UGC NET Paper 2: Management 4th Dec 2019 Shift 2 (Previous Year Paper)

The correct answer is (a) - (iv), (b) - (iii), (c) - (ii), (d) - (i). 

International Trade: 

• International trade is the purchase and sale of goods and services by companies in different countries.
• Consumer goods, raw materials, food, and machinery all are bought and sold in the international marketplace.
• International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically.
• As a result of international trade, the market is more competitive.

Important Points

Hence , the correct answer is (a) - (iv), (b) - (iii), (c) - (ii), (d) - (i).

Key Points

Multi-National Company:

• A company is considered a multinational corporation if it conducts business in at least one nation other than its own or produces at least 25% of its revenue outside of its home nation.
• There are many companies that start their operations in different countries However, it always involves risk.

Important Points

Modes of Entry for an MNC:

Branch office

• A mode of expanding a business to various cities or nations.
• A branch office is a branch of a business established at a different location.
• It is not a distinct legal entity from the main office of the organization.
• For instance, Bank of America has a branch in Canada.
• Less risky as already established business and opening its branch only.

Co-operative joint venture

• A cooperative joint venture is an agreement between two or more businesses to work together, frequently to launch a new commercial endeavour.
• In a cooperative venture, the partners may conduct their business as distinct legal entities.
• And bear liabilities independently.

Equity joint venture

• A deal between two businesses to collaborate on a new business venture is known as an equity joint venture.
• An EJV has a distinct limited liability company.
• This limits the legal liability of each partner and the company. Depending on their proportion of equity participation in the joint venture, each partner shares in profits and losses.
• The risk involved as partners shares limited liability in case of losses.

Portfolio investment

• Holding financial assets from a nation other than the investor's own is referred to as a foreign portfolio investment.
• Very risky as investors do not directly own any real estate or a stake in that business.
• Chances of losing money due to currency fluctuations

Wholly-owned subsidiary

• Business activity in another nation that a company entirely owns is known as a totally owned subsidiary.
• In a "greenfield" project, the company builds the complete operation from scratch, it can create a wholly-owned subsidiary.
• It is very risky as business needs to start totally new projection in other countries and needs to study all rules and regulations of other nations.

Hence, the correct answer is (b), (a), (e), (c), and (d).

Key Points

Culture

• Culture is derived from the Latin word which means to cultivate.
• Culture is that intricate system that consists of all of the skills and routines that a person develops as a member of a community, including knowledge, belief, morals, and custom.

There are four predispositions toward doing things in specific way:

1. Ethnocentricism
2. Polycentricism
3. Regiocentricism
4. Geocentricism

Important Points

• Ethnocentricism: Nationalistic management concept that prioritises the values and interests of the parent firm while making strategic decisions.
• Polycentricism: A management philosophy that bases strategic choices on the cultures of the nations where an MNCs work.
• Regiocentricism: A management style whereby the company attempts to regionally align its own interests with those of its subsidiary.
• Geocentricism: A management philosophy whereby the business attempts to include a global systems approach to decision-making.

Hence, the correct sequence is (d) Ethnocentricism, (c) Polycentricism, (a) Regiocentricism and (b) Geocentricism.

The correct answer is Prospecting, pre-approach, approach, presentation, overcoming objections, closing, follow-up.

Personal Selling:

• Personal selling is a promotional method by which the salesperson uses his or her skills and abilities in an attempt to make a sale.
• Personal selling is a face-to-face selling technique by which a salesperson uses his or her interpersonal skills to persuade a customer in buying a particular product.

Key Points

• Prospecting: The first step is to identify potential customers. Marketers can identify prospects through emails, websites, or other referral sources.
• Pre-Approach: The next step is to decide how to approach prospective customers. Whether to make a visit, send a letter, or make a phone call.
• Approach: Under this stage, the salesperson properly approaches the customer, greets him/her, and gives a start to the conversation.
• Presentation and demonstration: Under this step, the salesperson gives detailed information about the product or service, its use, benefits, etc and if required, demonstrates how to use the product.
• Overcoming objections: After presentation and demonstration, customers may have objections relating to price, product features, etc. Therefore, at this stage, the salesperson clarifies the doubts and tries to convince the customer to buy the product.
• Closing the sale: The next step is to close the sale wherein the salesperson requests the customer to buy the product and place the order.
• Follow up: Under this step, the salesperson ensures satisfaction and assures delivery at the right time, after-sales service, etc.

Hence, the correct sequence of steps in personal selling is Prospecting, pre-approach, approach, presentation, overcoming objections, closing, follow-up.

The correct answer is Preparation Phase → Divergent Planning Phase → Option identification Phase → Scenario Development Phase.

Key Points

QUEST Technique: 

• QUEST stands for the Quick Environmental Scanning Technique.
• This technique is designed to analyze the environment quickly and inexpensively so businesses can focus on critical issues that must be addressed promptly.
• It attempts to analyze the forces of nature by analyzing the impact of developments and patterns that are occurring in the market.

Important Points STEPS IN QUEST TECHNIQUE

1. Preparatory Phase

The first step in the QUEST analysis is to do preliminary preparations. These initial tasks are:

• Definition of environmental concerns.
• Choose the participants for a study (around 12 to 15).
• Provide complete details regarding the recent trends in the environment of the company.
• Choose the place to conduct the research.

2. Divergent Planning Phase

• After the preparatory work is completed, the setting where the organization’s operations are conducted is evaluated.
• The first step is identifying the company’s vision, mission, and goals. Strategic leaders must take a lot of time to analyze their surroundings.
• For this, you must study the nature and importance of the business environment.

3. Option Identification Phase

• After analyzing the necessary alternative actions, one of them is chosen.
• The results are compiled in a short report when the business environment is examined.
• The first section outlines the organization’s strategy, and the second section focuses on the possibilities for the future presented to the organization.

4. Scenario Development Phase

• The strategic leaders must discuss the report during a meeting and then analyze the various options available to the company.
• You can evaluate the multiple options as per the organization’s future direction.
• It does not provide a strategy to be developed but rather highlights the problems and issues to be considered when forming the strategy.

Hence, the correct answer is Preparation Phase → Divergent Planning Phase → Option identification Phase → Scenario Development Phase.

Key Points

Marketing feasibility

• Market viability research determines if a product will succeed in a specific market.
• A good market feasibility study evaluates the competitive landscape while also finding potential clients and additional revenue streams.

Important Points It includes:

Current and future demand estimates

• Demand forecasting is the process of estimating and predicting future consumer demand for a good or service using predictive analysis of historical data.
• The proposal will be more persuasive if you can demonstrate that there is a market (or demand) for your goods or services in present and future scenarios.

Market segmentation and identification of target markets

• The market is segregated into different groups and further target audience is identified to know who will be the potential customer and what is its size.
• This will give an idea of whether the business is feasible enough to generate sufficient profits by satisfying the demand of people.

Competition analysis

• It is the procedure of locating rivals in your business and investigating their various marketing tactics.
• It gives an idea of the strengths and weaknesses of the firm in comparison with other competitors and guides about the feasibility of the business proposal.

Hence, (a) Current and future demand estimates, (b) Market segmentation and identification of target markets and (c) Competition analysis are the correct answer

Additional InformationMarket testing

Market testing is part of product development.

To find out how well a product, service, or offering will perform, one can conduct market testing.

Hence, the correct answer is (a), (b), (c) only.

The correct answer is Exporting, Licensing, Franchising, Partnering, Strategic Alliance. 

International Expansion:

• An international expansion strategy comprises a market entry strategy including crucial choices in regard to primary markets of focus, determination of target customer and channel strategy, resource allocation, product and service value offerings, brand positioning, and creation of an operating model.
• A successful market penetration strategy ensures the most suitable and efficient use of corporate resources and helps companies increase their success.

Important Points The five modes of International Expansion Entry modes are 

• Exporting
• Licensing
• Franchising
• Partnering
• Strategic Alliance

Key Points

• Exporting is a standard international expansion method. It involves marketing and direct sale of domestically manufactured products in foreign markets.
• Licensing is a popular method of international expansion. Here, a licensor gives a licensee the right to use its intellectual property (like a patent, or copyright) for a royalty fee.
• Franchising works similarly to licensing. As the franchisor, you sell the rights to a franchisee to use your brand name.
• A partnership is when two or more companies or individuals agree to share the profits and losses of a business, either equally or proportionally.
• A strategic alliance is when two or more companies or individuals agree to collaborate with each other without changing their independent status. The companies keep their individual identities, and the people in the alliance collaborate to achieve a common goal.

Hence, the correct answer is Exporting, Licensing, Franchising, Partnering, Strategic Alliance.

Key Points

 International negotiation

The practice of conducting talks to accomplish specific goals which may or may not result in the resolution of issues between the parties is known as international negotiation.

Important Points The following steps are included in international negotiations:

1. Preparation

This is learning as much as you can about the issue, getting to know the individuals you'll be negotiating with, and being clear on the goals you want to achieve through negotiation.

2. Strategy

Developing effective strategies for negotiation is the next phase.

3. Building a relationship

In order to effectively manage the situation throughout the negotiation, it is crucial to comprehend the individuals participating in the process.

4. Information exchange and offer

 The parties to the negotiation interact in person at this stage. In this situation, both parties attempt to sway the other.

5. Persuasion

 The process of getting others to do what you want them to do is called persuasion. It entails persuading the opposing side that the demand is appropriate before urging them to accept the offer.

6. Compromise

This is referred to as a concession, and it can be either freely or unwillingly made.

7. Agreement

 The final step is for the parties to reach an understanding. The agreement must be formalized in a written contract or letter of intent.

Hence, the correct sequence is (c), (e), (d), (a), (f) (b), and (g).

Key Points

Budgeting

Creating and managing a financial plan that forecasts income and expenses for a time period is known as budgeting.

Important PointsProcess of budgeting 

Most large businesses start creating budgets four to six months before the fiscal year begins and it follows numerous stages.

1. Setting the objectives

• The objective is the major goal for which the organization is established.
• First of all, the organization's management should set its objectives which may be short-term or long-term to be achieved.
• For example, the objective is to maximize the profits of the organization.

2.  Specifying the goals

• The managers shall specify short terms goals that can be achieved in order to accomplish the desired objective of the organization.
• For example, the list of goals could be increasing sales, reducing costs, targeting more customers, etc.

3. Laying down the strategies

• Afterward, strategies are designed and developed.
• Alternative methods are found to achieve the specified goals.

