Notes for Half yearly Exams -_ Principles of Management

Question 1.Functions of Management ?

Management is a set of principles relating to the functions of

planning, organizing, directing, and controlling, and the
applications of these principles in harnessing physical, financial,
human, and informational resources efficiently and effectively
to achieve organizational goals”.

There are basically five primary functions of management. These are:

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling

Planning :
is the function of management that involves setting objectives and determining a
course of action for achieving those objectives. Planning requires that managers be
aware of environmental conditions facing their organization and forecast future conditions

Organizing:
According to Henry Fayol, “To organize a business is to provide it
with everything useful or its functioning i.e. raw material, tools,
capital and personnel’s”.

Thus the function of organizing involves the determination of

activities that need to be done in order to reach the company goals,
assigning these activities to the proper personnel, and delegating
the necessary authority to carry out these activities in a coordinated
and cohesive manner.

Staffing:

According to Kootz & O’Donnell,  “Managerial function of

staffing involves manning the  organization structure  through
the proper and effective selection, appraisal & development of
personnel to fill the roles designed in the structure”.
Directing:
The directing function is concerned
with leadership, communication, motivation, and supervision so that
the employees perform their activities in the most efficient manner
possible, in order to achieve the desired goals.

Controlling:

According to Koontz & O’Donnell, “Controlling is the

measurement & correction of performance activities of
subordinates in order to make sure that the enterprise
objectives and plans desired to obtain them as being
accomplished”.

Question 2.
What are the functions of planning?
1. Creation of Goals

Planning involves the process of creating realistic goals to be

achieved. Thus it makes a business goal-oriented.

2. Planning Provides Direction

The apparent purpose of planning is to provide directions where

the efforts should be channelized to achieve the desired results in
the most efficient manner possible.

3. Planning Tackles Uncertainty

As elaborated above, planning involves making predictions with the

amount of information we actually have. This allows for a business
to bring about a certain degree of certainty to the uncertain future

4. Planning Facilitates Decision Making

Planning plays an integral role in making important decisions.

Whenever a manager has to make a decision he has to think about
the bearing of such a decision on the overall plan and the business’
trajectory. Thus planning acts as a guide to making efficient and
accurate decisions
Question 3.
State the difference between long-term and short-term
planning.
Short-term planning focuses on resolving present issues and takes 12 months or less. Long-
term planning is more complex and tactical and takes more time. Medium-term planning
means applying long-term solutions to short-term problems.

What is short-term planning?

Short-term planning is defined by the characteristics of an organization, such as
skills. In the workplace, managers devise strategies on how to improve these
characteristics in the short-term to meet long-term goals. For example, issues
with company equipment like computers, or the quality of content provided by
employees, need to be addressed to meet short-term deadlines set by
management.
Short-term planning can factor in these concepts to reach success:
 Cash flow
 Budget
 Savings of capital
 Investments of stock
 Organization
 Communication
 Ability to network
 Attention to detail
 Daily routines
What is long-term planning?
Long-term planning displays how your business can be successful over a
continued period. The goals set in long-term planning are less likely to be
changeable due to the consensus a management team needs when creating
them initially.
Long-term goals can factor in these concepts to reach success:
 Sales
 Brand awareness of your product
 Public reputation
  Number of staff members
 Social and digital media presence
 SEO traction
 Attendance at industry events
Here are two key differences between short-term and long-term planning:
1. Scope
Ideally, a short-term goal should tie into a long-term goal. However, daily
adjustments are required to ensure that you're working efficiently to meet your
goals and that operations are smooth. Thus, the scope of short-term planning
may change daily compared to long-term planning, where their goals are finite
after they're discussed with key employees.
2. Execution
The execution of short-term planning depends on current operations that can
determine if an organization is completing projects. The execution of long-term
planning is based on if short-term goals can be met. For example, if your long-
term goal is to hire 50 more staff members within the next four to five years,
you can set short-term goals for which positions need to get filled quickly.

