Transcript Chapter_01

Chapter No#01
INTRODUCTION TO BUSINESS
In every day life the people
perform different activity. All
such activities are classified into
two major categories.
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INTRODUCTION TO BUSINESS
1) Economic activities: Economic activities are those
which are inspired by the objective of earning money;
this is required by people to satisfy their day to day
needs of life. For example Business, profession and
employment are the major types of economic
Activities
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INTRODUCTION TO BUSINESS
2) Non-economic activities:
All those activities which are inspired by many motives Other
than earning money. For example family-obligation activities,
religious activities and social welfare activities
Business:
Business is that economic activity which consists in providing
goods or Services for the satisfaction of human wants on a
systematic and regular basis; with View to earning profits.
OR
Any legal activity to earn money is called business.
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Characteristics of Business
1) Deals in goods and services:
Every business enterprise whether it is carried on a
small or a large scale deals in goods and services. The
good may be consumer goods.
Or capital goods or it may be in the shape of services.
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Characteristics of Business
2) Production / exchange of goods:
An important characteristic of business is that it
Involves production or exchange or sale of goods
and services for earning of money.
3) Desire to earn profit:
The primary purpose of the business is to earn
profit. With out Profit the business cannot survive.
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Characteristics of Business
4) Must be legal:
The business must be legal. It must be according to
the rule and Regulation of the country.
5) Involves element of Risk:
There is an element of risk and uncertainty in every
Business.
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Private sector Organization:
The Private sector organizations/ enterprise are those
organizations that have a clear aim of seeking profit for
their owner.
Public sector Organization:
Public sector organizations are those that are run by the
state. These are the nationalized industries. These
organizations are owned by the state on behalf of the
community and their objective is to provide a service
rather than a profit for the owner.
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Types of Business Organization
1)
Sole
trader
:
2) Partnership
3) Limited liability Company
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1) Sole trader:
A business owned by a single person is
called sole proprietorship or Sole trader.
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Photo by Francesco Maldovian
Characteristics of Sole trader
1) Owner ship: The business is owned by
a single person.
2) Finance: Only the owner is responsible
for providing finance.
3)Management and Control: The owner
has full control overall activities of the
business.
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•Risk: The proprietor himself bears all the
risk. No body else has any stake in the
business
•Profit and Loss: The Sole Proprietor enjoys
all the profits; he or she is personally liable
for all the debts of the business.
:
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Partnership: “Partnership is the relation
between two or more than two persons (but
not more than 20) who have agreed to share
the profit of a business carried on by all or
any one of them acting for all”
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Elements of Partnership
1) Association of at least two persons: there
must be at least two persons to form a
partnership.
2) Contractual relation: Their must be an
agreement between the partners.
3) Earning of profit: the agreement must be to
share profit/ loss of a business.
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Partnership deed:
An Agreement in written form is called partnership
deed. Partnership deed is a document which is signed by
all the partners.
Partnership deed contains the following points.
1) Name and location of the business.
2) Nature of the business
3) The amount of capital put into the business by each
partner.
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4) Method of sharing the profits and
losses of the business.
5)The role of each partner.
6)Retirement and admission of a new
partner.
7)Length or life of the business.
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Limited Liability Company (Joint
Stock Company):
A legal Entity distinct from the share holders who own
the company.
•A company has a separate legal status.
•It can make a contract.
•It can sue and be sued.
•The share holders enjoy limited liability.
•The company can own and hold property in its own
name.
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Registration of company:
There are three basic documents require for a company registration:
1) Memorandum of Association: it is also known
as a charter of the company. It contain the
following information
•Name of the company
•Location of the company( state, province, city )
•Objectives of the company
•Capital of the company
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Articles of Association:
• Articles of Association define the rules and
regulation of the company. It contains the
following information.
• Amount of share capital issued.
• Rights of shareholder regarding voting,
dividend.
• Rules regarding appointment of directors
• Number, Qualification and powers of the
directors.
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Classification of Company:
• Private Limited Company:
The Company that cannot issue the
share to the general pubic. The
minimum number of member must two
and the maximum number of member
cannot exceed fifty.
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Public Limited
company
• The company that can issue the share to
the general public. The minimum
number of member seven and there is
no limit for maximum number of
member but cannot exceed the number
of share.
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Annual general meeting
• According to company ordinance section 158,
every company will conduct a general meeting
of its member every year. The notice of the
annual general meeting shall be sent to
shareholders at least 21 days before the date of
the meeting. The annual general meetings,
shall in the case of a listed company, be held
in the town in which the registered office of
the company is situated.
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Conti…..
• According to company ordinance
section 305, a company may be
wind up by the court if it does
not hold two consecutive annual
general meetings.
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Extra-Ordinary general
meeting:
All the meetings other than annual
general meeting are called extraOrdinary general meeting. The
directors may at any time call an extraordinary general meeting to consider
any matter which they think it
necessary. Or it may call at the
shareholder request.
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Annual reports of Companies:
The Annual report is the source of providing
information to the shareholders and other
interested parties. Annual report is a requirement
of:
• The Company Act , according to company law
company is liable to prepare the annual report.
• Professional accountancy standards, mean for
external auditors.
• Stock exchange requirement, company also
forward their annual report to stock exchange
market.
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The Annual reports of a company consist
of:
1) Financial statements
a) Balance sheet, it shows company financial position. At
specific date. Simply we can say it provide information
regarding company assets, liabilities and owner equity.
b) Profit and loss account/ income statement. It shows
profit and loss of the company during a given time
period.
c) Cash flow statement. It show the inflow and out flow of
cash in the organization.
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The Annual reports of a company
consist of:
2) Reports from:
a) The Chairman
b) The Directors
c) The Auditors
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1) Chairman’s report:
The Chairman’s report will include the
following items:
1) A review of results, including information on
divisional and product performance. To know
about total assets of the company, liabilities,
owner capital.
2) A summary of the financial results. Either we
are going profit or lost.
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3) Statement of dividends payment. It provide
information regarding dividend that how much
dividend they are going to pay to share holder
and when did they will pay the dividend.
4) Details of acquisitions, how much assets we
acquired. eg machinery, equipments, building,
vehicle etc.
5) An explanation of steps taken to improve
efficiency mean future planning.
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2) Directors Report:
1) The director’s report, separate from the
chairman’s report. It contains the following
items:
2) Review overall activities of the business. A brief
review regarding overall activities of the business
e.g which unit of the business generate revenue
3) Details of changes in fixed assets. Fixed means
those assets which life is more than one year.
How much change occur in these fixed assets.
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4) Future research and development in the
business. Report regarding future
planning.
5) Details of the shareholders. How many
shareholder the company have.
6) A statement of the company polices.
Company rules regulation.