4. Preparing of budget

• After deciding the strategies and required actions to be performed, the manager budgets are prepared to know how much money will come and how much money has to be spent to achieve the goals and objectives.
• Previous financial data is also utilized to forecast future costs and income and a budget is formulated.

The correct answer is Forming, storming, norming, performing, adjourning.

Group development:

• The process of learning to work together effectively is known as group development.
• Research has shown that teams go through definitive stages during development.
• Bruce Tuckman, an educational psychologist, identified a five-stage development process that most teams follow to become high performing.

Important Points

STAGES IN GROUP DEVELOPMENT

• Forming Stage — mainly characterized by team orientation.
• Storming Stage — mainly characterized by a power struggle.
• Norming Stage — mainly characterized by cooperation, integration, and unity.
• Performing Stage — mainly characterized by overall synergy.
• Adjourning Stage — mainly characterized by a sense of closure.

Key Points

• Stage 1: Forming stage: The first stage of group development is the forming stage. In this stage of group development, individual members are just getting to know each other and don’t have a group process yet. As a result, they're unsure of how they'll interact together.
• Stage 2: Storming stage: The next stage of group development is the storming stage. In this stage, team members are in the process of learning how to work together. As team members begin collaborating, conflicts may arise, whether that’s from clashing personalities or opinions on how a project should progress.
• Stage 3: Norming stage: This is the stage when things begin to settle down as your team finds its groove. As they grow more comfortable working together, team members are more comfortable asking for help completing a task or getting constructive feedback. Your team starts to increase their productivity at this stage as they become more familiar with their teammates and their working styles.
• Stage 4: Performing stage: At this stage, your team has reached cohesion with team processes and team members are working together at their highest potential. The team follows established workflows to achieve the team’s goals and group members feel as if they have a common goal to reach together. This is the ideal stage of group development.
• Stage 5: Adjourning stage: The fifth stage of group development, also known as the mourning stage, is the final stage a team will go through. After a project is over or if a team is disbanded, team members who worked together will go into a small mourning period.

Hence the correct sequence of stages in group development is Forming, storming, norming, performing, adjourning.

The correct answer is Set strategy, identify crucial executive behaviour, global philosophy framework, identify gaps, systematize pay system, adopt pay policies.

Key Points

• A global payments system allows companies and marketplaces around the world to make and receive payments in multiple, certified international currencies.
• Although currencies may vary between payment services.
• The definition of a payment system is ‘any system used to settle financial transactions through the transfer of monetary value.
• This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make its exchanges possible’
• The ‘global’ element comes into play when the sole supplier, vendor, company, or marketplace has a bank account in a different country to the one in which the business is based.

Important Points The steps in developing a global payment system are: 

1. Set strategy
2. Identify crucial executive behaviour
3. Global philosophy framework
4. Identify gaps
5. Systematize pay system
6. Adopt pay policies

Hence the correct answer is Set strategy, identify crucial executive behaviour, global philosophy framework, identify gaps, systematize pay system, adopt pay policies.

Key Points

 Marketing

• Marketing is any activity a business engages in to draw a target audience to its goods or services through compelling messaging.
• It is to persuade consumers to purchase their goods and bring loyalty to a certain business.

Marketing strategy

• The comprehensive plan created specifically for attaining the organization's marketing goals is known as a marketing strategy.
• It offers a strategy for achieving these marketing goals.

Important Points

4P's of Marketing Mix

1. Product

• A good or service that satisfies the requirements or desires of consumers is a product.
• The type of goods affects how consumers perceive their value, enabling businesses to set a fair price.
• Hence, marketers need to be aware of the product life cycle and develop packaging, warranty, customer service plans, etc. to make it appealing to customers.

2. Price

• Pricing directly affects sales volume and, as a result, business earnings.
• Pricing comprises making choices regarding the base price, discounts, price changes, credit terms, freight payments, etc.

3. Place

• Place refers to the selection of the location where things will be made available for purchase.
• Making sure that the product is easily accessible to the customer at the appropriate time and location is the main goal of controlling trade channels.
• Distribution options like outsourcing or business transportation fleets are chosen after doing a cost-benefit analysis.

4. Promotion

• Decisions about advertising, sales force, direct marketing, public relations, advertising expenditures, etc. are part of the promotion process.
• It aids in convincing customers to select a specific product over competing options on the market.

These 4 P's are the same for every type of business and their correct sequence is Product, Price, Place, and Promotion. 

Hence, the correct answer is (a), (d), (c), and (b)

Key Points

 Branding

• Branding is giving your company a unique identity in the eyes of your target market and customers.
• Branding can identify and differentiate a product from competing goods and services.

Important Points Assertion (A):  Every product or service should be branded otherwise they will be treated as commodities.

• Every good or service needs to have a brand name because a brand name gives human characteristics to an object. Otherwise, it is considered just a commodity.
• It makes it easier for you to stand out from rivals in the market

Hence, the assertion is correct that the product should be given a brand name, or else it will be considered a commodity. 

Reasons (R): If the product or service is branded then it always commands a higher price.

• It need not be true that a branded product or service always fetches a higher price.
• Occasionally brands attempt to compete with their rivals by adopting a cost leadership strategy or by reducing prices.

So, the reason is not correct.

Hence, the correct answer is (A) is correct but (R) is incorrect.

Key Points

International product standardization

• Product standardization is the practice of selling a product in foreign markets with little to no alteration other than minor adjustments to packaging and labeling.
• For instance, COCA-COLA Company uses global standardization in marketing by maintaining a largely consistent product presentation throughout regions.

Important Points Assertion (A): International product standardization is the least costly in terms of both. manufacturing and marketing costs for the company. So companies should bring uniformity in their marketing mix elements

• Because the same method is being utilized on a big amount of material, Engineers and designers are also more incentivized to produce less waste.
• It leads to lower material costs and the overall cost of production.
• Hence, the assertion is correct that companies should bring uniformity in their marketing mix elements to reduce their marketing cost as well.

Reasons (R): No change in the product itself is required for marketing overseas but many items may require some adaptation for making them suitable for foreign markets.

• Because different markets have distinct cultures, traditions, economic levels, tastes, and fashions, a company may frequently need to alter its products to fit the needs of the international market.
• Hence, the reason is also true but it is not a valid explanation for the assertion.

So, the correct answer is Both (A) and (R) are correct but (R) is not the correct explanation of (A).

The correct answer is Both statements (A) and (R) are correct and (R) is the right explanation of (A).

Important Points Strategic Management:

• Strategic management is the ongoing planning, monitoring, analysis, and assessment of all necessities an organization needs to meet its goals and objectives.
• Changes in business environments will require organizations to constantly assess their strategies for success.
• The strategic management process helps organizations take stock of their present situation, chalk out strategies, deploy them and analyze the effectiveness of the implemented management strategies.
• Strategic management strategies consist of five basic strategies and can differ in implementation depending on the surrounding environment.
• Strategic management applies both to on-premise and mobile platforms.

Key Points

• In the process of strategic management, the basic thrust or push is to make a wise choice regarding the courses of action to adopt so as to answer the very objective or goals of the business as to what it currently is and what actions need to be taken or adapted so as to take it to an expected level.
• Strategic Management try to answer questions like - what is the business? What will it be? What should it be?

Hence, the correct answer is Both statements (A) and (R) are correct and (R) is the right explanation of (A).

The correct answer is Both statements are correct and statement (R) is not the correct explanation of (A).

Assertion (A): Plant location is often oriented toward dominant factors such as raw material sources while warehouse location is definitely distribution oriented.

• Facility location is the process of determining a geographic site for a firm’s operations.
• Managers of both service and manufacturing organizations must weigh many factors when assessing the desirability of a particular site, including proximity to customers and suppliers, labor costs, and transportation costs.
• Location factors can be further divided into two categories:
• Dominant factors are those derived from competitive priorities (cost, quality, time, and flexibility) and have a particularly strong impact on sales or costs.
• Secondary factors also are important, but management may downplay or even ignore some of them if other factors are more important.

Reason (R): The plant location decision is driven by the competition and competitor while the warehouse location decision is exclusively driven by the cost considerations.

• One complication in estimating the sales potential at a different location is the impact of competitors.
• Management must not only consider the current location of competitors but also try to anticipate their reaction to the firm’s new location.
• Avoiding areas where competitors are already well established often pays.

However, both statements are speaking about two factors affecting the plant location.

Hence, both Assertion and Reason are correct but Reason is not the correct explanation of the Assertion.

The correct answer is Both statements are correct and (R) is the correct explanation of (A).

Important Points Regression Analysis:

• Regression analysis is a set of statistical methods used for the estimation of relationships between a dependent variable and one or more independent variables.
• It can be utilized to assess the strength of the relationship between variables and for modeling the future relationship between them.
• Regression analysis includes several variations, such as linear, multiple linear, and nonlinear.
• The most common models are simple linear and multiple linear.
• Nonlinear regression analysis is commonly used for more complicated data sets in which the dependent and independent variables show a nonlinear relationship.

Key Points

Assertion (A): The addition of independent variable(s) causes the predictions error to become smaller

Reasons (R): With the addition of an independent variable, R2 becomes larger to cause a smaller prediction error

In Regression analysis addition of independent variables causes the prediction error to become smaller as R2 becomes larger to cause a smaller prediction error.

Hence, Both Assertion and Reason are correct and Reason is the correct explanation of Assertion.

The correct answer is Rs 4800 unfavorable. 

• Labour efficiency variance is calculated as the difference between the actual labor hours used to produce an item and the standard amount that should have been used, multiplied by the standard labor rate.
• An unfavorable variance means that labor efficiency has worsened, and a favorable variance means that labor efficiency has increased.

Key Points

Labor efficiency variance

= (Standard hours - Actual hours) x Standard rate 

= (SH - AH) x SR

Where,

• SH is the standard hours of direct labor worked;
• AH is the actual hours of direct labor worked;
• SR is the standard rate paid to direct labor;

Important Points

Labour Efficiency Variance

= (Standard Labour Hours - Actual Labour Hours) × Standard Rate

= (1000 × 2 - 2240) × 20

= -240 × 20

= Rs 4800 unfavourable

Hence, the labour efficiency variance is Rs 4800 unfavourable.

The correct answer is Rs. 1,202 unfavorable. 

• Overhead Spending Variance is the difference between what the production overheads actually cost and what they should have cost given the level of activity during a period.
• Overhead spending variance is favorable if the actual costs of indirect materials are lower than the standard or budgeted variable overheads.
• Overhead spending variance is unfavorable if the actual costs are higher than the budgeted costs.