Question 4
Explain the term strategic planning. Meaning and Definition
Video on Strategic Planning

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Strategic Planning – Meaning
Strategic planning means planning for strategies and implementing
them to achieve organisational goals. It starts by asking oneself
simple questions like- What are we doing? Should we continue to do
it or change our product line or the way of working? What is the
impact of social, political, technological and other environmental
factors on our operations? Are we prepared to accept these changes
etc.?
Strategic Planning – Definition
Strategic planning is the process of determining a company’s long-
term goals and then identifying the best approach for achieving
those goals.

Question 5 Strategic Planning – Features

The following are the salient features of strategic

planning:
1. Process of Questioning:
It answers questions like where we are and where we want to go,
what we are and what we should be.

2. Time Horizon:
It aims at long-term planning, keeping in view the present and
future environmental opportunities. It helps organisations analyse
their strengths and weaknesses and adapt to the environment.
Managers should be farsighted to make strategic planning
meaningful.

3. Pervasive Process:
It is done for all organisations, at all levels; nevertheless, it involves
top executives more than middle or lower-level managers since top
executives envision the future better than others.

4. Focus of Attention:
It focuses organisation’s strengths and resources on important and
high-priority activities rather than routine and day-to-day activities.
It reallocates resources from non-priority to priority sectors.

5. Continuous Process:
Strategic planning is a continuous process that enables
organisations to adapt to the ever-changing, dynamic environment.
6. Co-Ordination:
It coordinates organisations internal environment with the external
environment, financial resources with non- financial resources and
short-term plans with long- term plans.

Question 6. Strategic Planning – Importance

Strategic planning offers the following benefits:

1. Financial Benefits:
Firms that make strategic plans have better sales, lower costs,
higher EPS (earnings per share) and higher profits. Firms have
financial benefits if they make strategic plans.

2. Guide to Organisational Activities:

Strategic planning guides members towards organisational goals.

3. Competitive Advantage:
In the world of globalisation, firms which have competitive
advantage (capacity to deal with competitive forces) capture the
market and excel in financial performance.

4. Minimises Risk:
Strategic planning provides information to assess risk and frame
strategies to minimise risk and invest in safe business
opportunities. Chances of making mistakes and choosing wrong
objectives and strategies, thus, get reduced.

5. Beneficial for Companies with Long Gestation Gap:

The time gap between investment decisions and income generation
from those investments is called gestation period. During this
period, changes in technological or political forces can disrupt
implementation of decisions and plans may, therefore, fail. Strategic
planning discounts future and enables managers to face threats and
opportunities.

6. Promotes Motivation and Innovation:

Strategic planning involves managers at top levels. They are not
only committed to objectives and strategies but also think of new
ideas for implementation of strategies. This promotes motivation
and innovation.

Question 7.Discuss the concept of Directing?

Directing refers to a process or technique of instructing, guiding, inspiring,
counselling, overseeing and leading people towards the accomplishment of
organizational goals. It is a continuous managerial process that goes on throughout the life
of the organization.

Question 8.How important is effective direction in an

organisation?
Directing is regarded as the heart of the management process. Other functions like planning, or-
ganising and staffing cannot function properly without proper direction.

Directing is a high level management function that is concerned with providing direction to the
goals of the organisation, from there it moves on to the lower levels in form of actions.

It binds all the efforts done by the management in the form of organising and planning and
brings together all of the organisation towards achieving the goals of the organisation.

Following are some of the points that show the importance of directing in the organisation:

1. Initiates Action: Directing is the starting point of action. It initiates action based on planning,
organising and staffing. Action is initiated when the managers provide direction to their subordin-
ates for carrying out the task. Therefore, the directing function provides a set of guidelines to the
employees on how to start working towards achieving the goals of the organisation.

2. Integrates efforts of employees: The activities and works of the employees across an organ-
isation are integrated towards achieving the objectives set by management. As all the activities
of the organisation are integrated by directing, it leads to efficiency and effectiveness in the or-
ganisation.

3. Provide motivation: Directing acts as a source of motivation for the employees. It helps in mo-
tivating the employees in contributing their efforts for the realization of organisational objectives.

4. Accommodates changes: Directing helps in steering the organization towards success by ac-
commodating the various changes in the business environment that can be brought about by
changes in competitors, changing market conditions.
5. Maintaining balance: Directing brings about stability and balance in the organization which is
essential for long term survival of the business. Balance and stability can be achieved by follow-
ing a persuading leadership style coupled with effective communication, motivating employees
and strictly supervising the work of employees and suggesting improvements.

