasing new technology/capital equipment - e.g.
caused by the need to compete with rivals or to meet more stringent government
regulations in areas such as health and safety or the environment.

As the above examples illustrate, rising input prices can be the result of factors operating at both the micro and macro level and these can range from events which are linked to natural causes to developments of a political, social and/or economic kind. While many of these influences in the business environment are uncontrollable, there are steps business organisations can (and do) often take to address the issue of rising input prices that may threaten their competitiveness. Examples include the following:

Seeking cheaper sources of labour (e.g. Dyson moved its production of vacuum
cleaners to the Far East).
Abandoning salary-linked pension schemes or other fringe benefits (e.g. com-
pany cars, healthcare provisions, paid holidays).
Outsourcing certain activities (e.g. using call centres to handle customer com-
plaints, or outsourcing services such as security, catering, cleaning, payroll, etc.). ● Switching raw materials or energy suppliers (e.g. to take advantage of discounts

by entering into longer agreements to purchase).

Energy-saving measures (e.g. through better insulation, more regular servicing of
equipment, product and/or process redesign).
Productivity gains (e.g. introducing incentive schemes).

In addition to measures such as these, some organisations seek cost savings through
divestment of parts of the business or alternatively through merger or takeover
activity. In the former case the aim tends to be to focus on the organisation’s core
products/services and to shed unprofitable and/or costly activities; in the latter the
objective is usually to take advantage of economies of scale, particularly those asso-
ciated with purchasing, marketing, administration and financing the business.

Case study questions

If a company is considering switching production to a country where wage costs
are lower, what other factors will it need to take into account before doing so?

Will increased environmental standards imposed by government on businesses
inevitably result in higher business costs?

Case 3 : Government and business - friend or foe?

As we have seen, governments intervene in the day-to-day working of the economy
in a variety of ways in the hope of improving the environment in which industrial
and commercial activity takes place. How far they are successful in achieving this
goal is open to question. Businesses, for example, frequently complain of over-
interference by governments and of the burdens imposed upon them by
government legislation and regulation. Ministers, in contrast, tend to stress how
they have helped to create an environment conducive to entrepreneurial activity
through the different policy initiatives and through a supportive legal and fiscal
regime. Who is right?

While there is no simple answer to this question, it is instructive to examine the
different surveys which are regularly undertaken of business attitudes and condi-
tions in different countries. One such survey by the European Commission - and
reported by Andrew Osborn in the Guardian on 20 November 2001 - claimed that
whereas countries such as Finland, Luxembourg, Portugal and the Netherlands
tended to be regarded as business-friendly, the United Kingdom was perceived as
the most difficult and complicated country to do business with in the whole of
Europe. Foreign firms evidently claimed that the UK was harder to trade with than
other countries owing to its bureaucratic procedures and its tendency to rigidly
enforce business regulations. EU officials singled out Britain’s complex tax formali-
ties, employment regulations and product conformity rules as particular problems
for foreign companies - criticisms which echo those of the CBI and other represen-
tative bodies who have been complaining of the cost of over-regulation to UK firms
over a considerable number of years.

The news, however, is not all bad. The Competitive Alternatives study (2002) by
KPMG of costs in various cities in the G7 countries, Austria and the Netherlands
indicated that Britain is the second cheapest place in which to do business in the
nine industrial countries (see www.competitivealternatives.com). The survey, which
looked at a range of business costs - especially labour costs and taxation -, placed
the UK second behind Canada world-wide and in first place within Europe. The
country’s strong showing largely reflected its competitive labour costs, with manu-
facturing costs estimated to be 12.5 per cent lower than in Germany and 20 per
cent lower than many other countries in continental Europe. Since firms frequently
use this survey to identify the best places to locate their business, the data on rela-
tive costs are likely to provide the UK with a competitive advantage in the battle for
foreign inward investment (see Mini case, above).

Case study questions

How would you account for the difference in perspective between firms who often
complain of government over-interference in business matters and ministers who
claim that they have the interests of business at heart when taking decisions?

To what extent do you think that relative costs are the critical factor in determining
inward investment decisions?

Case 4 : The end of the block exemption

As we have seen in the chapter, governments frequently use laws and regulations to promote competition within the marketplace in the belief that this has significant benefits for the consumer and for the economy generally. Such interventions occur not only at national level, but also in situations where governments work together to provide mutual benefits, as in the European Union’s attempts to set up a ‘Single Market’ across the member states of the EU.

While few would deny that competitive markets have many benefits, the search
for increased competition at national level and beyond can sometimes be
restrained by the political realities of the situation, a point underlined by a previous
decision of the EU authorities to allow a block exemption from the normal rules of
competition in the EU car market. Under this system, motor manufacturers operat-
ing within the EU were permitted to create networks of selective and exclusive dealerships and to engage in certain other activities normally outlawed under the competition provisions of the single market. It was argued that the system of selective and exclusive distribution (SED) benefited consumers by providing them with a cradle-to-grave service, alongside what was said to be a highly competitive supply situation within the heavily branded global car market.

Introduced in 1995, and extended until the end of September 2002, the block
exemption was highly criticised for its impact on the operation of the car market in
Europe. Following a critical report by the UK competition authorities in April 2000,
the EU published a review (in November 2000) of the workings of the existing
arrangement for distributing and servicing cars, highlighting its adverse conse-
quences for both consumers and retailers and signalling the need for change. Despite
intensive lobbying by the major car manufacturers, and by some national govern-
ments, to maintain the current rules largely intact, the European Commission
announced its intention of replacing the block exemption regulation when it expired
in September, subject of course to consultation with interested parties.

In essence the Commission’s proposals aimed to give dealers far more independ-
ence from suppliers by allowing them to solicit for business anywhere in the EU
and to open showrooms wherever they want; they would also be able to sell cars
supplied by different manufacturers under the same roof. The plan also sought to
open up the aftersales market by breaking the tie which existed between sales and
servicing. The proposal was that independent repairers would in future be able to
get greater access to the necessary spare parts and technology, thereby encouraging
new entrants to join the market with reduced initial investment costs.

While these proposals were broadly welcomed by groups representing consumers
(e.g. the Consumer Association in the UK), some observers felt that the planned
reforms did not go far enough to weaken the power of the suppliers over the market
(see e.g. the editorial in the Financial Times, 11 January 2002). For instance it
appeared to be the case that while manufacturers would be able to supply cars to
supermarkets and other new retailers, they would not be required by law to do so,
suggesting that a market free-for-all was highly unlikely to emerge in the foreseeable
future. Equally the Commission’s plans appeared to do little to protect dealers from
threats to terminate their franchises should there be a dispute with the supplier.

In the event the old block exemption scheme expired at the end of September
2002 and the new rules began the next day. However, the majority of the provisions
under the EC rules did not come into effect until the following October (2003) and
the ban on ‘location clauses’ - which limit the geographical scope of dealer opera-
tions - only came into effect two years later. Since October 2005 dealers have been
free to set up secondary sales outlets in other areas of the EU, as well as their own
countries. This is expected to stengthen competition between dealers across the
Single Market to the advantage of consumers (e.g. greater choice and reduced prices).

Case study questions

Can you suggest any reasons why the European Commission was willing to grant
the block exemption in the first place, given that it ran counter to its proposals for
a Single Market?

Why might the new reforms make cars cheaper for European consumers?

Case 5 : The sale of goods on the Internet

The sale of consumer goods on the Internet (particularly those between European member states) raises a number of legal issues. First, there is the issue of trust, with-
out which the consumer will not buy; they will need assurance that the seller is genuine, and that they will get the goods that they believe they have ordered.
Second, there is the issue of consumer rights with respect to the goods in question: what rights exist and do they vary across Europe? Last, the issue of enforcement: what happens should anything go wrong?