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3) Audit report:
It verifies the financial statements. It is
prepared according with the
Companies Act and that they give a
true and fair view of the company’s
affaires. To find out that the financial
statement is fair, reliable.
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Franchise:
A Business in which right are
purchased for selling goods or
services under specified trade name
and with in a specified geographical
area. The location should be specified
from franchisor to franchisee.
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Conti
The company that provide license is
called franchisor and those who
want to buy their license is called
franchise. It is a contractual
relationship between franchisor and
franchisee.
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Termination of business enterprise
(activity):
Termination mean’s winding up business
enterprise. A business enterprise involves
challenge and risk.
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Conti
It is necessary for entrepreneurs to be optimists
(positive thinking), to make such strategies to
overcome problems and achieve the objectives of
the organization. But a large numbers of business
enterprises suffer decline and many of these will
be forced in closure.
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Symptom of declining
1) Falling profit margins.
2) Increased debts.
3) Decreasing liquidity means decrease in your
current assets. Liquidity means anything that
easily converts to cash, bonds, shares etc.
4) Falling sale volume.
5) High labor turnover.
6) Falling market share: Decrease in number
customers.
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Major causes of failure
1) Failure in marketing process;
2) Competition;
3) Lack of managerial skill;
4) Lack of finance;
5) Poor decisions;
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Bankruptcy:
when a business is unable to pay its
debts than the court declare it as
bankrupt. And ordered to sell out
all available assets of the business.
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Division of Business or Components
of Business:
The scope of business is very wide. It
covers activities related to
production and distribution of goods
and services with an aim to earn
profit. The business activities are
usually divided into two parts.
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CHAPTER NO =02
Industry and Commerce.
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a) Industry
The term “industry” refers to that part of
business activity which is concerned with the
extraction (pulling out, with draw),
production of products.
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Conti
The products which are produced or
processed by an industry may either be
used by the final consumer or by another
concern for further production. One is call
consumer products another is call producer
or industrial products.
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Types of industry:
1) Extractive industry: Extractive industries are
those industries which extract or produce raw
material from above or below the surface of the
earth, e.g Mining (Coal, petrol, gas etc),
fisheries (Fish form) forestry (Furniture),
Agriculture (Fruits, vegetables)’ are some of
the examples of extractive industries.
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2) Genetic industries:
Those industries which are engaged in
reproducing and multiplying certain species
(types, kinds) of animals and plant and selling
them in market for profit are named as genetic
industries. These include cattle breeding forms
like Australian cow, poultry farm, plant
nurseries.
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3) Constructive industries:
Constructive industries as the name
signifies are engaged in the
construction of building, canals,
bridges, dames, roads etc.
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4) Manufacturing industries:
Manufacturing industries are those which are
concerned of converting raw material or semifinished products. Like garments industries,
shoes industries, cold drink industries.
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Service industries:
• These industries are engaged in
creation of intangible goods which can
not be seen or touched. The provision
of services of professionals such as
doctors, lawyers, etc are example of
service industries.
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B) commerce:
Commerce is a very important part of business.
It is concerned with the buying and selling of
goods. It include all those activities which are
related to the transfer of goods from the place
of production to the ultimate consumers.
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Categories of Commerce:
Commerce can be classified into
two categories.
a) Trade:
b) Aids to trade:
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a) Trade:
• Trade means buying and selling of
goods. It is the exchange of goods and
services among buyers and sellers in
which both the parties (sellers and
buyers) are benefited.
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Types of trades:
• Trade may be classified as:
• a) Internal Trade
• b) External trade
• c) Whole sale trade
• d) Retail Trade
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a) Internal Trade:
The buying and selling of goods
with in the boundary of a country
is called internal trade
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b) External trade
When there is any purchase and sale of
goods between two countries is foreign
trade, or when your trade cross the
national boundaries that’s called
external trade.
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c) Whole sale trade
Whole sale trade involves the
purchase of goods in large quantities
from the producers and they resale
to retailers. The retailers sells those
goods to consumers.
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d) Retail trade
Retailing consists of all the activities
which are related to sale of goods
and services to the final consumers,
here goods are sold in small
quantities to the consumer.
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b) Aid to trades:
• The activities which facilitate in the purchase of
goods and services are called aids (help) to trade.
The aids which are essential for the expansion of
the trade are,
• I) Transport
• ii) Insurance
• iii) Ware housing
• iv) Banking
• V) Advertisement
• Vi) Mercantile agents
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I) Transport
The different means of transport e.g
railways, ships, airline and road
transport etc. Help in carrying goods
from the place of production to
centers of consumption.
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ii) Insurance
• Insurance is another important aid to trade.
The risk of damage of goods due to fire,
floods, earth quake, accident s are covered
by insurance. Insurance thus helps in the
expansion of trade. The amount which paid
by the traders to the insurance companies is
called premium.
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(iii) Warehousing:
Warehousing is a kind of storage. Nowadays
most of the goods are produce in
anticipation (expectation, hope) of demand.
They are stored in safe places and released
as and when demanded in the market .
Warehousing thus help in our coming the
barrier of time and creates time utility.
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iv) Banking:
The commercial banks play an important role
in financing the various trade activities.
They finance the traders for stock holding
and transportation of goods. They provide
loan to traders for various activities.
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v) Advertisement:
Selling of goods is the most important and difficult
problem for the manufacturer. Advertisement
about the product through newspapers,
magazine, radio, television etc. has greatly helped
the consumers in choosing the goods of their
tastes. The consumer come to know about the
quality and price of the good in a short time and
pick up the product that suits them.
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 Vi) Mercantile Agents:
• These are those brokers who acts as agents
between the producers and the consumers.
They bring the sellers and buyers of goods
together and help them in completing
transaction of goods. These agents acts for
commission .
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CHAPTER NO=05
• MARKETING RESEARCH.
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Marketing Research projects:
• Marketing research consist of projects
to answer of managerial questions.
The result of projects may be used to
make particular decision. Marketing
Research is usually done for the
problems that occur for the first time
as well as occur regularly.
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Conti
• For example before launching a products the company
will try to know about the current product and market
situation, it competitor, consumer buying behavior etc.
Marketing research is also done by the companies
after launching the products in order to know the
performance of the different products in different
areas, i.e. the products launched by the company, so
marketing research give a clue to the company that
what kind of changes are there to be include into the
products.
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Marketing Research
projects
Define the objective
Conduct situation analysis
Conduct informal investigation
Further
Study
nNo
Needed?
End Project and
Report Results
Yes
Plan and conduct formal investigation
Analyze data and report results
Conduct follow-up
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Marketing research Project is usually
categories in six steps.