 Key Points

• Overhead Spending Variance = Fixed Overhead Spending Variance + Variable Overhead Spending Variance
• Fixed Overhead Spending Variance = Actual Fixed Overhead - Standard Fixed Overhead
• Variable Overhead Spending Variance = Actual Variable Overhead - Standard Variable Overhead

Important PointsFixed Overhead Spending Variance = Actual Fixed Overhead - Standard Fixed Overhead

= 12,850 - 12,000

= Rs 850 unfavourable

Variable Overhead Spending Variance = Actual Variable Overhead - Standard Variable Overhead

= 2,352 - 2000

= Rs 352 unfavourable

Overhead Spending Variance = 850 + 353 = Rs.1202 unfavourable

Hence, the Overhead Spending Variance is Rs. 1202 unfavorable.

The correct answer is Rs. 2,000 unfavorable. 

• Overhead volume variance refers to the difference between the budgeted fixed overheads and the actual overheads applied to the units produced during an accounting period.
• The variance value reflects the over or under-absorption of fixed overheads, and it arises due to a change in the quantum of production against the budgeted quantum of production.

Key Points

Overhead Volume Variance

= (Actual Unit - Expected Unit) × Standard Fixed Overhead Rate

Important Points

Overhead Volume Variance

= (Actual Unit - Expected Unit) × Standard Fixed Overhead Rate

= (1000 - 1200) × 10

= -200 × 10

= Rs 2,000 unfavourable

Hence, the overhead volume variance is Rs. 2,000 unfavourable.

The correct answer is 52,000 unfavourable.

• Direct material price variance is the difference between the actual amount spent on direct material purchases during a given period, and the amount that would have been spent had the material been acquired at the standard price.
• It is also called direct material spending/rate variance.

Key Points

Direct Material Price Variance

= Standard Price of Material Purchased − Actual Spending on Material

= AQ × SP − AQ × AP

= (SP − AP) × AQ

Where,

• AQ is the actual quantity of direct material purchased;
• SP is the standard unit price of direct material; and
• AP is the actual price per unit of direct material;

Important Points

Direct Material Price Variance = (SP − AP) × AQ

Direct Material Price Variance = (Rs 4.5 per Kg - Rs 5 per Kg) × (1,04,000 Kg)

Direct Material Price Variance = Rs. 52‚000 unfavourable

Hence the direct materials price variance is Rs. 52‚000 unfavourable.

The correct answer is Rs. 20,000 unfavourable.

• A materials quantity variance compares the actual and expected direct material used in manufacturing a product.
• The firm has an unfavourable materials quantity variance when you use more material than expected. It’s favourable when they use less material than planned.

Key Points

Materials Quantity Variance

= (Standard Quantity– Actual Quantity) × Standard Price

= (SQ - AQ) × SP

Where,

• SQ is the standard quantity of direct material.
• AQ is the actual quantity of direct material purchased.
• SP is the standard unit price of direct material.

Important Points

Material Quantity Variance

= (SQ - AQ) × SP

= (1,000 × 100 - 1,04,000) × 5

= -4,000 × 5 = Rs 20,000 unfavourable

Hence, the material quantity variance is Rs 20,000 unfavourable.

The correct answer is I'm Ok, You are Ok. 

• Transactional analysis is a technique that helps to understand the other person's behavior so that communication becomes effective.
• A person's behavior depends upon his experience at different stages of his life.
• He develops a philosophy towards work from early childhood which becomes part of his identity and remains with him for a lifetime unless some external factor changes it.
• These positions are called lifetime positions.

Important Points

The diagrammatic representation of the same is as follows: 

Key Points I'm OK You're OK

• This life position represents the adult ego of a person.
• It becomes the philosophy of a person who has good and positive experiences with others.
• They feel confident about themselves and others.
• They are competent in taking decisions and also allow others to participate in the decision-making processes.
• In the given scenario, the organization expects Dinesh to have this life position which will benefit both himself and the organization.

Additional Information

• I am OK, You are not OK: This life position represents the parent ego of a person who is brought up as a rebellious child. They have a critical attitude towards others.
• lam not OK, You are OK: This life position represents a state of distrust in the person himself. He lacks confidence in whatever he does.
• I am not OK, You are not OK: This life position represents a desperate state of persons who have lost interest in life.  They have been brought up as neglected children and, therefore, have a negative attitude toward life.

 Hence, As HR Manager, we would expect Dinesh to have I'm OK You're OK life position in Transactional Analysis.

The correct answer is (b) and (c).

• A promotion is when an employee is elevated to the next organizational level, job grade, or designation.
• A promotion policy sets the criteria that determine how management recommends, implements, and approves employee promotions.
• It is an important concept in organizational settings because it details how to get promoted and what qualifications are needed.

Key Points

• A merit-based promotion, in general, is a deserved advance into a higher position of employment. It is when the promotion takes place on the basis of an employee’s performance in the current job. It is done on the basis of his skills, knowledge, and ability.
• Accretion of duties is defined as a non-competitive promotion of an employee whose position is being reclassified to a higher grade level because of additional duties and responsibilities.
• These methods are to be followed by Softech Co. in order to motivate high-performing employees and avoid conflict within the organization by accretion of duties.

Additional Information

• A Career Ladder is a process designed to formally progress a staff employee to a higher level of job responsibility within his/her current position. Since the employee and the manager work together to progressively advance to a higher level of responsibility, there is no need for a competitive posting process.
• Generally, a competitive promotion occurs when individuals compete for and are considered for a position that results in a promotion. A non-competitive promotion is an advancement to a position that has not been advertised or posted and does not involve a vacancy.

Hence, Merit-Based and Accretion of duties are the promotion policies recommended to Softech Co.

The correct answer is developmental mode. 

Key Points

• Counselling is a two-way process in which a counsellor provides help to the workers by way of advice and guidance.
• There are many occasions in work situations when a worker feels the need for guidance and counselling.
• It is a process of helping the employees to achieve better adjustment to their work environment to behave as psychologically mature individuals, and help in achieving a better understanding with others so that their dealings with them can be effective and purposeful.

Important Points

• Developmental counselling is a mutual attempt where both managers or superiors and subordinates or juniors take part in order to identify strengths and weaknesses, decide on performance-related problems, and determine and create an appropriate action plan.
• Developmental counselling is an employee-focused communication in order to work on aligning the individual’s career goals to the company’s goals.
• In the given scenario, the development mode of counselling will help the employee to achieve his goals.

Additional Information

• Discipline mode of counselling is an opportunity for face-to-face communication between the supervisor and the employee, conducted in private, and is intended to have a constructive goal of providing feedback to the employee to correct the problem.
• Open-ended counselling means that counselling sessions are open to you and ongoing for as long as you feel you need them. An identified and dedicated counsellor will be available to work with you on a weekly basis, on a day and at a time agreed with you at the outset.
• If you describe someone or something as unbiased, you mean they are fair and not likely to support one particular person or group involved in something. Unbiased counselling helps the person to open up to the counsellor with all their hidden problems.

Hence, As HR Manager, a Developmental mode of counselling would be chosen for Dinesh.

The correct answer is Peoples skills. 

Key Points

• People skills — sometimes referred to as soft skills, interpersonal skills, social skills, emotional intelligence, and interpersonal intelligence — give us the tools to effectively communicate and engage with our colleagues.
• People skills are important because if the people within an organization struggle to explain themselves or understand how their coworkers feel about a given project, task, or challenge, it becomes much harder for them to work together to achieve common goals.
• In turn, that hurts the organization’s productivity and profitability, while also hampering things like creativity and innovation.
• In the given scenario, we can find that Dinesh is finding it difficult to engage himself with his colleagues and also struggles with conflict resolution. Thus he needs to develop his people skills.

Additional Information

• Technical skills are the specialized knowledge and expertise required to perform specific tasks and use specific tools and programs in real-world situations. Diverse technical skills are required in just about every field and industry, from IT and business administration to health care and education.
• Communication skills enable individuals to understand others and to be understood themselves. In everyday life, these skills are required to communicate ideas to others, develop a confident attitude, respect for others, and public speaking.
• Negotiation skills are a way to achieve an outcome with a formal discussion between two people having different aims or intentions. They try to reach common ground by eliminating their differences.

Hence, the HR Manager should impart people skills to Dinesh in the above case.

The correct answer is Interactionalism Approach. 

Key Points

• Interactionalism approach emphasizes continuous, multidirectional interaction between person and situation characteristics.
• This perspective suggests that organizational behavior researchers should focus more attention on personal factors that might be expected to mediate the effects of situational factors and vice versa.
• It also encourages a less restricted interpretation of an interaction, which can mean non-additivity, differential validity, overlapping main effects, reciprocal influence, and cognitive sense-making of experience.

 Important Points

• HR approach is a roadmap for solving an organization's biggest challenges with people-centric solutions. This approach requires HR input during policy creation and elevates the importance of recruitment, talent management, compensation, succession planning, and corporate culture.
• The contingency approach, often called the Situational Approach is based on the premise that all management is essentially situational in nature. All decisions by managers will be affected (if not controlled) by the contingencies of a given situation.
• The systems approach is a management perspective that advocates that any business problem should be seen as a system as a whole which is made up of a hierarchy of sub-systems. So rather than seeing the problem in parts it should be seen as a whole.

Hence, the HR Manager should deploy Interactionalism Approach for Dinesh.

Key Points

 Demand in Economics:

• In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time.
• The relationship between price and quantity demand is also called the demand curve.
• In its standard form a linear demand equation is Q = a - bP.
• When the desire for a commodity is backed by purchasing power and willingness to spend, then it becomes an effective demand. Hence, demand always means effective demand.

Important Points

Law of Demand:

• The law of demand states that if all the other parameters are constant then, the demand for a good or service is inversely proportional to price
• This law is not true for complementary goods. A complementary good is a product or service that provides value to another product or service.
• If the price of one good falls the demand for the other good rises.
• There is an inverse relationship between the complementary goods
• For instance, if the prices of petrol rise there is a fall in the demand for cars and vice-versa.

Supply Curve:

• It is a graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply.
• Product price is measured on the vertical axis of the graph and quantity of product supplied on the horizontal axis.
• A decrease in the prices of a good's inputs reduces costs and allows suppliers to supply more of that good at all prices.
• Therefore, a decrease in the prices of a good's inputs leads to a rightward shift of the supply curve for that good

​ 

Therefore, we conclude that the "The desire for a commodity backed by ability and willingness to pay is demand" is correct.