Information and trust

Europe recognises the problems of doing business across the Internet or telephone
and it has attempted to address the main stumbling blocks via Directives. The
Consumer Protection (Distance Selling) Regulations 2000 attempts to address the
issues of trust in cross-border consumer sales, which may take place over the
Internet (or telephone). In short, the consumer needs to know quite a bit of infor-
mation, which they may otherwise have easy access to if they were buying face to
face. Regulation 7 requires inter alia for the seller to identify themselves and an
address must be provided if the goods are to be paid for in advance. Moreover, a
full description of the goods and the final price (inclusive of any taxes) must also
be provided. The seller must also inform the buyer of the right of cancellation available under Regulations 10-12, where the buyer has a right to cancel the contract for seven days starting on the day after the consumer receives the goods or services. Failure to inform the consumer of this right automatically extends the period to three months. The cost of returning goods is to be borne by the buyer, and the seller is entitled to deduct the costs directly flowing from recovery as a restocking fee. All of this places a considerable obligation on the seller; however, such data should stem many misunderstandings and so greatly assist consumer faith and confidence in non-face-to-face sales.

Another concern for the consumer is fraud. The consumer who has paid by
credit card will be protected by section 83 of the Consumer Credit Act 1974, under
which a consumer/purchaser is not liable for the debt incurred, if it has been run
up by a third party not acting as the agent of the buyer. The Distance Selling
Regulations extend this to debit cards, and remove the ability of the card issuer to
charge the consumer for the first £50 of loss (Regulation 21). Moreover, section 75
of the Consumer Credit Act 1974 also gives the consumer/buyer a like claim against
the credit card company for any misrepresentation or breach of contract by the
seller. This is extremely important in a distance selling transaction, where the seller
may disappear.

What quality and what rights?

The next issue relates to the quality that may be expected from goods bought over
the Internet. Clearly, if goods have been bought from abroad, the levels of quality
required in other jurisdictions may vary. It is for this reason that Europe has
attempted to standardise the issue of quality and consumer rights, with the
Consumer Guarantees Directive (1999/44/EC), thus continuing the push to encour-
age cross-border consumer purchases. The implementing Sale and Supply of Goods
to Consumer Regulations 2002 came into force in 2003, which not only lays down
minimum quality standards, but also provides a series of consumer remedies which
will be common across Europe. The Regulations further amend the Sale of Goods
Act 1979. The DTI, whose job it was to incorporate the Directive into domestic law
(by way of delegated legislation) ensured that the pre-existing consumer rights were
maintained, so as not to reduce the overall level of protection available to con-
sumers. The Directive requires goods to be of ‘normal’ quality, or fit for any
purpose made known by the seller. This has been taken to be the same as our pre-
existing ‘reasonable quality’ and ‘fitness for purpose’ obligations owed under
sections 14(2) and 14(3) of the Sale of Goods Act 1979. Moreover, the pre-existing
remedy of the short-term right to reject is also retained. This right provides the
buyer a short period of time to discover whether the goods are in conformity with
the contract. In practice, it is usually a matter of weeks at most. After that time has
elapsed, the consumer now has four new remedies that did not exist before, which
are provided in two pairs. These are repair or replacement, or price reduction or
rescission. The pre-existing law only gave the consumer a right to damages, which
would rarely be exercised in practice. (However, the Small Claims Court would
ensure a speedy and cheap means of redress for almost all claims brought.) Now
there is a right to a repair or a replacement, so that the consumer is not left with an
impractical action for damages over defective goods. The seller must also bear the
cost of return of the goods for repair. So such costs must now be factored into any

business sales plan. If neither of these remedies is suitable or actioned within a ‘rea-
sonable period of time’ then the consumer may rely on the second pair of
remedies. Price reduction permits the consumer to claim back a segment of the pur-
chase price if the goods are still useable. It is effectively a discount for defective
goods. Rescission permits the consumer to reject the goods, but does not get a full
refund, as they would under the short-term right to reject. Here money is knocked
off for ‘beneficial use’. This is akin to the pre-existing treatment for breaches of
durability, where goods have not lasted as long as goods of that type ought reason-
ably be expected to last. The level of compensation would take account of the use
that the consumer has (if any) been able to put the goods to and a deduction made
off the return of the purchase price. However, the issue that must be addressed is as
to the length of time that goods may be expected to last. A supplier may state the
length of the guarantee period, so a £500 television set guaranteed for one year
would have a life expectancy of one year. On the other hand, a consumer may
expect a television set to last ten years. Clearly, if the set went wrong after six
months, the consumer would only get £250 back if the retailer’s figure was used,
but would receive £475 if their own figure was used. It remains to be seen how this
provision will work in practice.

One problem with distance sales has been that of liability for goods which arrive
damaged. The pre-existing domestic law stated that risk would pass to the buyer once
the goods were handed over to a third-party carrier. This had the major problem in
practice of who would actually be liable for the damage. Carriers would blame the
supplier and vice versa. The consumer would be able to sue for the loss, if they were
able to determine which party was responsible. In practice, consumers usually went
uncompensated and such a worry has put many consumers off buying goods over the
Internet. The Sale and Supply of Goods to Consumer Regulations also modify the
transfer of risk, so that now the risk remains with the seller until actual delivery. This
will clearly lead to a slight increase in the supply of goods to consumers, with the
goods usually now being sent by insured delivery. However, this will avoid the prob-
lem of who is actually liable and should help to boost confidence.

Enforcement

Enforcement for domestic sales is relatively straightforward. Small-scale consumer
claims can be dealt with expeditiously and cheaply under the Small Claims Court.
Here claims under £5000 for contract-based claims are brought in a special court
intended to keep costs down by keeping the lawyers’ out of the court room, as a vic-
torious party cannot claim for their lawyers’ expenses. The judge will conduct the
case in a more ‘informal’ manner, and will seek to discover the legal issues by ques-
tioning both parties, so no formal knowledge of the law is required. The total cost of
such a case, even if it is lost, is the cost of issuing the proceedings (approximately

10 per cent of the value claimed) and the other side’s ‘reasonable expenses’. Expenses
must be kept down, and a judge will not award value which has been deliberately run
up, such first-class rail travel and stays in five star hotels. Residents of Northampton
have hosted a trial of an online claims procedure, so that claims may now be made
via the Internet. (www.courtservice.gov.uk outlines the procedure for MCOL, or
Money Claims Online.) Cases will normally be held in the defendant’s court, unless the complainant is a consumer and the defendant a business.

Enforcement is the weak point in the European legislation, for there is, as yet, no
European-wide Small Claims Court dealing with transnational European transac-
tions. The consumer is thus forced to contemplate expensive civil action abroad in a
foreign language, perhaps where no such small claims system exists - a pointless
measure for all but the most expensive of consumer purchases. The only redress lies
in EEJ-Net, the European Extra-Judicial Network, which puts the complainant in
touch with any applicable professional or trade body in the supplier’s home member
state. It does require the existence of such a body, which is unlikely if the transac-
tion is for electrical goods, which is one of the most popular types of Internet
purchase. Therefore, until Europe provides a Euro Small Claims Court, the consumer
cross-border buyer may have many rights, but no effective means of enforcement.
Until then it would appear that section 75 of the Consumer Credit Act 1974, which
gives the buyer the same remedies against their credit card company as against the
seller, is the only effective means of redress.

Case study questions

Consider the checklist of data which a distance seller must provide to a consumer
Is this putting too heavy a burden on sellers?

Is a consumer distance buyer any better off after the European legislation?
Are there any remaining issues that must be tackled to increase European cross-
border consumer trade?