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1) Define the Objective:
It means what is the objective of the project? What
we expect from conducting the project? Usually
research is conducted by someone other than
marketing managers; it is usually used to solve the
problem which may relate to identify the current or
expected position of the market or product. For
example if TOYOTA want to launch a new model of
its new car so Marketing Research is required to
know about the performance of the previous cars
and what kind of changes customer need in that
model.
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2) Conduct a Situation
Analysis:


In this second stage the researcher tries to identify
the surrounding of the problem which includes
market, competitor, and the whole industry.
Situation analysis is the background investigation
which refines or shows the clear picture of the
problem.
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Conti
Here information is obtained by mean of library (if
some data is available regarding this type of problem or
any previous research for this problem is available),and
information from company officials.
In this step researcher defines the problem and develop
hypotheses, hypothesis is the supposition or idea of the
researcher which would suggest a possible solution. For
example young people spent more money on clothing
or education or entertainment.
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3) Conduct an informal
investigation:
After the recognition of the problem, the researcher
will try to collect primary data, which is normally
collected from the company (people inside or
outside the company), middlemen, and
advertisement agencies and in the last from the
customers.
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Conti
It is critical stage which tells the researcher whether
to go ahead or not, means to continue his study or
not.
Mystery shoppers are also used, which are sometime
company top officials visited their own stores or
branches to know about the behavior of the sale
staff, or the behavior of the consumers for their
products.
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4) Plan and conduct formal investigation
• If the researcher wants to continue his or her
study for the project then what kind of
information is needed and how to collect it.
• Select the sources of information i.e. primary or
secondary data. Researcher use primary data for
the current project and secondary data which are
already gathered for some other purpose.
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Source of secondary data
• Researchers use to collect this kind of data
from:
1) Firms reports.
2) Firms web site
3) Reports of the professional organization
related to the research, universities, business
publications or magazines like business recorder
etc, or any good library.
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Sources of Primary data:
• Researcher use primary data when
secondary data is not available or not
sufficient for the research purpose, than
researcher obtain primary data by
interviewing customer, sales people, and
distributors.
•
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Conti
• Every method has its own strength and
weaknesses so that is why more than
one method may be used. For example
observation may be used to develop
hypotheses about customers, shopper’s
behavior and a survey may be used to
test these hypotheses etc.
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Primary Data-collection
Method:
• There are three widely used methods
of gathering primary data:
i) Observation
ii) Survey
iii) Experimentation
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i) Observation
• In this method data is collected by observing the
action of a person. Information may be gathered by
personal observation or mechanical observation. In
personal observation researcher acts as a customer in
order to know what brands sales people and customer
prefer. In mechanical observation scanners are used in
retail stores to record purchase, eye cameras which
record people response that how they behave while
purchasing.
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Merits of observation method:
i) In observation methods usually the parties
being observed are unaware that they are
being observed so they behave normally.
ii) It can provide highly accurate data about
behavior in given situation.
iii) Observation methods eliminate bias
result.
iv) There is no direct interaction between the
observer and observe, so researcher can
observe them for a long time.
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Demerits of observation method:
i) It tells us the reason “what happens”
but it cannot tell “why” it happens.
ii) Observation cannot explore the
attitude, opinion, knowledge,
personality.
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ii) Survey method:
• A survey consists of gathering data by
interviewing people. Researcher can
conduct it by contacting a person by
telephone, mail, or internet. The
advantage of survey method is that
information comes directly from the
people you are interested in.
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Types of survey method:
i)
Telephone survey: In this we can contact people more
rapidly as compare to other sources. Fewer interviewers can
contact many people within less time.
•
Limitation of telephone survey:
i) The time is very short for this type of survey. Due to which the
researcher cannot gather accurate information.
ii) It also difficult to keep the contact number of all customers to
whom you are going to find information.
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2) Mail survey:
• it is a type of survey in which the researcher send a
questionnaire to potential respondent , in which the
researcher write different types of questions regarding
their research and ask them to complete that
questionnaire and then return it back.
• Traditionally in this type of survey the questionnaire is
sent by post but now internet is mostly use for this
purpose. In this survey, because of absence of interviewer
the answer are more likely to be frank and honest.
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3) Internet survey:
• In research internet plays an important role.
And researcher takes a lot of information from
internet. A lot of important information is
present on internet. And the researcher can
easily access the data. The reply of respondent
is also quick on internet and low cost occurs
on this type of survey.
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Experimental Method:
An experiment is a method of gathering primary data in which the
researcher conducts an experiment to gather data for their
research. For example the researcher compares various bundles of
product to see the response of customers. That which product they
give prefer and why. Another example of experimental method is
that if a product is not selling in the market. Now the researcher
conducts an experiment to reach a final conclusion. In this they will
test different things. For example they will bring some changes in
the quality, that either it is due to quality, sometime they change
the shape of the product to solve the problem. Like these the
researcher conducts experiment to reach a final conclusion.
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•
5) Analyze the data and present
a
report:
Here the researcher will analyze all the data that they gather from
primary source as well as from secondary source. The research will
be accurate if the data is correct and according to requirement of
research. After analyzing the data than they come to the conclusion
about the problem. That where the problem exist. Than they give
recommendation based on their research. That how they can solve
these problems.
• Conclusion and recommendation is an important step in research
project. If the researcher did not give conclusion and
recommendation than the research will be aimless.
• After finding the conclusion and recommendation than the
researcher forward their research project to their supervisor in a
final shape.
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6) Conduct a follow up:
• Researchers should follow up their
studies to know whether their result and
recommendations are being used are not.
With out follow up, the researcher has no
way of knowing that the project is on
target or not.
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ETHICAL ISSUES IN
MARKETING RESEARCH:
Through Marketing research, companies learn
more about consumer needs, wants and demands,
resulting in more satisfying products and services
and stronger customer relationships. However the
misuse of marketing research is also harmful.
Marketer face increasing variety of ethical issues
related to the collection and use of research
information. Some of them are as following.
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1) Privacy in data collection:
During the research, the researcher use
different type of methods for collecting data.
Like observing customers with the help of
hidden cameras, or collecting data through
scanners, through credit cards or check
cashing records. But to collect data through
such a way is unethical. Because the person
did not aware about it. And the researchers
follow him. Means they are interfering in their
personal activities. Which is unethical?
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2)Privacy(confidential)
in data use:
During the research the researcher collect a lot of information
regarding their customers. But some time these information goes
into the hand of other people and they misuse it. Which is
unethical? For example when a research conduct a research
regarding their product. They collect different information from
different type of people. When an organization publish their
annual reports. Sometime they mention regarding that
information. And when it goes into the hand of other peoples and
they misuse it. Which is unethical. So care must be taken that the
data will not be misuse.