Confusion Points

• As per the official answer key by UGC, the answer to this question is marked as Option 1.
• However, Option 3 "Demand for car and price of petrol are inversely related" is also true as these two are complementary products.

Key Points

Selection Process in HRM:

• The selection process can be defined as the process of selection and shortlisting of the right candidates with the necessary qualifications and skill set to fill the vacancies in an organisation

 Selection Process Involves Following steps':

1. Application Blank:

• Application blank is most commonly used to collect information from the applicants.
• It a standardized form used to obtain basic biographical data on a candidate for employment, such as age, sex, education, qualifications, employment history, leisure interests, and the like

2. Preliminary Or initial Interview:

• It is used to eliminate those candidates who do not meet the minimum eligiblity criteria laid down by the organization.
• The skills, academic and family background, competencies and interests of the candidate are examined during preliminary interview.
• These are less formalized and planned than the final interviews.

3. Screening of Applicants:

• Screening applicants is a part of the overall hiring process, coming before the interview stage and after you have collected résumés through a job ad or recruitment event

4. Employment Tests:

• It is the practice of administering written, oral, or other tests as a means of determining the suitability or desirability of a job applicant.

5. Selection or Final Interview:

• It known as employment interview, is a formal, in-depth conversation conducted to evaluate the acceptability of candidates for employment.
• Its aim is to discover those aspects of an applicant which may not be disclosed by other methods.

6. Checking references:

• It  is an objective evaluation of an applicant's past job performance based on information collected from key individuals (e.g., supervisors, peers, subordinates) who have known and worked with the applicant.

7. physical examination:

• It is conducted by a physician. In this, Medical tests are conducted to ensure the physical fitness of the potential employee. It will decrease chances of employee absenteeism.

Therefore we can conclude that the correct Sequence of steps as per the question is Application blank, initial interview, employment tests, final interview, checking references, physical examination.

The correct answer is What to produce, how to produce, how much to produce, how to determine price of product.

Key Points

 Microeconomics

• It is a branch of mainstream economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms
• Businesses use microeconomic principles to make decisions regarding the factors like: labour, productivity, types of goods and services offered, supply and demand.
• It is based on models of consumers or firms (which economists call agents) that make decisions about what to buy, sell, or produce—with the assumption that those decisions result in perfect market clearing (demand equals supply) and other ideal conditions.

What to produce, how to produce, how much to produce, how to determine price of product is the most important aspect in microeconomics for business firms.

Key Points

Decision making process:

• It is thought to be a selection from alternatives.
• It is deeply related to all the traditional functions of a manager, such as planning, organizing, staffing, directing, and controlling. When he performs these functions, he makes decisions
• It is the process of identifying problems and opportunities and then resolving them.
• Decision-making involves effort both before and after the actual choice.
• In problem-solving you identify and evaluate solution paths; in decision making, you make a similar discovery and evaluation of alternatives.
• The crux of decision-making, then, is the careful identification and evaluation of alternatives.
• A decision can be defined as a commitment to a course of action having the intention of serving the interests and values of particular people.
• Not that if  a situation is too self-evident requiring an answer, you do not need to make nay decision for that.
• For example, “you can't be in two places at once,” “something either is or it isn't,” “everything exists.

Hence, "The process of identifying problems and opportunities and then resolving them" is closest to the nature of decision making.

Important PointsThe Delphi approach calls for a group of experts who are questioned using a series of questions, each of which is created from the answers to the previous one. As a result, any information that some experts have access to but not others are shared, giving all experts access to all the data needed for predicting.

The technique is used to predict the probable long-term sales of new items.

This approach assumes two things:

• First and foremost, the panel members should be highly qualified, knowledgeable, and experienced.
• Second, its drivers are impartial in their work. The method's unique benefits include time and resource savings.

Hence, a forecasting technique in which the group consists of persons who are physically dispersed and are anonymous to one another is called Delphi Technique.

Additional Information

• Brainstorming is a strategy for solving group problems that involves the spontaneous presentation of novel ideas and solutions.
• Decision Tree Technique is a broad predictive modelling tool that has a wide range of applications**.** Decision trees are often built using an algorithmic method that finds ways to divide a data set depending on several criteria.
• The Heuristic Ideation Technique (HIT) Matrix is a tool used to compare the features of two seemingly unrelated products or services in order to generate novel ideas.

Key Points

Indifference Curve:

• An indifference curve is a graphical representation of a combination of products that gives a consumer a similar level of satisfaction and renders them indifferent.
• Every point on the indifference curve indicates that a person or consumer has no preference between the two goods because they provide him with equivalent utility.

Important PointsProperties of the Indifference Curve:

• An indifference curve slopes downwards because of monotonic preferences.
• An indifference curve is convex to the point of origin because of diminishing slope of indifference curve.
• Every indifference curve to the right represents higher level of satisfaction which means higher indifference curve means higher satisfaction.
• Indifference curves do not intersect each other.

Hence, the statement "Lower indifference curves indicate a higher level of satisfaction" is incorrect.

Key Points Human Resource Selection:

• Choosing the right personnel for the right jobs is the process of selection.
• It is a process of aligning individual credentials and skills to organizational needs. Only when there is effective matching can selection be done.
• The organization will receive high performance from its workforce by choosing the best candidate for the position.

Important Points

1. Applying the right procedures to choose a candidate and determining who is the best fit for the organization is what human resource selection is all about, allowing an organization to accomplish its goal.
2. There isn't a set hiring process that can be used across all businesses or positions. The procedures or processes vary depending on the job, or even position, and the company.
3. However, organizations typically follow the processes below when choosing their staff members:

• Scrutiny of application
• Preliminary Interview
• Application Blank
• Selection test and Group Discussion
• Interview
• Medical Examination
• Checking References
• Final approval, placement and Induction

Hence, human resource selection is concerned with applying appropriate technique to select a candidate.

Key Points

International Human Resource Management:

• Pulapa Suba Rao defines International Human Resource Management as performing human resource management and its related activities and arranging for related and necessary immigration facilities for prospective and current expatriate employees by organizations operating in domestic and/or foreign countries.
• Human resource management makes sure that international joint ventures are staffed with top-notch managers, which aids in the development of effective cross-border partnerships.

Important Points

• In order to create successful cross-border alliances, strategic IHRM can assist in a variety of ways.
• For instance, it can strive to ensure that International Joint ventures are staffed with top managers, or that cultural diversity is successfully managed during mergers and acquisitions.

Hence, it can be concluded that human resource management (HRM) helps build successful cross border alliances by ensuring that International joint ventures are staffed by high quality managers.

Additional InformationThere are two sorts of cross-border mergers and acquisitions:

• When a domestic company is sold to a foreign investor, there is an inward capital movement known as an inward cross-border M&A.
• On the other hand, outbound cross-border M&As involve outward capital movement as a result of the acquisition of a foreign company.

Key PointsHuman Resource:

• Human resources are the set of people who make up the workforce of an organization, business sector, industry, or economy.
• Choosing the correct candidate for the job is very crucial for the success of the organisation.

Important Points

Technique for assessing human resource requirement in an organisation:

Ratio Analysis:

• Ratio analysis is the technique of assessing the relationship between a certain business variable and the required number of employees in order to forecast the future demand for human resources.
• It specifically aids the organization in forecasting its personnel demands due to growth.

Trend Analysis:

• Trend analysis involves studying past ratios and forecasting future ratios, making some allowances for changes in the organization or its methods.

Gap Analysis:

• The core of an organization's people strategy is an HR gap analysis. It enables businesses of all sizes to plan their budgets and hire employees wisely. By identifying the skills and the necessary number of individuals with those skills, gap analyses help organizations make decisions about hiring, training, in-sourcing, and outsourcing

Additional Information

• A replacement chart aids in future succession planning by listing the crucial job roles in a company, the workers who are presently filling those jobs, their qualifications, and the existing openings.

Hence, replacement charts method is not a forecasting technique for assessing human resource requirement in an organisation

Key Points 

 Bureaucratic management

• A pyramidal command structure is characteristic of bureaucratic management.
• The bureaucratic apparatus is extremely well-organized and functions with a high level of formality.
• Every department typically has an organizational chart, and decisions are made in accordance with a set procedure.
• There is always a rigid command and control system in place. Bureaucracies are designed to be well organized, equitable, and very effective.

Important Points

The characteristics of bureaucratic management are:

• Rules and duties are specified in writing and are written down.
• Several high-ranking managers hold a clear hierarchy of power.
• Organizations are under intense pressure to innovate and change in order to guarantee corporate growth.
• Promotions and appointments are formal since these individuals will be held responsible.
• Employees are hired based on their qualifications and experience, not out of favor or chance.
• Pay scales are used to determine salaries.
• Bureaucracies struggle or refuse to quickly change to new circumstances. It's typical to micromanage.

Hence, the correct answer is option 2.

Key Points

Public Relations

• Public relations deals with how people perceive your company.
• The process of maintaining a positive image and developing healthy relationships between a company and the external parties it serves is known as public relations.

Important Points Aims of Public Relations

• Create and build the reputation of the company in the market.
• Make people aware of the brand or service.
• Maintain positive relations with those who influence the target audience.
• Build goodwill and retain the same.

Common PR Tools and Techniques:

Attendance at public events: In order to attract public attention and keep it engaged with a particular organisation or an individual, PR specialists take an advantage of every public event and the opportunity to speak publicly.

Press releases: Advertisements have a far smaller impact than information that is conveyed as part of a regular TV or radio programme, newspaper, magazine, or other form of mainstream media. Press release is therefore one of the oldest and most effective PR tools.

Newsletters: Another popular strategy to build and keep a solid relationship with the public is to send newsletters directly to the target audience with pertinent information about the organisation or/and its products/services.

Blogging: PR experts employ digital versions of press releases and newsletters as well as a range of other media, like blogging and, more recently, microblogging, to reach an online audience. It enables them to establish two-way communication with the target audience and build and sustain relationships with them.

Social media marketing: It is utilised mostly by the marketing sector, as its name would imply. However, an increasing number of PR professionals are also using social media platforms to build direct relationships with the general public, customers, investors, and other target audiences.

All activities are performed by public relations officers mainly to create a positive image or build the reputation of the company. 

Hence, Public Relations as a part of promotion in marketing refers to management of reputation of the company.