Wednesday 24 July 2019

MANAGERIAL ECONOMICS IIBM ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558

CONTACT:

DR. PRASANTH BE BBA MBA PH.D. MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com

Managerial Economics
Section A: Objective Type & Short Questions (30 marks)
 This section consists of multiple choices & Short notes type questions.
 Answer all the questions.
 Part one carries 1 mark each & Part two carries 5 marks each.
Part one:
Multiple choices:
1. It is a study of economy as a whole.
a. Macroeconomics
b. Microeconomics
c. Recession
d. Inflation
2. A comprehensive formulation which specifies the factors that influence the demand for the product.
a. Market demand
b. Demand schedule
c. Demand function
d. Income effect
3. It is computed when the data is discrete and therefore incremental changes is measurable.
a. Substitution effect
b. Arc elasticity
c. Point elasticity
d. Derived demand
4. Goods & services used for final consumption is called:
a. Demand
b. Consumer goods
c. Producer goods
d. Perishable goods
5. The curve at which satisfaction is equal at each point.
a. Marginal utility
b. Cardinal measure of utility
c. The Indifference Curve
d. Budget line
6. Costs that are reasonably expected to be incurred in some future period or periods are:
a. Future costs
b. Past costs
Examination Paper of Managerial Economics
IIBM Institute of Business Management 2
c. Incremental costs
d. Sunk costs
7. Condition when the firm has no tendency either to increase or to contract its output:
a. Monopoly
b. Profit
c. Equilibrium
d. Market
8. Total market value of all finished goods & services produced in a year by a country’s residents is
known as:
a. National income
b. Gross national product
c. Gross domestic product
d. Real GDP
9. The sum of net value of goods & services produced at market prices:
a. Government expenditure
b. Product approach
c. Income approach
d. Expenditure approach
10. The market value of all the final goods & services made within the borders of a nation in an year.
a. Globalization
b. Subsidies
c. GDP
d. GNP
Part Two:
1. Discuss the concept of Demand Schedule.
2. Explain the law of ‘Diminishing marginal returns’.
3. List the various forms of Market Structure.
4. What are the various methods of measuring national income?
END OF SECTION A
Section B: Case lets (40 marks)
 This section consists of Case lets.
 Answer all the questions.
 Each Case let carries 20 marks.
 Detailed information should form the part of your answer (Word limit 150 to 200 words).
Examination Paper of Managerial Economics
IIBM Institute of Business Management 3
Case let 1
The war on drugs is an expensive battle, as a great deal of resources go into catching those who buy or
sell illegal drugs on the black market, prosecuting them in court, and housing them in jail. These costs
seem particularly exorbitant when dealing with the drug marijuana, as it is widely used, and is likely no
more harmful than currently legal drugs such as tobacco and alcohol. There's another cost to the war on
drugs, however, which is the revenue lost by governments who cannot collect taxes on illegal drugs. In a
recent study for the Fraser Institute, Canada, Economist Stephen T. Easton attempted to calculate how
much tax revenue the government of the country could gain by legalizing marijuana. The study estimates
that the average price of 0.5 grams (a unit) of marijuana sold for $8.60 on the street, while its cost of
production was only $1.70. In a free market, a $6.90 profit for a unit of marijuana would not last for
long. Entrepreneurs noticing the great profits to be made in the marijuana market would start their own
grow operations, increasing the supply of marijuana on the street, which would cause the street price of
the drug to fall to a level much closer to the cost of production. Of course, this doesn't happen because
the product is illegal; the prospect of jail time deters many entrepreneurs and the occasional drug bust
ensures that the supply stays relatively low. We can consider much of this $6.90 per unit of marijuana
profit a risk-premium for participating in the underground economy. Unfortunately, this risk premium is
making a lot of criminals, many of whom have ties to organized crime, very wealthy. Stephen T. Easton
argues that if marijuana was legalized, we could transfer these excess profits caused by the risk premium
from these grow operations to the government: If we substitute a tax on marijuana cigarettes equal to the
difference between the local production cost and the street price people currently pay – that is, transfer
the revenue from the current producers and marketers (many of whom work with organized crime) to the
government, leaving all other marketing and transportation issues aside we would have revenue of (say)
$7 per [unit]. If you could collect on every cigarette and ignore the transportation, marketing, and
advertising costs, this comes to over $2 billion on Canadian sales and substantially more from an export
tax, and you forego the costs of enforcement and deploy your policing assets elsewhere. One interesting
thing to note from such a scheme is that the street price of marijuana stays exactly the same, so the
quantity demanded should remain the same as the price is unchanged. However, it's quite likely that the
demand for marijuana would change from legalization. We saw that there was a risk in selling
marijuana, but since drug laws often target both the buyer and the seller, there is also a risk (albeit
smaller) to the consumer interested in buying marijuana. Legalization would eliminate this risk, causing
the demand to rise. This is a mixed bag from a public policy standpoint: Increased marijuana use can
have ill effects on the health of the population but the increased sales bring in more revenue for the
government. However, if legalized, governments can control how much marijuana is consumed by
increasing or decreasing the taxes on the product. There is a limit to this, however, as setting taxes too
high will cause marijuana growers to sell on the black market to avoid excessive taxation. When
considering legalizing marijuana, there are many economic, health, and social issues we must analyze.
One economic study will not be the basis of Canada's public policy decisions, but Easton's research does
conclusively show that there are economic benefits in the legalization of marijuana. With governments
scrambling to find new sources of revenue to pay for important social objectives such as health care and
education expect to see the idea raised in Parliament sooner rather than later.
Questions:
1. Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case
above.
2. On the basis of the analysis of the case above, what is your opinion about legalizing marijuana in
Canada?
Examination Paper of Managerial Economics
IIBM Institute of Business Management 4
Case let 2
Case 1: The Stock Market
The stock market is very close to a perfect competitive market. The price of a stock usually is
determined by the market forces of demand and supply of the stock and individual buyers and sellers of
the stock have little effect on price (they are price-takers). Resources are mobile as stock is bought and
sold frequently. Information about prices and quantities is readily available. Funds flow into stocks and
resources flow into uses in which the rate of return. Thus stock prices provide the signal for efficient
allocation of investment in the economy. However, imperfections occur here also though the stock
market is very close to a perfect competition, for example, sale of huge amount of stocks by a large
corporation will certainly affect (depress) the price of its stocks.
Question
1. Find out the characteristic of National Stock Exchange.
END OF SECTION B
Section C: Applied Theory (30 marks)
 This section consists of Applied Theory Questions.
 Answer all the questions.
 Each question carries 15 marks.
 Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. What do you understand by Monitory Policy? Discuss roles and functions of RBI.
2. What is the concept of law of demand? Discuss Elasticity of Demand in detail.
END OF SECTION C
S-2-250613

Friday 12 July 2019

GENERAL MANAGEMENT IIBMS ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558

GENERAL MANAGEMENT IIBMS ONGOING EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558
CONTACT:
DR. PRASANTH BE BBA MBA PH.D. MOBILE / WHATSAPP: +91 9924764558 OR +91 9447965521 EMAIL: prasanththampi1975@gmail.com WEBSITE: www.casestudyandprojectreports.com
  General Management
                                 Marks - 100

Attempt Any Four Case Study

CASE – 1 Your Job and Your Passion—You Can Pursue Both!

The 21st century offers many challenges to every one of us. As more firms go global, as more economies interconnect, and as the Web blasts away boundaries to communication, we become more informed citizens. This interconnectedness means that the organizations you work for will require you to develop both general and specialized knowledge—such as speaking multiple languages, using various software applications, or understanding details of financial transactions. You will have to develop general management skills to foster your ability to be self-reliant and thrive in a changing market-place. And here’s the exciting part: As you build both types of knowledge, you may be able to integrate your growing expertise with the causes or activities you care most about. Or, your career adventure may lead you to a new passion.
Former presidents George H. W. Bush and Bill Clinton are well known for combining their management skills—running a country—with their passion for helping people around the world. Together they have raised funds to assist disaster victims, those with HIV/AIDS, and others in need. Jake Burton turned his love of snow sports into an entire industry when he founded Burton Snowboards. Annie Withey poured her business and marketing knowledge into her two famous business ventures: Smartfood and Annie’s Homegrown. Both products were the result of her passion for healthful foods made from organic ingredients.
As you enter the workforce, you may have no idea where your career path will lead. You may be asking yourself, “How will I fit in?” “Where will I live?” “How much will I earn?” “Where will my business and personal careers evolve as the world continuous to change at such a fast pace?” If you are feeling nervous because you don’t know the answers to these questions yet, relax. A career is a journey, not a single destination. You may have one type of career or several. It is likely you will work for several organisations, or you may run one or more businesses of your own.
As you ask yourself what you want to do and where you want to be, take a few minutes to review the chapter and its main topics. Think about your personality, what you like and dislike, what you know and what you want to learn, what you fear and what you dream. Then try the following exercise.

Questions

Create a three-column chart in which the first column lists nonmanagement skills you have. Are you good at travel? Do you know how to build furniture? Are you a whiz at sports statistics? Are you an innovative cook? Do you play video games for hours? In the second column, list the causes or activities about which you are passionate. These may dovetail with the first list, but they might not.
Once you have you two columns complete, draw lines between entries that seem compatible. If you are good at building furniture, you might have also listed a concern about families who are homeless. Remember that not all entries will find a match—the idea is to begin finding some connections.
In the third column, generate a list of firms or organizations you know about that reflect your interests. If you are good at building furniture, you might be interested working for the Habitat for Humanity organization, or you might find yourself gravitating towards a furniture retailer like Ikea or Ethan Allen. You can do further research on organizations via Internet or business publications.