6. Efficient use of resources: Directing provides individual roles to each employee. Therefore, the
resources are utilised efficiently that leads to less wastage of resources, reduces duplication of
efforts by maintaining a clear set of work for each employee.

It leads to best possible utilisation of resources of the organisation, which translates into growth
of the organisation.

How Controlling Function Helps Managers

Managers at all levels of management Top, Middle & Lower – need
to perform controlling function to keep control over activities in
their areas. Therefore, controlling is very much important in
an educational institution, military, hospital, & a club as in any
business organization.

Therefore, controlling function should not be misunderstood as the

last function of management. It is a function that brings back the
management cycle back to the planning function. Thus, the
controlling function act as a tool that helps in finding out that how
actual performance deviates from standards and also finds the cause
of deviations & attempts which are necessary to take corrective
actions based upon the same.

This process helps in the formulation of future plans in light of the

problems that were identified &, thus, helps in better planning in the
future periods.  So from the meaning of controlling we understand it
not only completes the management process but also
improves planning in the next cycle.

Question 10. How controlling helps Managers?

How Controlling Function Helps Managers
Managers at all levels of management Top, Middle & Lower – need
to perform controlling function to keep control over activities in
their areas. Therefore, controlling is very much important in
an educational institution, military, hospital, & a club as in any
business organization.

Therefore, controlling function should not be misunderstood as the

last function of management. It is a function that brings back the
management cycle back to the planning function. Thus, the
controlling function act as a tool that helps in finding out that how
actual performance deviates from standards and also finds the cause
of deviations & attempts which are necessary to take corrective
actions based upon the same.

This process helps in the formulation of future plans in light of the

problems that were identified &, thus, helps in better planning in the
future periods.  So from the meaning of controlling we understand it
not only completes the management process but also
improves planning in the next cycle.

Question 15 What are the elements of organisational design?

ORGANIZATIONAL DESIGN:
Organizational design is a process of developing and changing the organization’s
structure by its managers. It is a chart containing the reporting structure i.e. who
reports to whom.
Organizational design involves decisions about the following six elements:
1. Work Specialization:
Work specialization describes to which the overall task of the organization is broken
down and divided into smaller component parts. For example, one person would
paint a wall and another person fixes a door. So by breaking jobs up into small tasks,
it could be performed over and over every 10 seconds while using employees who
had relatively limited skills.
2. Departmentalization:
Once jobs have been specified through work specialization process, now they will be
grouped in common tasks. There will be formed departments with common activities
for effective coordination of effort.

3. Chain of Command:
Another element in an organizational design is defined an order which authority and
power in an organization is used and delegated from top management to the lower
management. It also ensures clear assignment of duties and responsibilities of every
employee at every level.
4. Span of Control:
The span of control in an organization is defined as the number of employees
reporting directly to one supervisor/manager. It is said, the wider the span, the more
efficient the organization. It determines the number of employees that a manager
can effectively and efficiently manage.
5. Centralization Vs Decentralization: v.v important
Robbins and Coulter describe this very well, “If top managers make the
organization’s key decisions with little or no input from below, then the organization
is centralized.”
Decentralization can be defined as “the spread of power away from the centre to
local branches or governments.”
The environment is stable in centralization and complex, uncertain in
decentralization. Also, the lower-level managers are not as capable or experienced at
making decisions as upper-level managers in centralization and on the other side in
decentralization, they are very capable and experienced at making decisions. In
centralization, the company is large and in decentralization, companies are
geographically dispersed.

6. Formalization:
Formalization is the extent to which employee behaviour is guided by rules and
procedures. The organizations with high formalization have strict rules and
regulations. The low formalization organizations have very few written rules and
procedures and are less stable.
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Question : What do you mean by organizational structure? What are the
different types of organisational structure?

What is Organizational Structure?

Organizational structure (OS) is the systematic arrangement of

human resources in an organization so as to achieve common
business objectives. It outlines the roles and responsibilities of every
member of the organization so that work and information flow
seamlessly, ensuring the smooth functioning of an organization.