The correct answer is Present Value × ert.

Key Points

Effect of Continuous Compounding:

• Continuous compounding refers to when interest earned on an investment is reinvested in the account for an infinite period.
• Continuous compounding means that there is no limit to how often interest can compound.
• Compounding continuously can occur an infinite number of times, meaning a balance is earning interest at all times.
• Continuous compounding is used to show how much a balance can earn when interest is constantly accruing.
• This allows investors to calculate how much they expect to receive from an investment earning a continuously compounding rate of interest.

Important Points Continuous Compounding is calculated by multiplying the present value and the rate of interest and the time period.

It is calculated like 

.

where,

r = rate of interest

t = time period

Hence, the correct answer is Present Value × ert.

Key Points

Hyper Competition 

• Hyper competition occurs when there is so severe(intense), fast and dynamic competition and it causes market instability.
• In this scenario, businesses must constantly change their strategies for survival.

Important PointsCharacteristics of Hyper Competition

• Intense competition among players.
• Fast changes in technology, structures, and strategies.
• Allowance of new players to enter and compete with established corporations.
• The new strategic competitiveness would appear, destroy, and replace the old ones almost immediately.
• Product life cycles become shorter due to dynamic environment
• There is uncertainty in a business environment, hence, adopting flexible strategies is common.
• In hyper-competition there is no high cost of financing the business due to the liberalization of entry and exit of firms.

Hence, "Financing cost becomes high" is not a characteristic of Hyper Competition.

New product development refers to the process that goes into bringing a new product to market, from brainstorming an idea to understanding if it fits into the market, ironing it out to prototyping to final commercialization.

Key Points Steps in New product development:

1. Idea Generation

The new product development process begins with idea generation, where the management brainstorm an idea (or ideas) that will help us to solve an existing customer problem in a new and innovative way.

2. Research

Once we have developed a product idea, the next step is conducting research to introduce it. It consists of - Market research to understand the current sentiment in your industry and if there are any holes that your product will fit into, and if there will even be demand for it. Competitor analysis to understand if customers think there are things your competitors' products or services lack that you can incorporate into your product to better fit your target market's needs.

3. Planning

The third stage is planning, where we formulate a final product idea/definition based on our initial idea and research and begin coming up with the plans to bring it to life.

4. Prototyping

The prototyping phase is when we come up with a sample product that is a mockup of what will be created during mass production.

5. Testing

Before launching the product we need to test it to ensure it will work as advertised and effectively solve the customer needs. So, during this stage, we’ll share the prototypes with target audiences and ask for actionable feedback on how the product works.  

6. Product Development

This stage involves creating the final product that will be commercialized once completed. We will use the insights gained from testing our MVP to make the final touches to the prototype and begin mass production.

7. Commercialization

The final stage of our new product development process is commercialization, where we introduce the products to the market. This is the culmination of brainstorming, research, and iteration, where our audiences can finally make use of what you created.

Additional Information Diffusion- Innovation process - Diffusion of innovation is the process by which the adoption of an innovation spreads over a period of time to other consumers through communication.

Product Life Cycle - The term product life cycle refers to the length of time from when a product is introduced to consumers into the market until it's removed from the shelves. 

Market Development - Market development is a strategic step taken by a company to develop the existing market rather than looking for a new market. The company looks for new buyers to pitch the product to a different segment of consumers in an effort to increase sales.

Hence, the correct answer is New Product Development.

Key Points Retail Business:

Retail stores play a crucial role in the everyday life of modern people. Retailers enable consumers to access a wide variety of products and services worldwide. The retail business helps support the country’s economy and create additional workplaces.

Important PointsFormat of Retail Business:

• Retailing in India is one of the pillars of its economy and accounts for about 10 percent of its GDP.
• The Indian retail market is estimated to be US$ 600 billion and one of the top five retail markets in the world by economic value.
• India is one of the fastest-growing retail markets in the world, with 1.2 billion people
• Modern organized retail business refers to a retail house providing a wide variety of products and services under a single roof, it has a multitude of formats.
• These formats can be classified according to the merchandise offered and the size of the area.

Hence, the correct answer is Merchandise offered and the size of the store area.$

As proposed by Parasuraman, Zeithaml, and Berry (PZB) in 1985, a service gap analysis is an effective methodology used to evaluate and improve customer satisfaction levels.

Key Points There are four gaps in the service gap analysis:

The Knowledge Gap

The knowledge gap is the difference between the customer’s expectations and the company's perception of customer needs. It occurs due to a lack of proper market research, insufficient communication between the company and the clients, or a knowledge silo between the management and the employees working with customers.

The Policy Gap

The policy gap means that the management understands the customer needs but fails to implement them fully or accurately in their products or services. Such gaps manifest in poor customer service, lack of regular quality checks, or lack of timely updates of service level standards.

The Delivery Gap

The delivery gap exposes the differences between the service in theory and how employees carry it out. This occurs when a company has poor human resource policies and doesn’t have proper onboarding and training practices. 

The Communication Gap

The communication gap appears when the company advertises its products and services in a way that doesn’t reflect reality. Creating a flawless promotional campaign is one thing but delivering on what you’ve promised is another.

Important Points In the communication gap, the actual differences between the promised service and the actual service delivered.

Hence, the correct answer is the Difference between the service delivered and the promise made to the customer.

Important Points 

 Enterprise Resource Planning:

• Enterprise resource planning (ERP) is platform companies use to manage and integrate the essential parts of their businesses.
• Many ERP software applications are critical to companies because they help them implement resource planning by integrating all the processes needed to run their companies with a single system.
• Some benefits of ERP include the free flow of communication between business areas, a single source of information, and accurate, real-time data reporting.
• An ERP software system can also integrate planning, purchasing inventory, sales, marketing, finance, human resources, and more.

Additional Information Customer Relationship Management- Customer relationship management (CRM) is the combination of practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle.

Manufacturing Resource Planning- Manufacturing Resource Planning (MRP II) is an integrated information system used by businesses. Manufacturing Resource Planning evolved from early Materials Requirement Planning (MRP) systems by including the integration of additional data, such as employee and financial needs.

Economic order Quantity- Economic order quantity (EOQ) is the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has been refined over time. The economic order quantity formula assumes that demand, ordering, and holding costs all remain constant.

Hence, the correct answer is Enterprise Resource Planning.

The correct answer is Degeneracy.

Important Points 

Row Minima and Column Minima Rule:

• Row minima method involves choosing the lowest element in the row and deducting it from all the elements.
• Column minima method involves choosing the lowest element and deducting it from all the other elements in the column.
• Degeneracy refers to the situation of simultaneous satisfaction of row minima and column minima rule.
• It can occur at two stages: at the initial solution and during the testing of the optimal solution.

Additional Information If the basic feasible solution of a transportation problem with m origins and n destinations has fewer than m + n – 1 positive xij (occupied cells), the problem is said to be a degenerate transportation problem. 

Hence, the correct answer is Degeneracy.

Important Points 

 Management Information System:

• Management Information Systems (MIS) is the study of people, technology, organizations, and the relationships among them.
• MIS professionals help firms realize maximum benefit from investment in personnel, equipment, and business processes.
• MIS is a people-oriented field with an emphasis on service through technology.
• In addition, they manage various information systems to meet the needs of managers, staff, and customers.
• By working collaboratively with various members of their work group, as well as with their customers and clients, MIS professionals are able to play a key role in areas such as information security, integration, and exchange.

Additional Information 

• Decision Support System- A decision support system (DSS) is an information system that aids a business in decision-making activities that require judgment, determination, and a sequence of actions.
• The information system assists the mid- and high-level management of an organization by analyzing huge volumes of unstructured data and accumulating information that can help to solve problems and help in decision-making.

Artificial Intelligence Systems- 

• Artificial Intelligence System was a volunteer computing project undertaken by Intelligence Realm, Inc.
• With the long-term goal of simulating the human brain in real-time, complete with artificial consciousness and artificial general intelligence.

Executive Support Systems- 

• An executive information system (EIS), also known as an executive support system (ESS), is a type of management support system
• It facilitates and supports senior executive information and decision-making needs.
• It provides easy access to internal and external information relevant to organizational goals.

Hence, the correct answer is Management Information System.

Key Points

 Theory of Comparative Advantage:

• Comparative advantage was first developed by 19^th-century British economist David Ricardo, that attributed the cause and benefits of international trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries.
• In Ricardo’s theory, which was based on the labor theory of value, the fact that one country could produce everything more efficiently than another was not an argument against international trade.
• In a simplified example involving two countries and two goods and only one factor of production.

It can be explained with the help of an example-

• If country A must give up three units of good x for every unit of good y produced
• Country B must give up only two units of good x for every unit of good y, both countries would benefit if country B specialized in the production of y and country A specialized in the production of x.
• B could then exchange one unit of y for between two and three units of x (before the trade, country B would have only two units of x),
• A could receive between one-third and one-half units of y (before the trade, country A would have only one-third unit of y) for every unit of x.
• This is true even though B may be absolutely less efficient than A in the production of both commodities

Hence, the correct answer is the Two Country, Two Commodity, and One Factor theory.

The correct answer is Segment Invasion Plan.

Key Points Market Targeting:

A target market is a group of people that have been identified as the most likely potential customers for a product because of their shared characteristics such as age, income, and lifestyle. A target market is a group of customers with shared demographics who have been identified as the most likely buyers of a company's product or service.

Important Points Segment Invasion Plan:

• Segment Invasion Plan provides marketers with a competitive assessment of current market segment activities.
• It also represents the probable market segment activities of the evaluating organization.
• In Market Targeting SIP means Segment Invasion Plan.
• SIP means a company would be wise to enter one segment at a time. Competitors must not know to what segments the firm will move next.

Additional Information Systematic Investment Planning- A Systematic Investment Plan (SIP), more popularly known as SIP, is a facility offered by mutual funds to the investors to invest in a disciplined manner. SIP facility allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme.

**Segment Investing Portfolio-**Portfolio Segmentation denotes the splitting of a Portfolio of financial assets into smaller components according to some defined characteristics.

Hence, the correct answer is Segment Invasion Plan.

The correct answer is Kurt Lewin.