CASE – 2 Biyani – Pioneering a Retailing Revolution in India

“I use people as hands and legs. I prefer to do thinking around here.”

─ Kishore Biyani, CEO & MD, Pantaloon Retail (India) Ltd.

Kishore Biyani (Biyani), CEO& MD of Pantaloon Retail (India) Ltd., planned to have 30 Food Bazaar outlets, 22 outlets in Big Bazaar, 21 Pantaloons outlets, and four seamless malls under the Central logo, by the end of 2005. He also planned to launch at least three businesses every year and had already selected music, footwear and car accessories as his next areas of investments. He was already the top retailer in India followed by Raghu Pillai of RPG. As of 2004, Biyani headed a company that had a turnover of Rs 6,500 million and operated 13 Pantaloon apparel stores, 9 Big Bazaars, 13 Food Bazaars, and 3 seamless malls (Central), one each located in Bangalore, Hyderabad, and Pune.
Biyani’s journey from a person who looked after his family business to India’s top retailer in 1987, when he launched Manz Wear Pvt. Ltd. The company launched one of the first readymade trousers brands – ‘Pantaloon’ – in the country. The company also launched its first jeans brand called ‘Bare’ in 1989. On September 20, 1991, Manz Wear Pvt. Ltd. went public and on September 25, 1992, it changed its name to Pantaloon Fashions (India) Limited (PFIL). ‘John Miller’ was the first formal shirt brand from PFIL.
The company opened its first apparel stores, called ‘Pantaloons’ at Kolkata in August 1997. The stores generated Rs 70 million. Biyani then realized the potential of the Indian market and started to aggressively tap it. Accordingly, Biyani decided to expand into other segments of retailing besides apparel. To reflect this change in focus, the company changed its name to Pantaloon Retail (India) Limited (PRIL) in July 1999 and set itself a target of achieving Rs 10 billion in sales by June 2005. In course of time he launched three other retail formats -- Big Bazaar, Food Bazaar, and Central.
Biyani didn’t believe in copying ideas from western retailers. He was critical of his peers who felt just copied ideas form the west without making any effort to mold them to Indian conditions. He ensured that his store formats such as Big Bazaar, Food Bazaar, and Pantaloons were all suited to the purchasing style of Indian consumers.
Biyani was a huge risk taker and his planning was always different from the conventional way of doing business. This was also one of the factors that had prompted Biyani to move away from his father’s conventional way of doing business. During the initial stages of his success, his risk-taking attitude sometimes had the effect of turning away financiers. The biggest risk that Biyani took was in opening Big Bazaar in Mumbai in 2001. The company needed money to expand Big Bazaar’s operations. However, it had profits of only Rs 40 million with a low share price at eighteen rupees. Therefore, Biyani could not raise money through equity. In light of this situation, Biyani took a loan of Rs 1,200 million from ICICI for launching the operations of Big Bazaar, which increased his debt exposure. However, Big Bazaar proved to be a resounding success with 100,000 customer visits in its first week of operations. According to analysts, if Big Bazaar had failed, Biyani would have landed in a severe debt crisis. The success of Big Bazaar not only increased the company profits, it also changed the perception of investors.
Many people criticized Biyani for not delegating authority and Biyani himself accepted the criticism. He said, “I use people as hands and legs. I prefer to do the thinking around here.” He preferred taking individual decision on activities like strategic planning, ideas for other ventures, and other important issues. It was because of this that managers like Kush Medhora of Westside were initially apprehensive about joining Biyani’s business. However, Biyani changed his attitude gradually with the launch of Big Bazaar, Food Bazaar, and Central and appointed different people for managing different business units.
Biyani believed in leading a simple life and in being simply dressed. His vision came from his diverse reading connected to retailing and other areas. He made it a point to visit each of his stores across the country. He aimed to spend at least seven hours a week at the stores. In the stores, he would stand at a corner and observe people. He also walked on streets, met common people, and talked to local leaders to plan and put up new products in his stores. Each of his stores was set with a weekly target, which was reviewed every Monday. Whenever a new store was opened, the details of its operations during the first 45 days were to be sent to him. Sometimes, he suggested remedies to some problems. Biyani believed in extensive advertising to make more people know about the product. His decision making was quick and devoid of unnecessary delays. Biyani was also a good learner and learned quickly from his mistakes. He planned to improve inventory management through responding effectively to the demands of the customers rather than forecasting them, as he felt that forecasting would pile up the inventory in this dynamic market.

Questions

The tremendous success of the ‘Pantaloons’, ‘Big Bazaar’ and ‘Food Bazaar’ retailing formats, easily made PRIL the number one retailer in India by early 2004, in terms of turnover and retail area occupied by its outlets. Explain how Biyani is further planning to consolidate his businesses.
“Our striving toward looking at the Indian market differently and strategizing with the evolving customer helped us perform better.” What other qualities of Kishore Biyani do you think were instrumental in making him top retailer of India?

CASE – 3 The New Frontier for Fresh Foods Supermarkets

Fresh Foods Supermarket is a grocery store chain that was established in the Southeast 20 years ago. The company is now beginning to expand to other regions of the United States. First, the firm opened new stores along the eastern seaboard, gradually working its way up through Maryland and Washington, DC, then through New York and New jersey, and on into Connecticut and Massachusetts. It has yet to reach the northern New England states, but executives have decided to turn their attention to the Southwest, particularly because of the growth of population there.
Vivian Noble, the manager of one of the chain’s most successful stores in the Atlanta area, has been asked to relocate to Phoenix, Arizona, to open and run a new Fresh Foods Supermarket. She has decided to accept the job, but she knows it will be a challenge. As an African American woman, she has faced some prejudice during her career, but she refuses to be stopped by a glass ceiling or any other barrier. She understands that she will be living and working in an area where several cultures combine and collide, and she will be hiring and managing a diverse workforce. Noble has the support of top management at Fresh Foods, which wants the store to reflect the surrounding community—in both staff makeup and product selection. So she will be looking to hire employees with Hispanic and Native American roots, as well as older workers who can relate to the many retired residents in the area. And she will be seeking their inputs on the selection of certain food products, including ethnic brands, so that customers know they can buy what they need and want a Fresh Foods.
In addition, Noble wants to make sure that Fresh Foods provides services above and beyond those of a standard supermarket to attract local consumers. For instance, she wants the store to offer free delivery of groceries to home-bound customers who are either senior citizens or physically disabled. She wants to be sure that the store has enough bilingual employees to translate for and otherwise assist customers who speak little or no English. Noble believes that she is a pioneer of sorts, guiding Fresh Foods Supermarkets into a new frontier. “The sky is almost blue here,” she says of her new home state. “And there’s no glass ceiling between me and the sky.”

Questions

What steps can Vivian Noble take to recruit and develop her new workforce?
What other ways can Noble help her company reach out to the community?
How will Fresh Foods Supermarkets as whole benefit from successfully moving into this new region of the country?

CASE – 4 The Law Offices of Jeter, Jackson, Guidry, and Boyer

THE EVOLUTION OF THE FIRM

David Jeter and Nate Jackson started a small general law practice in 1992 near Sacramento, California. Prior to that, the two had spent five years in the district attorney’s office after completing their formal schooling. What began as a small partnership—just the two attorneys and a paralegal/assistant—had now grown into a practice that employed more than 27 people in three separated towns. The current staff included 18 attorneys (three of whom have become partners), three paralegals, and six secretaries.
For the first time in the firm’s existence, the partners felt that they were losing control of their overall operation. The firm’s current caseload, number of employees, number of clients, travel requirements, and facilities management needs had grown far beyond anything that the original partners had ever imagined.
Attorney Jeter called a meeting of the partners to discuss the matter. Before the meeting, opinions about the pressing problems of the day and proposed solutions were sought from the entire staff. The meeting resulted in a formal decision to create a new position, general manager of operations. The partners proceeded to compose a job description and job announcement for recruiting purposes.
Highlights and responsibilities of the job description include:

Supervising day-to-day office personnel and operations (phones, meetings, word processing, mail, billings, payroll, general overhead, and maintenance).
Improving customer relations (more expeditious processing of cases and clients).
Expanding the customer base.
Enhancing relations with the local communities.
Managing the annual budget and related incentive programs.
Maintaining annual growth in sales of 10 percent while maintaining or exceeding the current profit margin.