An OS displays how different resources of an organization come

together and align with its goals. It clearly defines the functions of
employees that enable them to work harmoniously and efficiently.
This reduces wastage of resources and increases productivity. The
OS of a company establishes its workflow. Without a proper OS,
there would be chaos in a business. Thus, a company must create a
centralized or decentralized OS depending on its workflow needs.
Table of contents

Key Takeaways
 An organizational structure is the arrangement of an organiza-
tion’s workforce according to job responsibility and ranking.
 It ensures the proper functioning of an organization by estab-
lishing its chain of command and workflow.
 The key elements of an organizational structure are work
design, departmentalization, delegation, hierarchy, and man-
agement ratio.
 The different types of organizational structure are hierarchical,
flat, flatarchy, functional, divisional, and matrix.
  Organizational structure enables quick decision-making and
better coordination and communication among employees
resulting in enhanced productivity.
Organizational Structure Explained  

An organizational structure is the grouping of resources at different

levels depending on their responsibilities, power, and position. It
helps various departments in a company exchange data, coordinate,
and work together to achieve business goals.

A company devises an organizational structure to ensure that

suitable employees with the right set of skills occupy each position
in the company. The OS reveals the accountability and authority of
each role. This removes any uncertainty with regard to task
performance and reporting and enhances employee productivity.

A company must clearly define its objectives before creating an OS.

Then, group similar activities together to create departments,
identify resources for each unit, and establish a hierarchy of
employees based on their duties.

Thus, an OS of a company:

 Forms the basis of employee reporting and relations

 Decides the post of employees in their administrative divisions
 Formulates a system of coordination and interdependence in
an organization
 Establishes a well-defined workflow aimed at attaining organ-
izational goals
Every OS contains the following six essential elements(Same as
above. These elements are explained in detail above)

 Work design: It defines the nature and job description of a

particular position
  Administrative division: It involves the grouping of jobs into
departments to facilitate the coordination of work.
 Deputation: It means the power conferred to each employee
and department in the organization.
 Management ratio: It refers to the number of employees that
are reporting to a supervisor.
 Hierarchy: It creates various levels of authority arranged in the
order of delegated powers in the organization.
 Centralization or decentralization: It presents the mode of op-
eration followed in an organization. 

Centralization or Centralized Organizational Structure

In this system, all the powers of decision-making rest at the

topmost level of the management. They take the shape of a
pyramid with the leader or executive team at the top responsible for
making all decisions. Below them are departmental managers
overseeing supervisors. These supervisors lead the workers at the
lowest level in the hierarchy.

A centralized OS structure gives uniformity of policy when the

operational units face a conflict of objectives and strategic goals.
Also, it speeds up the decision-making process. This type of OS is
prevalent in the retail industry.

Decentralization or Decentralized Organizational

Structure
In this system of OS, an organization’s middle- and lower-level
managers make decisions as per the local culture or laws. This
leaves the top management to direct its attention to major
decisions. This type of OS flattens the hierarchy and empowers
employees. It is widely prevalent in the hotel sector.

The hotel sector has to comply with local laws to function properly
in areas of food and beverages, human resources (HR), and
operations. Therefore, decentralization is required because handling
the guests, food, staff, and processes with a centralized structure is
impossible.

Types of Organizational Structure

Organizations implement different types of OS depending on the
nature of their business, needs of customers, types of products in
demand, and services required. Here are some of the popular
organizational structures.

#1 – Hierarchical
This is a type of centralized organizational structure. There is a
hierarchy of workers with leaders at the top, the workers below, and
supervisors placed in between to get the work done. It is more of a
linear OS where the delegation of power emanates from the top
management. It is a widely popular form of OS and is seen in
companies like Amazon.

This system concentrates decision-making at the top level. As a

result, the organization suffers from a lack of creativity as innovative
ideas have to work their way up through various levels of
management. Also, each employee communicates with their
immediate superior and subordinates only. This reduces
coordination at various levels of power and departments.
Nevertheless, it is a salient feature of most government
organizations.

#2 – Flat
This organizational structure is devoid of any hierarchy. No one
commands or controls the employees. Instead, decisions are made
at every level of management. Therefore, it is usually used in small
companies with few employees or new startups. However, with time
and business growth, some form of hierarchy creeps into the
organization; otherwise, it may cause chaos and inefficiency in the
organization.