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3)Intrusiveness
(disturbance , interference):
• All marketer research wants to gather data through different
sources from their customers. But sometime it create problem
for customers and the researcher disturb them. Which is
unethical? For example telephone surveys sometime disturb
people. If telephone survey conduct around dinner time. Which
disturb the interviewer? Like the researcher try to collect data
during the purchasing time. Which disturb people and this is
unethical. Another example is that if the researcher sent a
questionnaire to a person at working time. Which disturb the
individual?
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4) Deceptive(deceiving)
implementation:
Sometime the researchers collect data for their
research through a wrong way. Like a researcher
went to a shopping center want to collect
information. He acts like a customer and asks
different questions from his fellow shoppers
regarding their view about the product. Which is
unethical.
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5) False representation:
Sometime the researchers present false
description in front of their customers. For
example a researcher comes in front of a
customer and tells him that he want to collect
some information regarding the product. But
after securing the cooperation of consumer. He
attempt for the sale of their product or request
for donation. This is unethical?
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CHAPTER NO =06
Product and the product Mix:
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Development of new product:
The development of a product can be possible
through product improvements, product
modifications and new brands through the firm’s
own Research and development efforts. Product
development is most important due to the rapid
change in consumer tastes, technological
development and competition in the market.
That’s why companies try to bring some innovation
in their products that attract customers toward it.
Every company tries to bring some changes in their
product to compete in the market.
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New product strategy
• To achieve strong sale and healthy profit
every producer of business goods or
consumer goods try to develop such a
strategy through which they capture the
market and gain competitive advantage.
• And this strategy should guide the producer
in every step in the process of developing a
new product.
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New product development process:
1) Idea generation:New product development starts with idea
generation. The systematic search for new
product ideas.
Major source for new product ideas include
internal sources and external sources.
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a) Internal idea sources:
Using internal sources, the company can find
new ideas through formal research and
development; it can be obtain from the
executives, scientists, engineers,
manufacturing staff and sales people.
Some companies have developed successful
“entrepreneurial” that encourage employees
to think up and develop new product ideas.
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b) External idea sources
Good new-product ideas also come from
customers. The company can analyze customer
questions and complaints to find new products
that better solve consumer problems. The firm
can obtain new ideas from competitors,
distributors and suppliers these are also the
main source of new ideas for the firm. Other
ideas sources include trade magazines,
seminars, new consultants, and advertising
agencies.
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2) Idea screening:
Screening new-product ideas in order to select
good ideas and drop poor one as possible.
The purpose of idea generation is to create a
large number of ideas. In idea screening the
firm selects the best one which is according to
the situation and demand of customer.
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3) Concept development and testing
After development of idea and than screening
the next step is to develop concept from that
idea they have generated. Means the idea that
present in their mind convert it into meaningful
form. Concept development means that how the
idea should be converted into practical form to
bring innovation in the product Concept
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Concept testing:
Testing new product concepts with a group
of target consumer to know about their
response to the product. Here at this stage
the firm presents their product just for
testing in the market. That how the
customer give response to their product.
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4) Marketing strategy development:
Designing a marketing strategy for a new
product based on the product concept and
testing. Here the firm prepares marketing
strategy that how they promote their
product with the passage of time. What will
be the price, distribution channel, of the
product?
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5) Business Analysis:
It is the review of the sale, cost and profit for
new a product to find out whether these factors
satisfy the company objectives. If they do, the
product can be move to the product
development stage. To estimate sale, the
company might look at the sale history of similar
products and conduct survey of market opinion.
After hat they estimate minimum and maximum
sale to assess the range of risk. After preparing
the sale forecast, management can estimate the
expected costs and profits for the product.
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6) Product Development:
Developing the product concept into a
physical product in order to ensure that the
product idea can be turned into a workable
product. At this stage the organization decide
to launch their product. The idea that they
generate now the organization gives a
practical shape.
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7) Test Marketing:
Here the firm tests their product into market.
To know about the response of the customers.
Test marketing gives the marketer experience
with marketing the product before going to
great expense of full introduction. It lets the
company test the product and its entire
marketing program, like , advertizing strategy,
distribution, pricing, packaging etc.,
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8) Commercializing:
Test marketing gives management the
information needed to make a final
decision about whether to launch the
new product. If the company goes ahead
with commercialization, introducing the
new product into the market. Here the
company decides to launch their
product.
107
Producer’s Criteria for New Products
development:
Here are guidelines that some producers
use for development of new product:
1) Market Demand:
2) Financial criteria:
3) Compatibility with environmental
standard:
4) Marketing structure:
108
1) Market Demand:
There must be adequate market demand. The
producer needs to find out that how much
the demand of the product in the market.
And according to that they prepare their new
product. If the demand of new product is low
in the market so the firm will not be
successful to achieve their target.
109
2) Financial criteria:
The product must satisfy key financial
criteria. Like the firm have sufficient finance
for making new product to launch in the
market. Another criteria which is also most
important that this product will gain
sufficient profit for the producer or not.
110
3) Compatibility with
environmental standards:
The product must be compatible with the
environmental standard. The key question
include “Does the production process avoid
polluting the air or not? The product that the
producers are going to present in the market
either it is according to the culture, life style of
the people of that area or not.
111
4) Marketing structure:
To know that the new product will be fit into
the company’s present marketing structure.
Mean the marketing strategy of the
company, the product will be adjust in that or
not, or this product needs new marketing
strategy.
112
New Product Adoption:
New product adoption process is the set of
successive decision an individual or
organization makes before accepting a new
product. Product adoption means how the
individual react to that product either he is
ready to buy or not. And the customer goes
through product adoption process before
deciding about that product.
113
Stages in Adoption Process:
A customer goes through six stages in
the Adoption process. While deciding
to purchase something or not.
114
1) Awareness:
The first stage in the adoption process is the
awareness of the product. That how much
the individual aware about the new product.
How much he now about it.
115
2) Interest:
After the awareness the next step is
interest. That how much the customer
takes interest in the product?
116
3) Evaluation:
Here the customer will evaluate the
product. If he shows some interest in
that product. At evaluation stage he will
compare the product with some
alternative product also, like comparing
in price, packaging, and color.
117
4) Trial:
After comparing the product. If the
customer decide to take it. So at this
stage the customer will try that product
to know about the result. If the result is
positive than the customer move to the
next stage.
118
5) Adoption:
At this stage the customer will look
the result of trail. If it is positive than
the customer decide to buy that
product.
119
6) Confirmation:
After adoption of the product. When
the customer use it, if he is satisfied
from that Product. He thinks the
decision that he take was correct.
120
Product Mix:
The set of all product lines and items that a
particular seller offers for sale. It means all those
products that a company offers for sale into the
market. For example P&G (Proctor and Gamble)
produce different brands. So the combination of all
these brands that P&G offer to the market for sale
are called Product Mix.