The general manager will provide an annual executive summary to the partners, along with specific action plans for improvement and change. A search committee was formed, and two months later the new position was offered to Brad Howser, a longtime administrator from the insurance industry seeking a final career change and a return to his California roots. Howser made it clear that he was willing to make a five-year commitment to the position and would then likely retire.
Things got off to a quiet and uneventful start as Howser spent few months just getting to know the staff, observing day-today operations; and reviewing and analyzing assorted client and attorney data and history, financial spreadsheets, and so on.
About six months into the position, Howser became more outspoken and assertive with the staff and established several new operational rules and procedures. He began by changing the regular working hours. The firm previously had a flex schedule in place that allowed employees to begin and end the workday at their choosing within given parameters. Howser did not care for such a “loose schedule” and now required that all office personnel work from 9:00 to 5:00 each day. A few staff member were unhappy about this and complained to Howser, who matter-of-factly informed them that “this is the new rule that everyone is expected to follow, and anyone who could or would not comply should probably look for another job.” Sylvia Bronson, an administrative assistant who had been with the firm for several years, was particularly unhappy about this change. She arranged for a private meeting with Howser to discuss her child care circumstances and the difficulty that the new schedule presented. Howser seemed to listen half-heartedly and at one point told Bronson that “assistance are essentially a-dime-a-dozen and are readily available.” Bronson was seen leaving the office in tears that day.
Howser was not happy with the average length of time that it took to receive payments for services rendered to the firm’s clients (accounts receivable). A closer look showed that 30 percent of the clients paid their bills in 30 days or less, 60 percent paid in 30 to 60 days, and the remaining 10 percent stretched it out to as many as 120 days. Howser composed a letter that was sent to all clients whose outstanding invoices exceeded 30 days. The strongly worded letter demanded immediate payment in full and went on to indicate that legal action might be taken against anyone who did not respond in timely fashion. While a small number of “late” payments were received soon after the mailing, the firm received an even larger number of letters and phone calls from angry clients, some of whom had been with the firm since its inception.
Howser was given an advertising and promotion budget for purposes of expanding the client base. One of the paralegals suggested that those expenditures should be carefully planned and that the firm had several attorneys who knew the local markets quite well and could probably offer some insights and ideas on the subject. Howser thought about this briefly and then decided to go it alone, reasoning that most attorneys know little or nothing about marketing.
In an attempt to “bring all of the people together to form a team,” Howser established weekly staff meetings. These mandatory, hour-long sessions were run by Howser, who presented a series of overhead slides, handouts, and lectures about “some of the proven management techniques that were successful in the insurance industry.” The meetings typically ran past the allotted time frame and rarely if ever covered all of the agenda items.
Howser spent some of his time “enhancing community relations.” He was very generous with many local groups such as the historical society, the garden clubs, the recreational sports programs, the middle-and high-school band programs, and others. In less than six months he had written checks and authorized donations totaling more than $25,000. He was delighted about all this and was certain that such gestures of goodwill would pay off handsomely in the future.
As for the budget, Howser carefully reviewed each line item in search of ways to increase revenues and cut expenses. He then proceeded to increase the expected base or quota for attorney’s monthly billable hours, thus directly affecting their profit sharing and bonus program. On the other side, he significantly reduced the attorneys’ annual budget for travel, meals, and entertainment. He considered these to be frivolous and unnecessary. Howser decided that one of the two full-time administrative assistant positions in each office should be reduced to part-time with no benefits. He saw no reason why the current workload could not be completed within this model. Howser wrapped up his initial financial review and action plan by posting notices throughout each office with new rules regarding the use of copy machines, phones, and supplies.
Howser completed the first year of his tenure with the required executive summary report to the partners that included his analysis of the current status of each department and his action plan. The partners were initially impressed with both Howser’s approach to the new job and with the changes that he made. They all seemed to make sense and were directly in line with the key components of his job description. At the same time, “the office rumor mill and grape vine” had “heated up” considerably. Company morale, which had been quite high, was now clearly waning. The water coolers and hallways became the frequent meeting places of disgruntled employees.
As for the marketplace, while the partner did not expect to see an immediate influx of new clients, they certainly did not expect to see shrinkage in their existing client base. A number of individual and corporate clients took their business elsewhere, still fuming over the letter they had received.
The partners met with Howser to discuss the situation. Howser urged them to “sit tight and ride out the storm.” He had seen this happen before and had no doubt that in the long run the firm would achieve all of its goals. Howser pointed out that people in general are resistant to change. The partners met for drinks later that day and looked at each other with a great sense of uncertainty. Should they ride out the storm as Howser suggested? Had they done the right thing in creating the position and hiring Howser? What had started as a seemingly, wise, logical, and smooth sequence of events had now become a crisis.

Questions

Do you agree with Howser’s suggestion to “sit tight and ride out the storm,” or should the partners take some action immediately? If so, what actions specifically?
Assume that the creation of the GM—Operation position was a good decision. What leadership style and type of individual would you try to place in this position?
Consider your own leadership style. What types of positions and situations should you seek? What types of positions and situation should you seek to avoid? Why?

CASE – 5 The Grizzly Bear Lodge

Diane and Rudy Conrad own a small lodge outside Yellowstone National Park. Their lodge has 15 rooms that can accommodate up to 40 guests, with some rooms set up for families. Diane and Rudy serve a continental breakfast on weekdays and a full breakfast on weekends, included in the room they charge. Their busy season runs from May through September, but they remain open until Thanksgiving and reopen in April for a short spring season. They currently employ one cook and two waitpersons for the breakfasts on weekends, handling the other breakfasts themselves. They also have several housekeeping staff members, a groundkeeper, and a front-desk employee. The Conrads take pride in the efficiency of their operation, including the loyalty of their employees, which they attribute to their own form of clan control. If a guest needs something—whether it’s a breakfast catered to a special diet or an extra set of towels—Grizzly Bear workers are empowered to supply it.
The Conrads are considering expanding their business. They have been offered the opportunity to buy the property next door, which would give them the space to build an annex containing an additional 20 rooms. Currently, their annual sales total $300,000. With expenses running $230,000—including mortgage, payroll, maintenance, and so forth—the Conrads’ annual income is $70,000. They want to expand and make improvements without cutting back on the personal service they offer to their guests. In fact, in addition to hiring more staff to handle the larger facility, they are considering collaborating with more local business to offer guided rafting, fishing, hiking, and horseback riding trips. They also want to expand their food service to include dinner during the high season, which means renovating the restaurant area of the lodge and hiring more kitchen and wait staff. Ultimately, the Conrads would like the lodge to open year-round, offering guests opportunities to cross-country ski, ride snow-mobiles, or hike in winter. They hope to offer holiday packages for Thanksgiving, Christmas, and New Year’s celebrations in the great outdoors. The Conrads report that their employees are enthusiastic about their plans and want to stay with them through the expansion process. “This is our dream business,” says Rudy. “We’re only at the beginning.”
Questions

Discuss how Rudy and Diane can use feedforward, concurrent, and feedback controls both now and in future at the Grizzly Bear Lodge to ensure their guests’ satisfaction.
What might be some of the fundamental budgetary considerations the Conrads would have as they plan the expansion of their logic?
Describe how the Conrads could use market controls plans and implement their expansion

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CONTACT:

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Attempt Any Four Case Study

Case 1: Zip Zap Zoom Car Company

Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment. It was set up 15 years back and since its establishment it has seen a phenomenal growth in both its market and profitability. Its financial statements are shown in Exhibits 1 and 2 respectively.

The company enjoys the confidence of its shareholders who have been rewarded with growing dividends year after year. Last year, the company had announced 20 per cent dividend, which was the highest in the automobile sector. The company has never defaulted on its loan payments and enjoys a favorable face with its lenders, which include financial institutions, commercial banks and debenture holders.