Important Points  Force-field Theory:

• Kurt Lewin’s Force Field Analysis attempts to explain how the process of change works by diagnosing the driving and restraining forces that lead to organizational change.
• One side of the model represents the driving forces, and the other side represents the restraining forces.
• The driving forces push the organizations towards the new state, and the restraining forces are the factors that provide resistance to change or are regarded as the behaviors of the employees that block the process of change.
• According to Lewin, stability can be achieved when both the driving and restraining forces reach a stage of equilibrium, which should be approximate of equal strength from the opposite directions.

Additional Information Peter Drucker- 

• Peter Drucker revolutionized the approach to business management by suggesting that successful leaders should put people and ethics first rather than focusing entirely on profits and rigid rules and work structures.
• The pillars of Drucker’s theory of management are decentralization, prioritization of knowledge work, management by objectives, and SMART goals.

Joseph A. Schumpeter- Schumpeter believed that the was to introduce successful, well, innovations. The innovation theory of profit claims that the main function of an entrepreneur is to introduce, well, innovations which Schumpeter defined as any new policy that reduces the overall cost of production or increases the demand for products.

David C McClelland- David McClelland's Human Motivation Theory allows you to identify people's motivating drivers. This can then help you to give praise and feedback effectively, assign them suitable tasks, and keep them motivated.

Hence, the correct answer is Kurt Lewin.

The correct answer is Policy Documents.

Key Points

Opportunity Identification:

• Searching for a business opportunity that is right for them is the major challenge would- be entrepreneurs face.
• New startups always focus on introducing a new product or service based on an unmet need, select an existing product or service from one market and offer it in another where they are not available; and sometimes the firm relies on a tried and tested formula that has worked elsewhere in a franchise setup.
• Opportunity refers to the extent to which possibilities for new ventures exist and the extent to which entrepreneurs have the leeway to influence their odds for success through their own actions.

Important Points

• Identification and selection of an appropriate business strategy play a vital role in an organization.
• Sources of opportunity identification are Employees, customers, dealers, distributors, friends and relatives, competitors, technology etc.
• In general sense, the term opportunity implies a good chance or a favorable situation to do something offered by circumstances.
• Opportunity identification and selection are like comer stones of business enterprise. Better the former, better is the latter.

Hence, the correct answer is Policy Documents.

Key Points

 Note payable

Long-term liabilities also known as notes payable represent the debt a corporation has to its lenders. For example,  taking a loan from a bank, buying a car for business, etc. 

Important Points

• As Pearl company signed a note payable of 7000, it becomes the liability of the company to pay after the stipulated time.
• Hence, it will increase the liabilities by 7000 on Balance Sheet.
• And as, it is a business transaction leading to impact liabilities and assets, not shares, it will not impact the owner's equity in Balance Sheet.
• As Pearl Company purchased the asset (van) of 12000 by making a cash payment of 5000, it results in a decrease in cash by 5000 and an increase in assets by 12000. Hence, it results in net increase in assets by 7000.

This transaction does not have any immediate effect on owner's equity as capital is neither increased nor decreased.

Off-the-job training methods include Classroom lectures, films and documentaries, Audio-visual, Simulation and laboratory training, Vestibule training, job rotation, Case studies, Role-playing and Programmed instructions.

With the simulation and lab training method of off-the-job training, trainees get trained through equipment or a machine that resembles what they'd use in the field or on the job. The simulation method helps them prepare for handling the equipment and machines in real life. Role-playing involves realistic behaviour in a hypothetical circumstance. Vestibule training is provided to employees when new or advanced equipment or tools are introduced into the organisation to do a particular job by using them. Vestibule training allows employees to get a full feel for doing tasks without real-world pressures. New companies have come up with providing audio-visual material for students in their concerned subject.

Key Points

 Communication

• Communication is involves providing, receiving, sharing and exchanging Information.
• The practice of exchanging information between persons through a system of signs and symbols is known as communication.

Barriers to Communication:

• Communication barriers are the hindrances which can cause confusion and result in the transmission of false information, or miscommunication.

Types of Barriers:

1. Semantic barriers
2. Organisational barriers
3. Psychological barriers
4. Cultural barriers
5. Physical barriers
6. Physiological barriers

Important PointsPsychological barriers

• In psychological barriers, state of the mind of make it difficult for the sender or the receiver to comprehend the information being sent, which frequently results in misunderstanding.

Reasons of Psychological barriers

Lack of attention:

• Being inattentive or preoccupied with many circumstances such as fatigue, stress, anxiety, etc. may result inability to consciously monitor the conversation.

Premature evaluation:

• People's minds, filled with their own ideas and beliefs, making it challenging to interpret the information in right manner as they already made opinion about the information.

Poor retention:

• Brain do not remember all facts everytime. Additionally, the data stored in the memory is transient. So, with time, it gets lost.

Lack of reliance:

• Lack of interest causes communication obstacles, which lowers the quality of the information.

Hence, Psychological barriers in communication take place due to Premature evaluation, lack of attention, Poor retention, lack of reliance.

Key Points

Future exchange

• The buying and selling of a wide variety of commodities futures, index futures, and options on futures contracts take place on a futures exchange.
• Brokers and business traders who are members of the exchange are permitted access to the exchange.

Important Points

Novation

• A novation is an arrangement that permits bilateral transactions to be carried out through an intermediary, i.e. clearinghouse.
• Instead of dealing with buyers directly, sellers transfer their securities to the clearinghouse, which then makes them available for purchase by purchasers and vice versa.
• As a legal counter party, central clearing house acts a intermediator between buyers and sellers.
• The clearinghouse switches roles, becoming a seller to every buyer and a buyer to every seller.

Hence, Novation, a feature of future exchanges stipulates exchange becomes a counterparty for all trades.

Key Points

The correct match is given below:

Important Points Consequentialism Approach

• Thomas Hobbes and Ayow Rand support the consequentialism Approach.
• It is an ethical theory that determines whether or not something is morally correct based on its results.
• For instance, the majority of individuals concur that lying is ethically wrong.
• However, consequentialism holds that it is morally good to tell a falsehood if doing so will help save someone's life.

Deontological Approach

• William David Ross is best known for his significant contributions to moral philosophy.
• Deontologists include John Rawls as well. His book 'A Theory of Justice' makes the case that a wealth redistribution system should be established so that it adheres to a particular set of moral principles.
• According to the ethical theory of deontology, certain principles determine whether an action is good or evil.
• Deon, which means duty in Greek,
• According to it, only actions that are in sync with rules are ethical.

Natural law theory

• This is the theory propounded by Ronald F. White in 1891.
• According to the ethics and philosophy notion known as "natural law,", human beings have inherent values that guide their thought and behavior.
• According to natural law, people naturally possess these concepts of good and wrong; they were not developed by society or legal authorities.

Theological Approach

• Theology by Aristotle is the longest and most well-known text to have an Arabic translation of Plotinus' Enneads.
• Theology is the examination of religious experience, practice, and belief, especially the study of God and how he interacts with the world.
• As per Aristotle, God is responsible for all activities happening around the world.

Key Points The correct match is given below:

Important Points

 There are four approaches to Organizational Behaviour:

Interactionalism

• It is the psychological theory of organizational behaviour.
• The focus of interactional psychology is continuous, multidirectional interactions between individual and environmental factors.
• According to this viewpoint, researchers studying organizational behaviour should pay more attention to personal aspects that may be anticipated to moderate the effects of situational elements.

HR Approach

• It is also called the supportive approach.
• It says that humans are highly intelligent beings with a lot of potentials so, they should always be treated with respect.
• HRM is intended to maximize staff productivity and fulfilment while advancing an organization's overall strategic objectives.
• Here, the manager's job shifts from active control of the employee's development to performance.

Productivity Approach

• An organization's productivity, which is the ratio of output to input, is a gauge of its efficiency.
• It also demonstrates how effective the management is in maximizing human resource utilization.
• The higher the ratio, the greater will be the efficiency of the management.

Contingency Approach

• Also known as the situational approach, to management.
• It maintains that there is no one, universal guideline for the ideal way to run an organization.
• Therefore, it is the manager's responsibility to determine which approach will, in a specific situation, and at a specific time, best contribute to the achievement of the organization's goals.

The correct answer is (a) - (iii), (b ) - (iv), (c) - (i), (d) - (ii).

Key Points

Quality product certifications: 

• India has a comprehensive system of product certifications governed by laws made by the Parliament of India at various times.
• These certifications are managed by various agencies, and hold various statuses before the law.
• Some of these marks are mandatory for such products to be manufactured or to be placed in the Indian market while some of the marks hold only advisory status.

Important Points 

Hence the correct answer is (a) - (iii), (b ) - (iv), (c) - (i), (d) - (ii).

The correct option is New Product - New market.

Key Points

Ansoff Matrix:

• It is often called the Product/Market Expansion Grid, is a two-by-two framework used by management teams and the analyst community to help plan and evaluate growth initiatives. In particular, the tool helps stakeholders conceptualize the level of risk associated with different growth strategies.
• It features Products on the X-axis and Markets on the Y-axis.
• The Matrix is used to evaluate the relative attractiveness of growth strategies that leverage both existing products and markets vs. new ones, as well as the level of risk associated with each.

Important Points

Each box of the Matrix corresponds to a specific growth strategy. They are:

1. Market Penetration (Present Product - Present market):

• The concept of increasing sales of existing products into an existing market.
• For example, all telecommunication companies sell to customers in the same market.

2. Market Development (Present Product - New market):

• Selling in different geographical areas (new countries/regions).
• Selling through different sales channels (e.g., on-line)
• Selling to different demographic groups (e.g., by age or gender).
• However, if the company holds a large market-share for the specific product type, or has strong brand recognition, or a strong brand-range, then this strategy could work in its favour
• The aim is to increase sales by selling the same product in a new market.
• For example, Google focusing on the Chinese market.

3. Product Development (New Product - Present market):

• Focuses on introducing new products to an existing market.
• This adds value for customers, who may well buy your new product, even though they have the current version.
• Apple is a prime example of this

4. Diversification (New Product - New market):

• The concept of entering a new market with altogether new products.
• It is advisable to carry this strategy out as a supplement to the existing core business.
• Diversification may be organic or perhaps more usually results from an acquisition or merger.
• One of the most prominent examples of a diversification strategy is General Electric. Originally, the company was focused on electrical goods.
• For example, mergers and acquisitions. A merger occurs when two separate entities combine forces to create a new, joint organization.
• Meanwhile, an acquisition refers to the takeover of one entity by another. Mergers and acquisitions may be completed to expand a company's reach or gain market share in an attempt to create shareholder value.

Hence, it can be concluded that mergers and acquisitions are example of New Product - New market strategy of Ansoff (2 × 2) matrix.