121
A company product Mix has four
important dimensions:
1) Width
2) Length
3) Depth
4) Consistency
122
1) Width:
Product mix width refers to the number of
different products lines the company carries.
Means the different brands that they offer like
P&G have 250 brands in the market. And these
brands are organized into many product lines.
Like beauty care, health care, food and beverages
products.
123
2) Length:
Product mix length refers to the total number
of items the company carries within its product
lines. Like P&G carries many brands within each
line. For example P&G offer to the market
seven laundry detergents, six hand soap, five
shampoos, and four dish washing detergents.
124
3) Depth:
Product line depth refers to the number of
versions offered of each product in the line. Like
P&G’s Crest toothpaste comes in 13 varieties,
including “Crest Multi care, Crest Cavity
protection, Crest Sensitivity protection, Crest
Dual Action Whitening” etc.
125
4) Consistency:
The consistency of the product mix refers that how
closely related the various product lines. Product lines
are consistent insofar as they are consumer products
that go through the same distribution channels. For
example most of the cosmetic products go through
the same distribution channels. The consistency will
be less if the products perform different function for
the customer. Means the nature of the products are
different. Like cosmetic products and electronic
products.
126
Chapter 03 Principles of Micro
Economics
127
Introduction
Adam Smith Definition: Adam Smith the father
of modern economics in 1776 in his book “The
Wealth of Nations” defines it as “Economics is
an enquiry into the nature and causes of
wealth of nations.” The early economists
called economics, the Science of Wealth.
Study of Wealth: Economics is the study of
wealth only. It deals with consumption,
production, exchange and distribution of
wealth.
128
Marshall’s Definition: (1842-1924)
Marshall was famous economist at the
Cambridge University who wrote a book
“Principles of economics” in 1890. The Marshall
defines economics in the following words.
“Economic is the study of mankind in the
ordinary business of life, it examines that part of
individual and social action which is most closely
connected with the attainment and with the use
of material requisites(basic) of well-being”
129
Main points:
•
Ordinary Business of Life: - by ordinary business of life, Marshall
means those economic activities of a man which are mostly
concerned with wealth getting and wealth using.
• Importance to the study of man: - welfare definitions have
accorded more importance to the study of man than to wealth.
Wealth is the means to satisfy human wants.
• Study of social man: - Economic is the study of social human
being.
• Study of material requisites: - economics studies those activities
of the man which are closely connected with the attainment and
with the use of material goods concerning human welfare.
130
Robbin’s Definition:
• Robbin’s an English economist give a new
definition in his famous book, “Nature and
Signification of Economic Science” in 1932.
• According to Robbins, “Economics is the
science which studies human behavior as a
relationship between ends and scarce means
which have alternative uses.”
131
Main Points of the Definition:
1) Ends- Unlimited Wants: ‘Ends’ here refers to
human wants. Our wants are unlimited in
number. As one’s want is satisfied immediately,
another arise. This chain of wants is endless.
That stage never reaches when all the wants of
a person are fully satisfied. We have to choose
between more urgent and less urgent wants.
132
Conti…..
2) Scarce Means: Most of the means or resources
which can be used to satisfy wants are limited in
supply. So we are bounded to satisfy the
unlimited wants with limited resources.
3) Alternative Uses: we can use the resources
alternatively. We have the choice to use the
resources alternatively. To satisfy most urgent
want first and less after that.
133
Demand
Demand is the desire to purchase a good or service,
back by ability and willingness to pay for the
product.
Key element in demand:
1) Desire: the first important thing in demand that
there should be desire for a product.
2) Ability: After desire, there should be the ability
to buy the product. Means the customer should
have the buying power to purchase the product.
3) Willingness: It means that the customer is ready
to buy that product or not.
134
Law of demand:
• According to the law of demand, other thing
remaining the same(income, price of
complementary products, Substitute products,
population, fashion, culture etc)when price
increase demand will decrease and when
price decrease demand will increase.
• The relationship between demand and price
will be negative. One increase it effect the
other and it will decrease and so on.
135
• For example the price of apple is 100 AFS, a
person consume 1 kg. As price decrease from
100 AFS to 50 AFS, the demand of that person
increase from 1 kg apple to 3 kg apple.
136
A Demand Schedule
Price
100
80
50
30
Quantity demand
1 kg
2kg
4kg
6kg
137
Demand Curve
price
Downwa
rd Slop
100
80
50
30
Demand
Curve
1
2
4
Quantity
Demand
6
138
Conti
• This diagram shows the relationship between
quantity demand and price. Which shows
negative relationship between price and
demand. As price decreases from 100 to 80,
demand of the product increase from 1 to 2
kg. Again as price decrease from 80 to 50,
demand increase from 2 to 4 kg. it clearly
shows that when price decrease demand will
increase and when price increase demand will
decrease.
139
Factors that effect law of Demand
• There are some factor that effect law of demand.
1) Income:
2) Substitute product:
3) Complementary products:
4) Fashion:
5) Taste:
6) Culture:
7) Population:
8) Necessities of life:
140
1) Income:
• If income of a person increase or decrease it
effect the law of demand. For example the
price of an apple increase from 80 to 100 but
the same time income of the person also
increase from 10000 AFS to 13000 AFS, so
here he will not reduce consumption of apple
because his income also increase with the
increase in price.
141
2) Substitute products:
• Some the change in price of substitute
product also effect law of demand. For
example coffee and cold drink both are
substitute, if the price of coffee decrease so it
effect the demand of cold drinks with out
change in their price.
142
3) Complementary products:
• Complementary products also effect law of
demand. For example car and oil both are
complementary product. If the price of petrol
increase it will effect the demand of cars. If
the price of cars increase it will effect the
demand of petrol.
143
4) Fashion:
• Those product that become a part of fashion,
if price of these product increase still people
did not reduce consumption, because of
fashion. So we can say that those product that
become fashion , so it effect law of demand.
144
5) Taste or Habit:
Those product that become a taste of people it
also effect law of demand, because if price
increase of decrease than consumer did not
care about that. For example the taste of
cigarette.
145
6) Culture:
• Those product that become a part of culture it
also effect law of demand. If price increase,
consumer did not care about that. For
example, shalware kamees.
146
7) population
• Population also effect law of demand. If price
increase and population also increase so the
demand of that product will not decrease.
Because with the increase in price demand of
people also increase due to increase in
population.
147
8) Necessities of life:
Necessities of life also effect law of
demand. Because with out these
product we can not survive. So if
price increase we can not stop
consumption of these product for
example, water, flour, medicines
etc.