The competition in the car industry has increased in the past few years and the company foresees further intensification of competition with the entry of several foreign car manufactures many of them being market leaders in their respective countries. The small car segment especially, will witness entry of foreign majors in the near future, with latest technology being offered to the Indian customer. The Zip Zap Zoom’s senior management realizes the need for large scale investment in up gradation of technology and improvement of manufacturing facilities to pre-empt competition.

Whereas on the one hand, the competition in the car industry has been intensifying, on the other hand, there has been a slowdown in the Indian economy, which has not only reduced the demand for cars, but has also led to adoption of price cutting strategies by various car manufactures. The industry indicators predict that the economy is gradually slipping into recession.

Exhibit 1 Balance sheet as at March 31,200 x

(Amount in Rs. Crore)

Source of Funds

Share capital 350

Reserves and surplus 250 600

Loans :

Debentures (@ 14%) 50

Institutional borrowing (@ 10%) 100

Commercial loans (@ 12%) 250

Total debt 400

Current liabilities 200

1,200

Application of Funds

Fixed Assets

Gross block 1,000

Less : Depreciation 250

Net block 750

Capital WIP 190

Total Fixed Assets 940

Current assets :

Inventory 200

Sundry debtors 40

Cash and bank balance 10

Other current assets 10

Total current assets 260

-1200

Exhibit 2 Profit and Loss Account for the year ended March 31, 200x

(Amount in Rs. Crore)

Sales revenue (80,000 units x Rs. 2,50,000) 2,000.0

Operating expenditure :

Variable cost :

Raw material and manufacturing expenses 1,300.0

Variable overheads 100.0

Total 1,400.0

Fixed cost :

R & D 20.0

Marketing and advertising 25.0

Depreciation 250.0

Personnel 70.0

Total 365.0

Total operating expenditure 1,765.0

Operating profits (EBIT) 235.0

Financial expense :

Interest on debentures 7.7

Interest on institutional borrowings 11.0

Interest on commercial loan 33.0 51.7

Earnings before tax (EBT) 183.3

Tax (@ 35%) 64.2

Earnings after tax (EAT) 119.1

Dividends 70.0

Debt redemption (sinking fund obligation)** 40.0

Contribution to reserves and surplus 9.1

* Includes the cost of inventory and work in process (W.P) which is dependent on demand (sales).

** The loans have to be retired in the next ten years and the firm redeems Rs. 40 crore every year.

The company is faced with the problem of deciding how much to invest in up

gradation of its plans and technology. Capital investment up to a maximum of Rs. 100

crore is required. The problem areas are three-fold.

The company cannot forgo the capital investment as that could lead to reduction in its market share as technological competence in this industry is a must and customers would shift to manufactures providing latest in car technology.
The company does not want to issue new equity shares and its retained earning are not enough for such a large investment. Thus, the only option is raising debt.
The company wants to limit its additional debt to a level that it can service without taking undue risks. With the looming recession and uncertain market conditions, the company perceives that additional fixed obligations could become a cause of financial distress, and thus, wants to determine its additional debt capacity to meet the investment requirements.

Mr. Shortsighted, the company’s Finance Manager, is given the task of determining the additional debt that the firm can raise. He thinks that the firm can raise Rs. 100 crore worth debt and service it even in years of recession. The company can raise debt at 15 per cent from a financial institution. While working out the debt capacity. Mr. Shortsighted takes the following assumptions for the recession years.

A maximum of 10 percent reduction in sales volume will take place.
A maximum of 6 percent reduction in sales price of cars will take place.

Mr. Shorsighted prepares a projected income statement which is representative of the recession years. While doing so, he determines what he thinks are the “irreducible minimum” expenditures under

recessionary conditions. For him, risk of insolvency is the main concern while designing the capital structure. To support his view, he presents the income statement as shown in Exhibit 3.

Exhibit 3 projected Profit and Loss account

(Amount in Rs. Crore)

Sales revenue (72,000 units x Rs. 2,35,000) 1,692.0

Operating expenditure

Variable cost :

Raw material and manufacturing expenses 1,170.0

Variable overheads 90.0

Total 1,260.0

Fixed cost :

R & D ---

Marketing and advertising 15.0

Depreciation 187.5

Personnel 70.0

Total 272.5

Total operating expenditure 1,532.5

EBIT 159.5

Financial expenses :

Interest on existing Debentures 7.0

Interest on existing institutional borrowings 10.0

Interest on commercial loan 30.0

Interest on additional debt 15.0 62.0

EBT 97.5

Tax (@ 35%) 34.1

EAT 63.4

Dividends --

Debt redemption (sinking fund obligation) 50.0*

Contribution to reserves and surplus 13.4

* Rs. 40 crore (existing debt) + Rs. 10 crore (additional debt)

Assumptions of Mr. Shorsighted

R & D expenditure can be done away with till the economy picks up.
Marketing and advertising expenditure can be reduced by 40 per cent.
Keeping in mind the investor confidence that the company enjoys, he feels that the company can forgo paying dividends in the recession period.

He goes with his worked out statement to the Director Finance, Mr. Arthashatra, and advocates raising Rs. 100 crore of debt to finance the intended capital investment. Mr. Arthashatra does not feel comfortable with the statements and calls for the company’s financial analyst, Mr. Longsighted.

Mr. Longsighted carefully analyses Mr. Shortsighted’s assumptions and points out that insolvency should not be the sole criterion while determining the debt capacity of the firm. He points out the following :

Apart from debt servicing, there are certain expenditures like those on R & D and marketing that need to be continued to ensure the long-term health of the firm.
Certain management policies like those relating to dividend payout, send out important signals to the investors. The Zip Zap Zoom’s management has been paying regular dividends and discontinuing this practice (even though just for the recession phase) could raise serious doubts in the investor’s mind about the health of the firm. The firm should pay at least 10 per cent dividend in the recession years.
Mr. Shortsighted has used the accounting profits to determine the amount available each year for servicing the debt obligations. This does not give the true picture. Net cash inflows should be used to determine the amount available for servicing the debt.
Net Cash inflows are determined by an interplay of many variables and such a simplistic view should not be taken while determining the cash flows in recession. It is not possible to accurately predict the fall in any of the factors such as sales volume, sales price, marketing expenditure and so on. Probability distribution of variation of each of the factors that affect net cash inflow should be analyzed. From this analysis, the probability distribution of variation in net cash inflow should be analysed (the net cash inflows follow a normal probability distribution). This will give a true picture of how the company’s cash flows will behave in recession conditions.

The management recognizes that the alternative suggested by Mr. Longsighted rests on data, which are complex and require expenditure of time and effort to obtain and interpret. Considering the importance of capital structure design, the Finance Director asks Mr. Longsighted to carry out his analysis. Information on the behaviour of cash flows during the recession periods is taken into account.

The methodology undertaken is as follows :

Important factors that affect cash flows (especially contraction of cash flows), like sales volume, sales price, raw materials expenditure, and so on, are identified and the analysis is carried out in terms of cash receipts and cash expenditures.

Each factor’s behaviour (variation behaviour) in adverse conditions in the past is studied and future expectations are combined with past data, to describe limits (maximum favourable), most probable and maximum adverse) for all the factors.
Once this information is generated for all the factors affecting the cash flows, Mr. Longsighted comes up with a range of estimates of the cash flow in future recession periods based on all possible combinations of the several factors. He also estimates the probability of occurrence of each estimate of cash flow.

Assuming a normal distribution of the expected behaviour, the mean expected

value of net cash inflow in adverse conditions came out to be Rs. 220.27 crore with standard deviation of Rs. 110 crore.

Keeping in mind the looming recession and the uncertainty of the recession behaviour, Mr. Arthashastra feels that the firm should factor a risk of cash inadequacy of around 5 per cent even in the most adverse industry conditions. Thus, the firm should take up only that amount of additional debt that it can service 95 per cent of the times, while maintaining cash adequacy.

To maintain an annual dividend of 10 per cent, an additional Rs. 35 crore has to be kept aside. Hence, the expected available net cash inflow is Rs. 185.27 crore (i.e. Rs. 220.27 – Rs. 35 crore)

Question:

Analyse the debt capacity of the company.