Key Points 

Queuing Theory:

• The complete system of waiting in line is examined by queuing theory in operations research, encompassing elements like customer arrival rate, server count, customer count, waiting room capacity, average service completion time, and queuing discipline.
• Queuing discipline refers to the guidelines of the queue, such as whether it follows a first-in, first-out, prioritized, or serve-in-random-order system.

Important Points

• In Queuing Theory, statistical pattern by which customers arrive over a period of time follows Poisson distribution
• The number of customer arrivals in a specific time period is expressed as follows

\(P\left( X \right) = \frac{{{\lambda ^x}{e^{ - \lambda }}}}{{X!}}\)

where X=The total number of arrivals during the period

λ =the mean number of customer arrivals per unit of the time period.

Thus, in Queuing Theory, statistical pattern by which customers arrive over a period of time, follows Poisson distribution

Key Points 

Sampling

Sampling is a method of collecting data for research in which certain individuals or a small portion(subsets) of the population is selected that represents the whole population in order to draw conclusions about the population as a whole. 

Important Points

Stratified Sampling 

• In stratified Sampling, researchers split the population into homogeneous subsets (subpopulations/subgroups) called strata depending on particular traits such as gender, region, race, education, etc.
• The subsequent probability sampling procedure is used to sample from each subset in order to estimate statistical measures.

Hence, Homogenous subsets in the sampling are called Strata.

Additional Information Clusters

• In cluster sampling, the population is also divided into subgroups,
• but each subgroup should share the same or homogeneous traits with the larger sample.
• Then, the researcher can select a random subgroup by using a sampling technique for analysis.

Samples

• A sample is a group of people or objects used in the study that is taken from a wider population for analysis.
• It should be representative of the whole population for generalization of results.

Sample sizes

The no. of individuals or objects to be included in the study is known as the sample size(denoted by n).

Key Points

 Accounting concept 

Accounting concepts or principles are the necessary assumptions on which accounting is based. These constructs are basic principles that are universally applicable.

Important Points

Going concern concept

• Going-concern concept says that a company will continue its operation for a longer period for achieving its goals irrespective of the existence of members.
• For Example, the company records fixed assets in the company and raises long-term loans to repay them within a specified period, these are taken on this assumption.

Hence, the correct answer is Going concern concept.

Hence, according to Going concern concept it is presumed that business will continue its operations for long time.

Additional Information

Separate entity concept

• In accounting, the company is always considered a separate legal entity that has distinctive existence from its member.
• Hence, the money invested by the members or owners is considered capital invested and is recorded on the liability side of the Balance Sheet.

Realization concept

• According to this principle, revenue should be recognized or realized when it is earned irrespective of whether it is received or not.
• For example- when goods are transferred to the customer, the business is entitled to record the revenue in books of accounts even if the transaction is made on a credit basis.

Accounting period concept 

• The books of accounts are prepared for short periods of months or a year as per the accounting period concept.
• The period commences on 1^st April and ends on 31^st March.

Key Points

Capital Budgeting

• The procedure a company uses to assess potential big projects or investments is called capital budgeting.
• The assessment is made to analyse whether the project should be accepted or not.

Important Points

Net present value

• ​The difference between the current value of cash inflows and outflows over a period of time is known as net present value (NPV).
• To evaluate the profitability of a proposed investment or project, NPV is used in capital budgeting and investment planning.
• There is a possibility of variation in cash flow at different tenures.
• These cash flows are discounted based on the firm's cost of capital.
• It is compared with the initial expenditure.
• NPV= Present value of cash inflow - Present value of cash outflow
• If PV of Inflow > PV of outflow = Project accepted

NPV is considered the best method for leveraged projects due to following reasons-

• It considers cash inflows for all periods.
• It considers the time value of money.

Additional Information

Internal Rate of Return

• A technique that calculates the rate of return earned by a project.
• By analyzing cash flow and reporting an expected percent return, the IRR estimates the outcome of a project.
• IRR is the rate at which the NPV becomes zero.
• The rate of return at which the Present value of cash inflow = Present value of cash outflow, is considered as ideal rate
• A profitable project is one that can achieve this.

Accounting rate of return

• Accounting Rate of Return (ARR) is the annual percentage of the average net income generated by an asset divided by its average capital cost.
• It is used when a company is deciding whether or not to invest in an asset based on the expected future net earnings versus the capital cost.

Profitability index

• A measure of the attractiveness of a project or investment.
• **PI is calculated by **dividing the present value of future expected cash flows by the project's initial investment.

The correct answer is  (A), (C) and (D) only.

Key Points Market Segmentation:

Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or segments with common needs and who respond similarly to a marketing action.

Behavioral-based market segmentation:

Behavioral market segmentation refers to the process of segmenting a market on the basis of behavioral characteristics of consumers like the frequency of using a particular product, the loyalty of the customers towards a particular brand, benefits needed, during any occasion and behavior or attitude of consumers towards purchasing/buying a product/service. 

Important Points Benefits Sought - Grouping the data by benefits sought helps you narrow down the specifics of what drives customer purchases, revealing which product feature or service aspect they feel most attuned to.

Purchase Occasion - Occasion-based purchasing can also occur in a customer’s daily routine. Purchases like a happy hour round of drinks after work and a caffeinated morning drink are all types of occasion-based purchases as they are only bought at precise times.

Usage rate - Usage and purchase behavior relate to how customers use a product and how they behave during the decision-making process. The usage rate refers to the number of times the item is used.

Additional Information Lifestyle - Lifestyle segmentation is a type of psychographic segmentation that includes collecting insights about potential customers' habits and preferences. Lifestyle is what people value and how they choose to spend their money.

Hence, the correct answer is (A), (C) and (D) only.

Key Points

Financial Markets 

• Any location or system that gives buyers and sellers the ability to trade financial assets, such as shares, various international currencies, and derivatives, is referred to as a financial market.
• The connection between people with capital to invest and those who need capital is facilitated by financial markets.

Important Points Growth of Financial Markets Globally

• Before 1970, there were restrictions imposed on global trading as during the 1950s, there were restrictions imposed by the United States on capital movement at the international level.
• However, after the 1970s, there has been a rapid change in the beliefs and massive financial flows across international borders were produced by the interaction of multiple strong forces.
• Nowadays, the global financial markets are highly integrated and transactions have become extensively complicated.

Reasons for Such Growth in Global financial markets

Deregulation

• It decreases entry barriers into industries, which helps to enhance innovation, entrepreneurship, competitiveness, and efficiency.
• This results in reduced pricing for customers and better quality.
• Hence, it leads to more capital flow beyond geographical boundaries and more trade at the global level.

Information Technology

• Innovation in technologies has made it facile to collect, analyze and manage financial risk, price, and trade the sophisticated new financial instruments that have emerged recently,
• Managing sizable books of transactions across international financial centers in the whole world has been made easier which led to the development of global financial markets.

International Banks

• International banking facilities have emerged as a result of globalization and expanding economies worldwide.
• Foreign banks are very crucial for trade.
• They can make external financing more accessible to exporting businesses and aid in overcoming information asymmetries which leads to more trade at the global level.

Hence, the factors contributing to the growth of global financial markets are Deregulation, International Banks, and Information Technology

Additional Information

Currency fluctuations-False

• In international financial markets, there is always a risk of currency fluctuation.
• Currency exchange rates are constantly changing, which can be a significant barrier to commerce because the buyer may have to pay more than they expected.
• Hence, it brings losses to the buyers of securities and cannot bring growth in financial markets.

Key Points

Corporate Social Responsibility

• Corporate social responsibility is a business strategy that encourages businesses to work in ways that benefit society and the environment rather than harming them.
• It aids in enhancing enormous societal facets as well as enhancing the reputation of businesses.

Andrew Carnegie

• Andrew Carnegie, the creator of the multinational US Steel corporation (1835–1919) wrote the book 'The Gospel of Wealth', which was released in 1899.
• It contains the founding principles of CSR (Corporate social responsibility).
• The charity principle and the stewardship principle served as the foundation for Carnegie's perspective.

Important Points

Stewardship Principle

• The stewardship principle requires wealthy people and corporations to see themselves as stewards or caretakers of their assets.
• According to Carnegie, the wealthy should hold their wealth in trust for the rest of society and be free to use it for any worthwhile endeavors that society considers appropriate.
• But he also believed that business had a responsibility to increase its own riches through wise management of the resources it was entrusted with managing for society.

Charity Principle

• According to the charity principle, those in society who are more fortunate should help others who are less fortunate, such as the elderly, the disabled, the sick, and the unemployed.
• Through organizations like churches and settlement homes, these unfortunates might get direct or indirect assistance.
• Carnegie personally put his words into action by donating millions of dollars to philanthropic and public causes.

Hence, Andrew Carnegie's view on Corporate Social Responsibility, as reflected in his book, 'The Gospel of Wealth' is based on Charity Principle and Steward Principle.

Key Points

Foreign trade policy

• A system of rules guiding and regulating the import and export of commodities and services is known as the foreign trade policy.
• its other name is EXIM (export-import) policy.

Important Points

 Assertion (A): Foreign trade policy is an important instrument that incentivizes the exporters of the country.

• In Foreign Trade Policy, various financial aid provided by the Indian government to exporters,
• It includes low-cost loans, tax breaks, subsidies, and government-funded marketing campaigns,
• Thus, it lowers their overall export costs, and they are better able to set competitive prices on the international market.

Hence, the assertion is correct that foreign trade policy supports and benefits the exports of the nation.

Reasons (R): It is important for exporters of our country to have knowledge of foreign trade policy.

• Though it is crucial for exporters to have knowledge of all benefits provided by foreign trade policies.
• This is important to achieve the objective of export promotion.
• However, the reason is true but not a valid explanation of the assertion.

Hence, the correct answer is Both (A) and (R) are correct but (R) is not the correct explanation of (A)

Key Points 

Net Income approach of firm's valuation:

According to the theory, a company's value can be raised by lowering its total cost of capital, which is calculated using the weighted average cost of capital. This can be accomplished by using more debt, which is a less expensive form of funding than equity.

Important Points Assumptions 

• Diminishing debt will not change the confidence/perception of the investors
• There are no expenses like the cost of floatation, transaction cost, or corporate dividend taxes.
• Cost of raising debt is cheaper as compared to cost of equity due to tax benefit
• All investors have access to information about all important companies since the capital market is functioning flawlessly
• All investors are rational and seek to minimize risk while maximizing profit.
• Uniform dividend payout ratio i.e. 1 must be used by all businesses
• In theory, debt and equity are the only sources of funding that are taken into account.