148
Shift in demand curve
A shift of demand curve can also be caused by
a change other than price, such as a change
in taste, population, fashion, price of
complementary goods, price of substitute
goods. For example price of complementary
goods, car and oil. If price of car increase it
will effect demand of petrol due to which the
demand curve of petrol shift downward.
149
Shift in Demand Curve
D1
D2
Demand
Curve
40
price
60
70
Quantity
Demand
150
Conti
This diagram shows shift of demand curve. When
price of complementary product increase or
decrease it shift the demand curve upward or
downward. Here when the price of car increase it
effect the demand of petrol due to which the
demand curve shift downward. The diagram
shows that when price of petrol was 40 Afs, the
demand was 70. but when the price of car
increase it effect the demand of petrol due to
which the demand decrease to 60 Afs, which shift
the curve downward.
151
Extension or Construction
of Demand
Extension of Demand: An
extension of demand caused by a
fall in price. When price decrease
demand increase which extend
the demand and curve moved
upward.
152
Extension of Demand
P1
Price
P2
D1
D2
Quantity
Demand
153
Construction of Demand
Construction of demand caused
by a rise in price. When price
increase demand decrease which
is called construction of demnad.
154
Construction of Demand
P2
Price
P1
D2
D1
Quantity
Demand
155
Elasticity of demand
Elasticity of demand measures the
degree of change in demand of a
commodity in response to a
change in the price of the
commodity, or change in the
income of the consumer or
change in the price of related
goods etc.
156
Types of Elasticity of
Demand:
1) Price Elasticity of Demand.
2) Income Elasticity of Demand.
3) Cross Elasticity of Demand.
157
1) Price Elasticity of Demand:
Price elasticity of demand is percentage change
in quantity demanded divided by the
percentage change in the price.
P.E = %age change in amount demanded / %
change in price.
Suppose the price of a commodity increase from
20 to 25. quantity demand decrease from 50
to 40. which is equal to 5÷10 = 0.5 there for
price elasticity of demand is 5%.
158
2) Income Elasticity of Demand:
Income Elasticity is a
measure of responsiveness of
Potential buyers to change in
income. It shows how the
quantity demand change when
the income of the buyer change.
Income Elasticity= %age change in
the quantity demand / %age
change in the Income
159
3) Cross Elasticity of demand
It refers to the effect on demand for one product
of a change in the price of another.
Means when the price of one product change, how
much it effect the demand of another product.
Formula,
% change in the demand for product x / % change
in the price of product y.
160
Conti….
suppose the price of coffee increase from 25 to 35,
due to which the demand for tea increase from
60 to 70.
Than Cross Elasticity is
10/10= 1 which shows that the demand is unitary
elastic.
161
Cases of Elasticity:
• There are five different cases of Elasticity.
1) Perfectly Elastic.
2) Perfectly Inelastic.
3) Relatively Elastic.
4) Relatively Inelastic.
5) Unit Elastic.
162
1) Perfectly elastic
A small increase in the price, the quantity demand
fall down to zero. It is called Perfectly Elastic
demand.
Mathematically Ed = ∞ because anything divided by
zero is ∞.
But perfectly elastic is extreme case, because there
is no concept of perfect competition in the real
world.
163
2) Perfectly Inelastic:
• Perfectly Inelastic: A large increase in the price
did not change quantity demand. In this case
change in the price has no effect on the quantity
demand. Mathematically Ed = 0
perfectly inelastic product also counted in extreme
cases. For example, Kohinoor Diamond, this type
of product is considered perfectly inelastic,
because if a large increase in the price, demand
did not change.
164
Conti…
Suppose the price of Kohinoor diamond is 20
billion dollars quantity demand is 10, if price of
this diamond increase to 100 billion dollars again
demand is 10.
perfectly inelastic =
% change in Qd / % change in price= 0/80= 0
165
3) Relatively Elastic:
Relatively Elastic: When the percentage change in
the quantity demand is greater than percentage
change in the price, it is called Relatively Elastic.
Mathematically Ed › 1
Suppose the price of a commodity increase from 20
to 25. quantity demand decrease from 50 to 40.
which is equal to 10/5 = 2 there for price
elasticity of demand is 2. It shows that the
demand is relatively Elastic.
166
4) Relatively Inelastic:
• Relatively Inelastic: when a percentage change in
the quantity demand is less than percentage in the
price, it is called Relatively Inelastic.
•
Mathematically Ed ‹1
suppose the price of a product increase from 30 to 40
so the quantity demand decrease from 20 to 18. so
Relatively inelastic=
% change Qd / % change in price = 2/10= 0.2 the
elasticity is less than one which is relatively
inelastic.
167
5) Unit Elastic:
Unit Elastic: When a percentage change in the
quantity demand is equal to percentage change
in the price. Mathematically Ed = 1
As price change at the same percentage Qd also
change, this is call unit elasticity.
Suppose the price of a product decrease from 50 to
40, quantity demand decrease increase from 10
to 20. so Unit Elasticity is equal to 10/10=1 this is
call unit elasticity.
168
Supply
Supply means the quantity offered for sale at a
given price. We may define supply as a schedule
of the quantity of a good that would be offered
for sale at all possible prices, during a given period
of time. The supply has direct relation with price
and the relationship of price and quantity supply
is positive. For example more quantity is offered
for sale at high price. As price increase quantity
supply increase and when price decrease quantity
supply decrease.
169
Law of Supply:
Other things remaining the same( cost of
production) When the price of a commodity
increase, the supplier supplies more and more
commodity to market and when price of a
commodity decrease the supplier decrease the
supply of commodity. The quantity offered for
sale varies directly with price that is the higher
the price the larger is the supply, and vice versa.
170
Schedule
P
10
12
16
18
22
QS
12
14
16
20
25
171
Supply Curve
20
18
Price
16
12
10
Supply
Curve
12 14
16
20
25
Quantity
Supply
172
Explanation
This diagram shows the relationship of price with
supply. As price increase quantity supply also
increase. Price increase from 10 to 12 quantity
supply also increase from 12 to 14, again when
price increase to 16 quantity supply also increase
to 16 and so on. It shows that the producer try to
increase supply as price increase.
173
Elasticity of Supply:
Elasticity of supply measure the degree of change
in quantity supply due to change in price. Means
when the price of a commodity increase or
decrease how much quantity supply change.
Measurement:
PES= % change in Quantity Supplied / % change in
price
PES = %∆Qs / %∆P
174
Price Equilibrium:
The equilibrium price the amount that buyers wish
to purchase is exactly equal to the amount that
supplier are willingly to offer to the market.
Simply we can say that the amount at which both
buyer and seller are agree. The buyer want to
purchase on that price, while supplier is ready to
supply that product to the market on that
amount.