#3 – Flatarchy
It includes features of both hierarchical and flat OS. It is a temporary
form of OS that comes into existence only when a new product is
created, a new service is being tested, or when a company seeks to
develop a new customer support system.

By employing flatarchy, an organization can have specialized teams

to handle the development of new products or services more
creatively and efficiently. It is the best tool for an organization to
tackle the change in market or industry sentiments without creating
capital-intensive departments or reforming the OS.
#4 – Functional
The functional organizational structure creates a fixed set of
departments based on certain functions like HR, accounts,
marketing, etc. It segregates the workforce based on the
requirements of each department. For example, an accounting
department will employ accountants and work to manage the
firm’s finances in the best possible manner.
Likewise, the HR department will look after the recruitment, payroll,
and administration of the firm. Moreover, the functional OS allows
the employees to work for a particular functional role without
worrying about the other departments. So, for example, a sales
executive won’t be worried about a firm’s accounting work and vice
versa.
#5 – Divisional
This type of organizational structure comes into play when a firm
has grown exponentially to become a giant in its sector. For
example, a giant clothing company will require separate divisions
based on customer groups, product types, and geographical
locations.

Hence, it will create a ladies’ fashion garment division, kids wear

division, men’s wear division, and affordable clothing division. Each
division will have its own production, marketing, human resource,
IT, and sales teams.  In this manner, the company could manage
the product line or geography with all necessary functional
resources.
#6 – Matrix
Under this organizational structure, there is no clear demarcation of
roles and responsibilities of resources. Resources may be shared
across different teams to ensure their maximum utilization. It is the
least used OS as it is quite complex and confusing and may prove
counter-productive.
The employees have to play a dual role in this OS. For example, the
customer service representative in many banks also acts as their
cashier. It may reduce operating costs but badly affects the
employee’s quality of work and the firm’s efficiency. It is a form of
decentralized OS.

Examples
Let’s take the help of organizational structure examples to
understand the working of the OS more comprehensively.

Example #1
Here is an example from the healthcare sector, which utilizes the
organizational structure for meeting its business, customer care,
employee relations, and healthcare objectives. Suppose a multi-
specialty hospital, Life-medical Healthcare Ltd, provides 247365
services to the patients, including surgery, emergency services, and
outdoor patient services.

Therefore, it creates an OS chart for the best services and healthcare

to cater to their patient’s needs. The OS segregates the hospital into
functional departments. Specialized staff is appointed under each
department based on its requirements. The roles, responsibilities,
and reporting of each employee are fixed. The OS chart would
appear as follows:

Examples #2
Let us assume a coffee shop Sipping Paradise has its operations
expanded to western, northern, eastern, and southern parts of
Japan. Therefore, it creates a divisional OS wherein its business
operation is segregated based on the geographical locations of the
business.
The Sipping Paradise divides its operational areas into the western,
northern, eastern, and southern divisions to monitor and control the
business properly. Each division has separate accounts and finance,
human resources, marketing, and operations departments. Each
division makes its own operational decisions.

Such an OS will enable the company to offer localized services and

quickly respond to customer needs of a specific location. However,
it may lead to duplication of resources and higher costs for the
company.

Benefits
An ideal OS helps in the efficient operation of a company. Some of
the benefits of OS are as follows.

 Swift decision-making possible – The organizational structure

helps the flow of information effortlessly across different levels
of management. It enables quick decision-making.  
 Coordination between different geographical divisions of a
company – OS promotes easy administration and working of
an organization at multiple locations. A well-defined OS en-
ables better coordination between different units at various
locations to ensure the attainment of common organizational
goals.
 Enhances efficiency and productivity – OS improves the level
of efficiency as the staff knows their roles and responsibilities,
and the supervisor knows what to expect of their subordinates.
Thus, it improves productivity in general.
 Empowers employees – When workers have specific roles and
duties according to their skill set, they learn and become com-
petent. Thus, OS boosts their confidence and empowers them.
 Reduces conflict within an organization – If an employee
knows the scope of his work, there is no possibility of conflict
 with other workers. Thus, OS reduces friction among the work-
ers.
 Better communication among members – OS establishes ex-
cellent communication between the management, supervisors,
and workers. This promotes an effective flow of information
and work.