Weighted Average Cost of Capital

 WACC, or weighted average cost of capital, is the cost of equity and debt divided by the total amount of capital raised from all sources.

\(WACC = \frac{\text{(Required rate of Return}\times {\text {Amount of Equity})+}\text{Cost of Debt} \times{\text{Amount of Debt}}}{Debt + Equity}\)

Key PointsCredit terms

• Credit terms detail the standard payment terms that the business will accept from its clients as well as the conditions under which different terms may be permitted.
• It includes discounts for early payments etc.

Here, credit terms are mentioned in which  2/10 means if the customer makes an early payment within 10 days, he is entitled to receive 2% discount on the same, and otherwise, net 30 states that the credit amount is due for 30 days and it is to be paid within this specified period. 

Additional Information

 Credit policy

• A credit policy is a collection of guidelines that specifies how your business will extend credit to customers and pursue overdue debts.
• Dictates whether credit should be extended or not

Credit standards

• Credit Standard refers to the criteria that are periodically established by the Authority for Lending.
• It gives rules or requirements that are to be met while extending credits.

Collection Policy

• A collection policy is a set of guidelines a business adopts to guarantee the payment of receivables.

The correct answer is Risk free asset.

Key Points

• Portfolio theory identifies the efficient asset combination to offer a high rate of return.
• The capital market theory states a trade-off between risk and returns so the major factor to develop capital market theory is to find out a risk-free asset by trading off between risk and return.

Additional Information Capital Market theory:

The capital market theory extends Markowitz's model to a situation when a risk-free asset is introduced in the capital market.

It also assumes that investors are rational and mean-variance optimizers as assumed by Markowitz's Portfolio Theory.

The capital market line is given in the following equation:

E (Rp) = Rf + [E (Rm) - Rf. σp σm

where E (Rp) = expected return of a portfolio

Rf = risk-free rate of interest

-E (Rm) = expected return on market portfolio σp = standard deviation of the portfolio σm = standard deviation of the market portfolio

Portfolio Theory:

The modern portfolio theory (MPT) is a practical method for selecting investments in order to maximize their overall returns within an acceptable level of risk. This mathematical framework is used to build a portfolio of investments that maximize the amount of expected return for the collective given level of risk.

Hence, the correct answer is a Risk-free rate.

Key Points

Merger:

• A merger is a corporate transaction in which two currently operating, independent firms come together to form a single, new legal company.
• Example-Vodafone and Idea Merged and made VI Company
• Here management plays a crucial role while making merger decisions
• Sometimes they commit some errors as well which results in losses.

Important Points

Hubris Hypothesis

• Hubris is taken from the Greek language which means "animal spirits" and has a dictionary meaning of "excessive pride and enthusiasm."
• As per the Hubris hypothesis, managers become overly optimistic while assessing potential targets because of their own overconfidence in their capacity to make wise decisions.

Hence, when managers commit errors of over-optimism in evaluating merger opportunities due to excessive pride or animal spirit is termed as Hubris Hypothesis.

Additional Information

Managerialism

• According to managerialism theory, managers' pay is a function of the size of the company.
• Hence, they aim to grow the company further.

Information Signaling

• The revaluation of a company's own shares in light of fresh knowledge produced by the merger process is referred to as informational signaling.
• Management usually has the chance to share inside information with investors so as to incline share price.

Sitting on gold mine

• It is a type of information signaling.
• the merging activity leads to the distribution of new information and let the market estimate that bidders have superior information.
• Once the announcement of merger activity has been made, the market may automatically revalue any previously "undervalued" shares of the bidder company.
• Theoretically, knowing that the "target firm is undervalued" makes a bidder more likely to engage in merger or acquisition activity.

The correct answer is (A), (C) and (D) only.

Key Points Retailing:

• Retailing is the distribution process of a retailer getting the goods (either from the manufacturer, wholesaler, or agents) and selling them to the customers for actual use.
• In simple terms, retailing is the transaction of small quantities of goods between a retailer and the customer where the good is not bought for resale purposes+.

Important Points

• Retailing firm is an intermediary part of the distribution channel and has no control over Brand building decisions only can control location decisions for the distribution, Merchandise mix decisions, and target market selection decisions for the distribution of the product.
• The main purpose of a retail firm is to increase sales and earn high profits. So their focus is only on activities that increase sales.
• The important strategic issues for a retailing firm are location decisions, merchandise mix decision, target market selection etc.

Hence, the correct answer is (A), (C) and (D) only.

The correct answer is (A) and (C) only.

Important Points 

• Autonomation is “intelligent automation" or "Automation with a human touch.
• In order to ensure only good units flow, first, automation should be replaced with autonomation and human general errors should be avoided.
• Baka-Yoke is a manufacturing technique of preventing mistakes by designing the manufacturing process, equipment, and tools so that an operation literally cannot be performed incorrectly; an attempt to perform incorrectly, as well as being prevented, is usually met with a warning signal of some sort.

Additional Information Automation - Automation is completing a task with machines and minimal human effort.

Kaizen- Kaizen is helpful for betterment and improvement but not materially helpful to ensure 100 percent good unit inflow. Kaizen means “improvement” and it focuses on quality improvement.

Hence, the correct answer is (A) and (C) only.

The correct answer is (A), (B) and (D) only.

Important PointsProperties of point estimation are:

1. Efficiency: It is a quick method of testing the two unbiased estimators for a parameter so as to which of the two is better.

2. Consistency: It defines the intimacy of the point estimator to the real value of the parameter as it(point estimator) gets large.

3. Unbiasedness: unbiasedness in point estimator is when the expected value of the point estimator is equal to the population parameter

Hence, the correct answer is  (A), (B) and (D) only

Key Points

Collection of data

Data collection is the process of compiling precise data from numerous sources and evaluating it to identify possibilities, and solutions to research problems, as well as to assess potential consequences.

Two methods of data collection:

1. Primary data
2. Secondary data

Important PointsPrimary data collection:

• The process of collecting primary data entails getting information directly from a first-hand source.
• It refers to information that has never before been used.
• Surveys, interviews, observation, and focus groups are examples of methods.

Primary data collection methods:

Observation:

• Researchers use this technique to observe their surroundings and document their results.
• It can be used to assess how various people behave in scenarios that are controlled i.e. everyone is aware that they are being watched and uncontrolled which means no one is aware that they are being watched.
• Example- The behaviour of customers in the market is observed to know the trends of the market.

Experimental method:

• As a researcher, you can modify some variables and track their effects on other variables through an experiment.
• The variables that change due to manipulation are known as dependent variables, whereas the variables that are manipulated are known as independent variables.
• Example- The taste (dependent variable) of plain tea is judged by using different levels of sugar (independent variable).

Survey method:

• The survey method gathers data from a population on their beliefs, actions, and knowledge.
• It can be done through questionnaires, in-person or phone interviews, electronic (e-mail or internet) surveys, etc.

Hence, these three methods are primary methods that collect first-hand data directly from the respondents are Observation, Experimentation and Survey method.

Additional Information

Secondary data

• Secondary data is information that has already been gathered by another party.
• A researcher can just utilize it for his own purpose.

Corporate Database

• A type of secondary data
• The data collected by corporations and made available on the websites so that researchers can use the same for analysis and research.

Key Points

 The correct match is given below:

Important PointsBird-in-the hand argument

• Myron Gordon has elaborated the Bird-in-the hand argument Theory.
• According to him, with time, uncertainty grows, and this is true for dividends as well.
• Therefore, the likelihood of receiving a guaranteed return or a larger payout decreases as the level of uncertainty associated with distant distributions rises.
• As a result, risk-averse investors want to get dividends soon rather than later and do so by applying a smaller rate of return discount.

Irrelevance of dividends

• One of the most popular concepts in dividend valuation is the Miller and Modigliani dividend irrelevance model.
• It claims that a company's dividend payout has no bearing on its company valuation.
• Even if dividends are paid or kept by the company for an endless period of time, the value of the company will not change.
• They argued that a company's dividend policy had no bearing on the price of its stock or its values.

Interdependence of investment and dividend decisions

• One of the most significant dividend theories in financial management is Walter's model.
• The model, put out by Professor James E. Walter, contends that a company's dividend policy is a sign of future worth.
• Due to the fact that dividend payments are based on earnings, the dividend distribution might reveal how highly a company was valued.

Tax considerations in dividend decisions

• Professor John Lintner of the Harvard Business School developed the Lintner's Model after speaking with 28 significant companies.
• Dividends are made to shareholders by distributing the organization's annual profits.
• Cash, shares, and real estate are all included in the common dividends issued.
• A dividend policy in a cooperative organisation is extremely delicate and intricate.
• To illustrate how dividend policy behaves, Lintner devised the dividend model.
• The model takes into account recent earnings and prior dividends as the two primary factors of dividend distribution.
• The model predicts that if a company sticks to its goal payout ratio, the dividend will fluctuate along with earnings.
• The lagged dividend (the dividend from the previous year) plus the current net income after taxes make up the dividend payout.

The correct answer is CLV (1) = m × \(\frac{r}{1+d}\)

Key Points Customer Lifetime Value (CLV) is the total predictable revenue your business can make from a customer during their lifetime as a paying customer. The importance of Customer Lifetime Value can be attributed to:

Identify high-value customers - 

• There are called high-value customers or customers having high Customer Lifetime Value (CLV).
• By calculating the CLV of each customer and ranking them by the results, we can identify the high-value customers.
• The higher the CLV, the more valuable the customer.
• Hence, measuring CLV helps you to build out product knowledge and tailor the marketing and sales activities to maximize the likelihood of acquiring and retaining such high-value customers.

 Build Brand Loyalty - 

• Brand loyalty is one of the important and most challenging strong points for a business to achieve.
• The CLV provides a better dimension to customer relationships by making businesses aware of a customer’s worth, especially those considered loyal having high CLV.

Important Points

The formula of CLV - CLV (1) = m × \(\frac{r}{1+d}\).

m = The margin contribution per customer

r = retention rate

d = discount rate

where, 

m = The margin contribution per customer is calculated= Gross margin* Average total revenue per customer

r = (Customers at the end of the month- customers acquired during the month)/ customers at the beginning of the month × 100

Hence, the correct answer is CLV (1) = m × \(\frac{r}{1+d}\).