175
Schedule
price
10
12
16
18
20
Qd
80
70
60
50
40
Qs
30
45
60
70
80
176
Diagram
20
18
16
Price
E is
Equilibrium
point
E
14
12
10
20
40
60
80
100
Qd/
Qs
177
Explanation
the above schedule and diagram shows various
prices of a product and its quantity demand
and quantity supply. When the price was 10,
the quantity demand of this product was 80
and the supplier supply 30 products to the
market. As price increase quantity demand
decrease and quantity supply increase. When
price increase to 16, at this point the quantity
demand and quantity supply both are same,
which is call equilibrium price.
178
Conti
On this price both buyer and seller are agree. In
diagram demand curve intersect supply curve
when price reach to 16 because this is the
equilibrium price and point E is call equilibrium
point.
179
CHAPTER NO=07
• AN INTRODUCTION TO HUMAN RESOURCE
MANAGEMENT.(HRM).
180
Introduction to HRM
What is HRM
HRM is the Management of people working in an organization, it is a
subject related to human. we can say that it is the Management of
humans.
HRM is a managerial function that tries to match
an organization needs to the skill s and abilities of its employees.
HRM is responsible for managing people in organization helping
them perform their work and solving problems that arise.
181
Conti…
HRM plays important role in creating organizations
and helping them survive. Our world is an
organizational world.
We are surrounded by organizations and we
participate in them as member, employees,
customers and clients.
182
Purpose of HRM
1) Helps you avoid common personnel mistakes:
Qualified HR managers utilize organization resources
in such a way that helps to avoid common
personnel mistake like the following:
a. Hiring the wrong person for the job.
b. Experiencing high turnover.
c. Finding employees not doing their best.
d. Having your company taken to court because of
your discriminatory actions.
183
2. Helps you get result through others: when you hire
right person for the right job. They will perform their task
efficiently. You will receive better quality result from your
subordinates.
3. helps you to gain Competitive Advantage:
Human Resource is the main source of an organization that
helps to gain competitive Advantage on your Competitors.
Because all organizations can have the same technology,
they can possess same type of financial resources, same
sort of raw material can be used. To produce goods and
services.
but the organizational source that can really create the
difference is workforce of the organization.
184
Major Activities under HRM:
The major Human Resource Management activities
are as follows:
1) Integrating organizational planning with human
resource requirement:
When an organization is going to plan for the
objective of an organization. HRM plays an important
role in the achievement of the objective. Because
without human being no one organization can achieve
their task efficiently
185
Conti…
2) Human Resource Planning:
Human Resource Planning is one of the most important
activities of the human resource management. Human
Resource planning helps in meeting the requirements for
the organization. It shows that how much human resource
is required for organization.
186
Conti…
3) Acquisition of Human Resource:
Acquiring human resource is yet another activity
of HRM. It is to be done very carefully because
everything depends on the people. Quality of the
product and prestige of the organization depends
on them. Organization has to acquire the people
with multidimensional skills and experience.
187
Conti…
4) Managing Performance:
This is the duty and responsibility of HR
department that they will evaluate
performance of employees in the
organization. For this purpose they use
different type of performance standard.
188
Conti…
5) Training and development:
In order to improve the performance of
individuals and group, training and
development activities are under taken.
Training and development is important due
to the rapid change in technology.
189
Conti…
6) Compensation and benefits:
Compensation and benefits is an activity that determines
salary and wage structure, other rewards and benefits to be
paid to the staff of the organization.
7) Health and safety provision:
Making adequate provision for health and safety of the
employees, build a strong workforce. It’s the duty of HR
department that they will take care about the health of
employees.
190
The objectives of HRM:
1) Organizational objectives: The main objective
of HRM is to create such an environment in the
organization in which each and every person feel
freely and friendly. HR department tries to create
strong relationship among the departments and
solve conflict among the employee. Whenever the
organization need human resource HR department
plan for that to hire right person for the right job.
191
2) Functional
objective:
HR department perform key functions
in the organization regarding the
employees. Like hiring of employees,
training and development of the
employees, compensation and
benefits of employees etc.
192
3) Societal
objective:
Once our organization performance improves
we will face no problems from external
environment. Because if HR hire employees for
the organization according to the criteria of the
organization without discrimination like basis
on religious, gender, age, culture etc. than the
output of the organization will be improve. We
will face no complaint from external
environment.
193
4)Personal objectives:
This is the major objective of HR department that it
will assist employees in achieving their goals
efficiently and effectively. For this purpose HR
department evaluate the performance of employees
after Six month or One year to know about the
performance of the employees.
194
Chapter No 08:
Leadership and motivation:
195
Leadership and Motivation
Motivation: Motivation is a general term
applying to the entire class of desires,
needs, wishes and similar forces that makes
us work. Means it is a desire or wish of a
person that force them to perform that task.
Motivation is a function of willingness and
ability (skills) to do the job.
196
Conti
We can say that motivation is the inner drive
that directs a person’s behavior towards
goals. In HRM the term refers to person’s
desire to do the best possible job or to exert
(apply) maximum effort to perform the
assign task. For example a person is thirsty,
so this thirst motivates that individual toward
water.
197
Motivated worker in an organization
• Motivated workers devoted to be at work.
• takes pride in their work.
• does not display negative attitude toward the
organization.
• Displays a high level of loyalty and gets
satisfaction out of work.
198
Benefit to the organization:
•
•
•
•
•
Higher productivity level.
Lower labor turnover.
Lower absenteeism.
Improve quality with minimum resources.
Greater willingness to accept rather than
resist change.
199
The Motivation Theories
Different authors present different theories on
motivation. Here we will discuss some of
them as under:
200
1) McGregor’s Theory X and Theory Y:
This theory Provide an insight into the nature of people in
relation to their work and about their work behaviors.
Moreover, this theory is based on the managers’
assumptions about the people they are managing.
Basically in this theory the author present that in organization
we have two types of people. Some employees who did not
want to do any work; they are lazy and avoid work. And the
author gives the name of theory X. On other hand there are
some employees in the organization who like challenging job.
Naturally, they are hardworking. So, the author gives the
name of Theory Y to these types of employees.
201
Assumption of theory X and theory Y:
Theory X vs. Theory Y:
Theory X Assumption:
• Average human beings have an inherent (natural) dislike of work
and will try to avoid it.
• People must be controlled, directed and threatened to make them
work. Means if these types of employees who dislike, they must
be forced, controlled and threatened with punishment to achieve
the task that are assign to them.
• People prefer to be directed, wish to avoid responsibilities, have
relatively little ambition, and want security above all. Means
these types of people always want direction from other, they did
not try to do their own job himself and try to avoid
responsibilities. Moreover, they want security above from all.
Means job security.