Frequently Asked Questions (FAQs)

Why is organizational structure important?
Organizational Structure is important for every business because it
helps bring out a homogeneity of function and administration
across the organization. It assists in handling the workforce effi-
ciently and enables better coordination between various divisions.
Moreover, an organized structure helps deal with customer needs
and enhances the firm’s revenues.

What are the different types of organizational structures, and

which is the most widely used?
The different types of organizational structures (OS) are hierarchical,
functional, divisional, flatarchy, and matrix. The most common OS in
use in all the companies is the functional OS. This model puts the
workforce into various groups and divisions depending on their job
role and functions as the HR department, accounts department,
marketing department, etc.

What is an organizational structure in healthcare?

The healthcare sector has to address the needs of patients with dif-
ferent conditions that specialist doctors can address. Therefore, the
healthcare sector utilizes the functional organizational structure to
group the patients with similar nature of illnesses into one group.
After that, these groups of patients are assigned to autonomous de-
partments that set the appropriate doctors for these patients. Thus,
the patients, doctors, and the departments coordinate efficiently
under the functional OS.

Question 16 What type of organisational structure would exist in India in context with a start up?

Flat Start up Organizational Structure

In the early stages, most start ups will adopt a flat org structure. This helps
create faster expansion because it’s less structured than competitors that
may have complex management hierarchies.
It also fosters faster decision-making. A flat org structure has few (or no)
layers of management. Employees have responsibilities but may work as a
team rather than report to a manager. In other cases, everyone reports to
the founder(s).

Question 17 Explain the concept of corporate planning

Corporate planning is a process that is used by businesses to map out a

course of action to grow, increase profits, gain exposure, or strengthen brand
identity. Corporate planning is a tool that successful business use to leverage their
resources more wisely than their competitors.

Question 18. What is the difference between Strategic plan and

operational plan.
Strategic planning is the process of developing a mission and long-range objectives
and determining in advance how they will be accomplished. Operational planning is
the process of setting short-range objectives and determining in advance how they
will be accomplished.

Question 19. What is Leadership ?

Leadership is the ability of an individual or a group of individuals to influence and
guide followers or other members of an organization.

Question What are 4 types of Leadership Styles ?

 Autocratic.
 Democratic.
 Laissez-faire.
 Transformational.

1. Autocratic or Authoritarian leadership

An autocratic leader centralizes power and decision-making in
himself. He gives orders, assigns tasks and duties without con-
sulting the employees. The leader takes full authority and as-
sumes full responsibility.

2. Democratic or Participative leadership

Participative or democratic leaders decentralise authority. It is char-
acterised by consultation with the subordinates and their participa-
tion in the formulation of plans and policies. He encourages parti-
cipation in decision-making.

3. The Laissez-faire or Free-rein leadership

Free-rein leaders avoid power and responsibility. The laissez-faire
or non-interfering type of leader passes on the responsibility for de-
cision-making to his subordinates and takes a minimum of initiative
in administration. He gives no direction and allows the group to es-
tablish its own goals and work out its own problems.

4. Transformational leadership

is a leadership style that can inspire positive changes in those who follow. Transformational leaders

are generally energetic, enthusiastic, and passionate. Not only are these leaders concerned and in-

volved in the process, but they are also focused on helping every member of the group succeed.

Question What is integrity and how does it contribute to effective

leadership?

Integrity in leaders refers to being honest, trustworthy, and reliable. Leaders with integrity

act in accordance with their words (i.e. they practice what they preach) and own up to their

mistakes, as opposed to hiding them, blaming their team, or making excuses.

Question Why is communication an important part of

leadership?

Communication skills help leaders to define the goals of team members clearly. It also
helps understand team members' goals and desires and solve their grievances. Effective
communication skills also help foster an open and good rapport between leaders and their
teams, which increases productivity and efficiency.
Question 23. Leadership Skills. And also explain The Hersey-
Blanchard Model of leadership.