CASE – 2 GREAVES LIMITED

Started as trading firm in 1922, Greaves Limited has diversified into manufacturing and marketing of high technology engineering products and systems. The company’s mission is “manufacture and market a wide range of high quality products, services and systems of world class technology to the total satisfaction of customers in domestic and overseas market.”

Over the years Greaves has brought to India state of the art technologies in various engineering fields by setting up manufacturing units and subsidiary and associate companies. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. The sales of Greaves Limited has increased from Rs 214 crore in 1990 to Rs 801 crore in 1997. Profits before interest and tax (PBIT) of the company increased from Rs 15 crore to Rs 83 crore in 1997. The market price of the company’s share has shown ups and downs during 1990 to 1997. How has the company performed? The following question need answer to fully understand the performance of the company:

Exhibit 1

GREAVES LTD. Profit and Loss Account ending on 31 March (Rupees in crore)
	1990	1991	1992	1993	1994	1995	1996	1997
Sales Raw Material and Stores Wages and Salaries Power and fuel Other Mfg. Expenses Other Expenses Depreciation Marketing and Distribution Change in stock	214.38 170.67 13.54 0.52 0.61 11.85 1.85 4.86 1.18	253.10 202.84 15.60 0.70 0.49 15.48 1.72 5.67 3.10	287.81 230.81 18.03 1.11 0.88 16.35 1.52 5.14 4.93	311.14 213.79 37.04 3.80 2.37 25.54 4.62 5.17 0.48	354.25 245.63 37.96 4.43 2.36 31.60 5.99 9.67 - 1.13	521.56 379.83 48.24 6.66 3.57 41.40 8.53 10.81 5.63	728.15 543.56 60.48 7.70 4.84 45.74 9.30 12.44 11.86	801.11 564.35 69.66 9.23 5.49 48.64 11.53 16.98 - 5.87
Total Op Expenses	202.72	239.40	268.91	291.85	338.77	493.41	672.20	731.75
Operating Profit Other Income Non-recurring Income	11.61 2.14 1.30	13.70 3.69 2.28	18.90 4.97 0.10	19.29 4.24 10.98	15.48 7.72 16.44	28.15 14.35 0.46	55.95 11.35 0.52	69.36 13.08 1.75
PBIT	15.10	19.67	23.97	34.51	39.64	42.98	65.67	82.64
Interest	5.56	6.77	11.92	19.62	17.17	21.48	28.25	27.54
PBT	9.54	12.90	12.05	14.89	22.47	21.50	37.42	55.10
Tax PAT Dividend Retained Earnings	3.00 6.54 1.80 4.74	3.60 9.30 2.00 7.30	4.90 7.15 2.30 4.85	0.00 14.89 4.06 10.83	4.00 18.47 7.29 11.18	7.00 14.50 8.58 5.92	8.60 28.82 12.85 15.97	15.80 39.30 14.18 25.12

Exhibit 2

GREAVES LTD. Balance Sheet (Rupees in crore)
	1990	1991	1992	1993	1994	1995	1996	1997
ASSETS Land and Building Plant and Machinery Other Fixed Assets Capital WIP Gross Fixed Assets Less: Accu. Depreciation Net Tangible Fixed Assets Intangible Fixed Assets	3.88 11.98 3.64 0.09 19.59 12.91 6.68 0.21	4.22 12.68 4.14 0.26 21.30 14.56 6.74 0.19	4.96 12.98 4.38 10.25 23.57 15.79 7.78 0.05	21.70 33.49 5.18 11.27 71.64 19.84 51.80 4.40	30.82 50.78 6.95 34.84 123.39 25.74 97.65 22.03	39.71 75.34 8.53 14.37 137.95 33.90 104.05 22.45	42.34 92.49 8.87 13.92 157.62 42.56 115.06 20.04	43.07 104.45 10.35 14.36 172.23 53.87 118.86 21.11
Net Fixed Assets	6.89	6.93	7.83	56.20	119.68	126.50	135.10	139.97
Raw Materials Finished Goods Inventory Accounts Receivable Other Receivable Investments Cash and Bank Balance Current Assets Total Assets LIABILITIES AND CAPITAL Equity Capital Preference Capital Reserves and Surplus	5.26 29.37 34.63 38.16 32.62 3.55 8.36 117.32 124.21 9.86 0.20 27.60	6.91 33.72 40.63 53.24 40.47 14.95 8.91 158.20 165.13 9.86 0.20 32.57	7.26 38.65 45.91 67.97 49.19 15.15 12.71 190.93 198.76 9.86 0.20 37.42	21.05 53.39 74.44 93.30 24.54 27.58 13.29 233.15 289.35 18.84 0.20 100.35	28.13 52.26 80.39 122.20 59.12 73.50 18.38 353.59 473.27 29.37 0.20 171.03	44.03 58.09 102.12 133.45 64.32 75.01 30.08 404.98 531.48 29.44 0.20 176.88	53.62 69.97 123.59 141.82 76.57 75.07 33.46 450.51 585.61 44.20 0.20 175.41	50.94 64.09 115.03 179.92 107.31 76.45 48.18 526.89 666.86 44.20 0.20 198.79
Net Worth	37.66	42.63	47.48	119.39	200.60	206.52	219.81	243.19
Bank Borrowings Institutional Borrowings Debentures Fixed Deposits Commercial Paper Other Borrowings Current Portion of LT Debt	14.81 4.13 4.77 12.31 0.00 2.33 0.00	19.45 3.43 16.57 14.45 0.00 3.22 0.00	26.51 9.17 19.99 15.03 0.00 3.10 0.08	24.82 38.09 4.56 14.08 0.00 3.18 0.12	55.12 38.76 4.37 15.57 15.00 17.08 15.08	64.97 69.69 4.37 17.75 0.00 1.97 0.02	70.08 89.26 2.92 20.81 0.00 2.36 1.49	118.28 63.60 1.49 19.29 0.00 2.57 1.57
Borrowings	38.35	57.12	73.72	84.61	130.82	158.73	183.94	203.66
Sundry Creditors Other Liabilities Provision for tax, etc. Proposed Dividends Current Portion of LT Dept	37.52 5.70 3.18 1.80 0.00	49.40 10.16 3.82 2.00 0.00	59.34 10.70 5.14 2.30 0.08	77.27 3.59 0.31 4.06 0.12	113.66 1.42 4.40 7.29 15.08	148.13 1.99 7.70 8.58 0.02	153.63 1.70 12.19 12.85 1.49	179.79 3.04 21.43 14.18 1.57
Current Liabilities	48.20	65.38	77.56	85.35	141.85	166.42	181.86	220.01
TOTAL LIABILITIES Additional information: Share premium reserve Revaluation reserve Bonus equity capital	124.21 8.51	165.13 8.51	198.76 8.51	289.35 47.69 8.91 8.51	473.27 107.40 8.70 8.51	531.67 107.91 8.50 8.51	585.61 93.35 8.31 23.25	666.86 93.35 8.15 23.25

Exhibit 3

GREAVES LTD. Share Price Data
	1990	1991	1992	1993	1994	1995	1996	1997
Closing share price (Rs) Yearly high share price (Rs) Yearly low share price (Rs) Market capitalization (Rs crore EPS (Rs) Book value (Rs)	27.19 29.25 26.78 65.06 4.79 35.64	34.74 45.28 21.61 67.77 6.82 37.22	121.27 121.27 34.36 236.56 9.73 42.54	66.67 126.33 48.34 274.84 1.93 57.75	78.34 90.00 42.67 346.35 2.66 40.61	71.67 100.01 68.34 316.87 7.16 64.98	47.5 90.00 45.00 210.02 5.03 45.35	48.25 85.00 43.75 213.34 9.01 50.73

Questions

How profitable are its operations? What are the trends in it? How has growth affected the profitability of the company?
What factors have contributed to the operating performance of Greaves Limited? What is the role of profitability margin, asset utilisation, and non-operating income?
How has Greaves performed in terms of return on equity? What is the contribution of return on investment, the way of the business has been financed over the period?

CASE – 3 CHOOSING BETWEEN PROJECTS IN ABC COMPANY

ABC Company, has three projects to choose from. The Finance Manager, the operations manager are discussing and they are not able to come to a proper decision. Then they are meeting a consultant to get proper advice. As a consultant, what advice you will give?