202
Theory Y Assumption:
•
Work activities are as natural as rest or play. Means performing
duties and responsibilities is a natural thing for these employees.
They like challenging jobs. And they like to play with challenges.
• People will work willingly for the achievement of objectives to
which they are committed. The task and responsibilities that are
assign to him. They perform willingly these tasks.
• People will exercise self direction and self control they are
committed to the objective. Means they did not want direction
from other people. But they perform all their responsibilities by
his own skills and abilities.
• People will not only accept responsibilities, but also seek it.
Means they try to find out challenging job in the organization.
203
2) Maslow’s Need Hierarchy Theory:
According to Maslow, human needs can be
arranged into five levels. When one need of
human being satisfied it motivate another
need as for as another need or want satisfy
than it create another one. And according to
Maslow Human needs are in the form of a
hierarchy, ascending from lowest to the
highest.
204
Maslow’s Hierarchy of Needs
Maslow’s Hierarchy of Needs
SelfActualization
Esteem Needs
Power, Status, Self-respect
Social Needs
Affection, Belongings and Friendship
Safety Needs
Security and protection
Physiological Needs
Food, Water, Shelter, Sleep
205
1) Physiological needs:
These basic needs are needed to a person to
survive in this world. These needs include
needs for air, water, food, clothing, shelter;
rest etc. the individual want to satisfy these
basic needs first.
206
2) Safety needs:
when the individual basic needs are satisfy.
Then he wants safety. These are the needs to
feel free from economic threat and physical
harm. Here the person wants to overcome
the financial problems and improve the
economic condition. He also want protection
in the society , that he feel free.
207
3) Social needs:
• these needs are concerned with affection
(care), belongingness, acceptance and
friendship. Here he wants to become a part
of society and makes friends. People known
him and expend relationship with others
peoples. He finds satisfaction in association
with others and feels a real deprivation (lack,
deficiency) when it is not possible
208
4) Esteem Needs:
• These are the two types (a) the desire for
achievement (b) the desire for status and
recognition among the society. At this stage
the person want to achieve something and he
want some status and recognition in the
society.
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5) Self-actualization Needs:
• Here it means that the person wants to be
master in his own field. For example, a
musician must make music, an artist must
paint, a doctor must serve his patient. At this
stage, the person feels free because he
reaches to top level in his own field.
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3) Herzberg’s Two Factor Theory
• It is also called the Dual Factor Theory and
The Motivation Hygiene theory.
1) Hygiene or Maintenance Factors:
2) Satisfiers or Motivators Factors:
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1) Hygiene (Cleanliness, sanitation or
Maintenance Factors:
Hygiene factors represent the need to avoid
pain in the environment. They are related to
the condition under which a job is
performed. It means the basic need
necessary for our existence in the job. Such
as pay, working conditions, relationship with
supervisors, relationship with subordinates,
company policies, Status, Security and other
benefits.
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2) Satisfiers or Motivators Factors:
These factors are associated with positive
feelings of employees about the job. Which
can motivate us to do something more.
Factors such as achievement, recognition, the
work itself, responsibility, advancement, and
growth. These factors satisfy employees with
their jobs.
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4) ERG Theory (Clayton Alderfer)
• ERG Theory is similar as Maslow’s Hierarchy
of Need Theory:
• Clayton Aldefer Classifies Needs into three
broader classes:
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ERG
• Existence Needs: (Physiological and Safety
Needs)
• Related Needs: (Social Needs)
• Growth Needs: (Esteem & Actualization
Needs): Here he want power, status and selfrespect.
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5) Skinner’s Reinforcement Theory:
Skinner’s represent Law of Effect: It means
Behaviors having pleasant or positive affect
are more likely to be repeated and behaviors
having unpleasant or negative affect are less
likely to be repeated.
Types of Reinforcement:
1) Positive Reinforcement:
2) Negative Reinforcement:
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Types of Reinforcement:
1) Positive Reinforcement: Techniques aimed at
increasing a desired behavior by providing pleasant
or rewarding consequences (penalty, cost). Means to
motivate an employee through positive way.
2) Negative Reinforcement: Techniques aimed at
increasing a desired behavior or decreasing an
undesired behavior that involves providing
unpleasant consequences. Means to motivate an
employee through negative way. Through
punishment, like motivation of an employee by
stick. Showing some threats to the employee.
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6) The Equity Theory:
• This theory states that we prefer a situation
of balance, or equity.
• Input: Employees contribution to the
organization
• Outcome: Rewards employee receives from
the organization.
• Outcome/Input Ratio: Comparison between
rewards and efforts.
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Outcomes of Comparison in Equity Theory
• Equity:
My Rewards
My Efforts
=
Others’ Rewards
Others’ Efforts
• A situation of equity exists when our
rewards/efforts ratio is equal to others’
rewards/efforts ratio
• We feel satisfied when a situation of equity
exists .
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Outcomes of Comparison in Equity
Theory
• Inequity:
My Rewards
Others’ Rewards
My Efforts
Others’ Efforts
• When our rewards/efforts ratio is not equal to
others’ rewards/efforts ratio, the situation is
called inequity.
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Outcomes of Comparison in Equity
Theory
My Rewards
• Inequity:
My Efforts
<
Others’ Rewards
Others’ Efforts
• When our rewards/efforts ratio is less than
others’ rewards/efforts ratio, we are under
rewarded and may feel anger and
dissatisfaction.
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Outcomes of Comparison in Equity
Theory
My Rewards
• Inequity:
My Efforts
>
Others’ Rewards
Others’ Efforts
• When our rewards/efforts ratio is greater than
that of others, we are over rewarded and may
experience blame and shame.
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Chapter
NO#04
• Principle of Macroeconomics.
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Macroeconomics Theory
or
Macroeconomics
• Macroeconomics theory or macroeconomics
• Deals with the whole economy.It is also called
economics of aggregate like aggregate
consumption, aggregate employment,
aggregate production(NI) and general price
level etc.
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Macroeconomics Variables and
their functional Relationships.
•
•
•
•
1.Consumption Function
Or
Relation between consumption and income.
According to Keynes, the consumption(c) of
the economy depends upon the income(y) of
the economy. Such relationship between
consumption and income is known as
consumption function.
• C=f(Y).
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2.Saving Function
or
Relationship between saving and
income
• According to Keynes, the saving function(S) of
the economy depends upon the income of the
economy(Y). Such relationship between
savings and income is known as saving
function.
• S=f(Y)
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3.Income Function
or
Relation between Investment and
Income.
• According to Keynes, The NI of a country
depends upon the investment.
• Y=f(I)
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4.Investment Function
or
Relation between income and
Investment.
• According to prof.Clark, investment depends
income of a country.Such relation between
income and investment is called investment
function.
• I=f(Y).
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