The cash flows are as follows. All amounts are in lakhs of Rupees.

Project 1:

Duration 5 Years

Beginning cash outflow = Rs. 100

Cash inflows (at the end of the year)

Yr. 1 – Rs 30; Yr. 2 – Rs 30; Yr. 3 – Rs 30; Yr.4 – 10; Yr.5 – 10

Project 2:

Duration 5 Years

Beginning Cash outflow Rs. 3763

Cash inflows (at the end of the year)

Yr. 1 – 200; Yr. 2 – 600; Yr. 3 – 1000; Yr. 4 – 1000; Yr. 5 – 2000.

Project 3:

Duration 15 Years

Beginning Cash Outflow – Rs. 100

Cash Inflows (at the end of the year)

Yrs. 1 to 10 – Rs. 20 (for 10 continuous years)

Yrs. 11 to 15 – Rs. 10 (For the next 5 years)

Question:

If the cost of capital is 8%, which of the 3 projects should the ABC Company accept?

CASE – 4 STAR ENGINEERING COMPANY

Star Engineering Company (SEC) produces electrical accessories like meters, transformers, switchgears, and automobile accessories like taximeters and speedometers.

SEC buys the electrical components, but manufactures all mechanical parts within its factory which is divided into four production departments Machining, Fabrication, Assembly, and Painting—and three service departments—Stores, Maintenance, and Works Office.

Though the company prepared annual budgets and monthly financial statements, it had no formal cost accounting system. Prices were fixed on the basis of what the market can bear. Inventory of finished stocks was valued at 90 per cent of the market price assuming a profit margin of 10 per cent.

In March, the company received a trial order from a government department for a sample transformer on a cost-plus-fixed-fee basis. They took up the job (numbered by the company as Job No 879) in early April and completed all manufacturing operations before the end of the month.

Since Job No 879 was very different from the type of transformers they had manufactured in the past, the company did not have a comparable market price for the product. The purchasing officer of the government department asked SEC to submit a detailed cost sheet for the job giving as much details as possible regarding material, labour and overhead costs.

SEC, as part of its routine financial accounting system, had collected the actual expenses for the month of April, by 5th of May. Some of the relevant data are given in Exhibit A.

The company tried to assign directly, as many expenses as possible to the production departments. However, It was not possible in all cases. In many cases, an overhead cost, which was common to all departments had to be allocated to the various departments using some rational basis. Some of the possible bases were collected by SEC’s accountant. These are presented in Exhibit B.

He also designed a format to allocate the overhead to all the production and service departments. It was realized that the expenses of the service departments on some rational basis. The accountant thought of distributing the service departments’ costs on the following basis:

Works office costs on the basis of direct labour hours.
Maintenance costs on the basis of book value of plant and machinery.
Stores department costs on the basis of direct and indirect materials used.

The accountant who had to visit the company’s banker, passed on the papers to you for the required analysis and cost computations.

REQUIRED

Based on the data given in Exhibits A and B, you are required to:

Complete the attached “overhead cost distribution sheet” (Exhibit C).
Note: Wherever possible, identify the overhead costs chared directly to the production and service departments. If such direct identification is not possible, distribute the costs on some “rational basis.
Calculate the overhead cost (per direct labour hour) for each of the four producing departments. This should include share of the service departments’ costs.
Do you agree with:
a. The procedure adopted by the company for the distribution of overhead costs?
b. The choice of the base for overhead absorption, i.e. labour-hour rate?

Exhibit A

STAR ENGINEERING COMPANY
Actual Expenses(Manufacturing Overheads) for April

Indirect Labour and Supervisions:
Machining
Fabrication
Assembly
Painting
Stores
Maintenance

Indirect Materials and Supplies
Machining
Fabrication
Assembly
Painting
Maintenance

Others
Factory Rent
Depreciation of Plant and Machinery
Building Rates and Taxes
Welfare Expenses
(At 2 per cent of direct labour wages and Indirect labour and supervision)
Power
(Maintenance—Rs 366; Works Office Rs 2,200, Balance to Producing Departments)
Works Office Salaries and Expenses
Miscellaneous Stores Department Expenses

33,000
22,000
11,000
7,000
44,000
32,700

2,200
1,100
3,300
3,400
2,800

1,68,000
44,000
2,400
19,400

68,586

1,30,260
1,190

1,49,700

12,800

4,33,930

5,96,930

Exhibit B

STAR ENGINEERING COMPANY Projected Operation Data for the Year
Department	Area (sq.m)	Original Book of Plant & Machinery Rs	Direct Materials Budget Rs	Horse Power Rating	Direct Labour Hours	Direct Labour Budget Rs
Machining Fabrication Assembly Painting Stores Maintenance Works Office Total	13,000 11,000 8,800 6,400 4,400 2,200 2,200 48,000	26,40,000 13,20,000 6,60,000 2,64,000 1,32,000 1,98,000 68,000 52,80,000	62,40,000 21,60,000 10,80,000 94,80,000	20,000 10,000 1,000 2,000 33,000	14,40,000 5,28,000 7,20,000 3,30,000 30,18,000	52,80,000 25,40,000 13,20,000 6,60,000 99,00,000

Note

The estimates given in this exhibit are for the budgeted year January to December where as the actuals in Exhibit A are just one month—April of the budgeted year.

Exhibit C STAR ENGINEERING COMPANY Actual Overhead Distribution Sheet for April
Departments Overhead Costs	Production Departments				Service Departments	Total Amount Actuals for April (Rs)	Basis for Distribution
Departments Overhead Costs						Total Amount Actuals for April (Rs)	Basis for Distribution
A. Allocation of Overhead to all departments A.1 Indirect Labour and Supervision						1,49,700
A.2 Indirect materials and supplies						12,800
A.3 Factory Rent						1,68,000
A.4 Depreciation of Plant and Machinery						44,000
A.5 Building Rates and Taxes						2,400
A.6 Welfare Expenses						19,494
A.7 Power						68,586
A.8 Works Office Salaries and Expenses						1,30,260
A.9 Miscellaneous Stores Expenses						1,190
A. Total (A.1 to A.9)						5,96,430
B. Reallocation of Service Departments Costs to Production Departments
B.1 Distribution of Works Office Costs
B.2 Distribution of Maintenance Department’s Costs
B.3 Distribution of Stores Department’s Costs
Total Charged to Producing C. Departments (A+B)						5,96,430
D. Labour Hours Actuals for April	1,20,000	44,000	60,000	27,500
E. Overhead Rate/Per Hour (D)

Case 5: EASTERN MACHINES COMPANY

Raj, who was in charge production felt that there are many problems to be attended to. But Quality Control was the main problem, he thought, as he found there were more complaints and litigations as compared to last year. With the demand increasing, he does not want to take any chances.

So he went down to assembly line, but was greeted by an unfamiliar face. He introduced himself.

Raj: I am in charge of checking the components, which we use, when we assemble the machines for customers. For most of the components, suppliers are very reliable and we assume that there will not be any problem. When we generally test the end product, we don’t have failures.

Namdeo: I am Namdeo. I was in another dept. and has been transferred recently to this dept.

Raj: Recently we have been having problems, and there has been some complaint or other about the machines we have supplied. I am worried and would like to check the components used. I would like to avoid lot of expensive rework.

Namdeo: But it would be very expensive to test every one of them. It will take at least half an hour for each machine. I neither have the staff nor the time. It will be rather pointless as majority of them will pass the test.

Raj: There has been more demand than supply for these machines in last 2 years. We have been buying many components from many suppliers. We have been producing more with extra shifts. We are trying to capture the market and increase our market share.

Namdeo: We order for components from different places, and sometimes we do not have time to check all. There is a time lag between order and supply of components, and we cannot wait as production will stop. We use whatever comes soon as we want to complete our orders.

Raj: Oh! Obviously we need some kind of checking. Some sampling technique to check the quality of the components. We need to get a sample from each shipment from our component suppliers. But I do not know how many we should test.

Namdeo: We should ask somebody from our statistics dept. to attend to this problem.

As a Statistician, advice what kind of Sampling schemes can we consider, and what factors will influence choice of scheme. What are the questions we should ask Mr. Namdeo, who works in the assembly line?