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The hard skills that you will need to succeed vary depending on where you
work. But across industries, there are soft skills that can advance your ca-
reer and improve your ability to lead a team. The leadership skills that are
valued by many workplaces include:
 Taking initiative
 Critical thinking
 Effective listening
 Motivating others
 Discipline
 Continued learning
 Delegation
 Managing conflict
 Empowering others

The Hersey-Blanchard Model suggests no single leadership style is better than another.

Instead of focusing on workplace factors, the model suggests leaders adjust their styles to
those they lead and their abilities. Under the model, successful leadership is both task-relev-
ant and relationship-relevant.

What’s Fiedler’s contingency theory of

leadership?
Fiedler’s Contingency Model states that there’s no one best style of
leadership. Instead, a leader’s effectiveness is determined by whether the
leader’s style and the environment in which the leader is performing
complement each other.
Fiedler’s Contingency Concept is based on a theory developed in the mid-
1960s by Austrian psychologist Professor Fred Fiedler after studying the
personalities and characteristics of leaders.
He found that a leader’s readiness level came down to two things:
 Natural leadership style
  Situational favourableness
Leadership style
Fiedler identified two different styles of leadership behaviour based on a
test called the Least Preferred Co-worker (LPC) scale.

Leaders think of the person they’d least like to work with. They then rate
their least-preferred co-worker from 1-8 on a variety of different criteria.
If you have a high score, you’re known as a high LPC leader. This means
you’re a relationship-oriented leader. Your leadership style is characterized
by your effectiveness at building relationships and managing conflict.
If you have a low score, you’re known as a ‘low LPC leader’ or a task-
oriented leader. Task-oriented leadership is characterized by a strong
ability to organize teams and projects for more efficiency and effective task
accomplishment.
Interestingly, just 12 percent of workers strongly agree that their leaders
have the right mindset to move them forward. This low figure may not have
little to do with the leader’s personality and more about whether the
leader’s style fits the group’s needs.
Situational favourableness
The second important factor in leadership effectiveness is situational
favourableness.
How favourable a situation is depends on three situational variables:
 Leader member relations
 Task structure
 Leader position power
Regarding leader member relation levels, a favourable situation would be
one where your team trusts you implicitly. The higher the trust between two
parties, the more favourable the situation is.
In terms of task structure, a favourable situation has very clear tasks. If it’s
obvious what the team should be doing and how they should carry out their
tasks, the leader has more situational control.
The last situational factor is the leader’s position power. A strong leader
position power means that you have high authority as a leader. The more
position power you have to reward or punish your team, the higher the
situational control.

Which situation is best for your leadership style?

According to Fiedler’s model, each leadership style works best in different
situations. https://youtu.be/ubGRWYpXxUM
Please watch the video above.

If you’re a task-oriented leader, your leadership style suits the extremes of

situational favourableness. If it’s a very favourable situation or a very
unfavourable situation, you’ll thrive.
If you’re a relationship-oriented leader, you’re the most effective leader in
environments with situational favourableness that sits in the middle of the
scale.

Question Pepsi Company: Indra Nooyi Leadership Case

Research Paper
According to the leader hierarchy developed by Collins (2011), Indra Nooyi is
level 5 leader. She does her best to combine personal humility and profes-
sional will. She is rather charismatic, which provides her with the opportunity
to transform PepsiCo from a good to great company. She focuses on people
and only then refers to the organizational strategy. Indra Nooyi determines
short- and long-term goals that must be achieved by the personnel. She en-
courages people to keep working for the company, but is not that focused on
moving the wrong employees off. She encourages the staff to provide clear in-
formation to realize if something is wrong in the company, but also wants the
staff to always feel optimistic about the future.

The CEO realizes that good-to-great transformations require much time and
effort, so she does not make snap decisions. She constantly uses technology
to interact with employees and customers, to receive their feedback, to gather
information and create new products. Using different leadership approaches,
Indra Nooyi develops a culture of discipline that combines different forms but
emphasizes disciplines action, which allows the staff to avoid excessive con-
trol. She is rather modest and usually speaks about the whole organization but
also reveals her personal achievements in some interviews. The CEO does
not believe that being good is enough and she emphasizes the necessity of
constant improvement. She wants PepsiCo to become extremely successful
and does her best for this purpose. Looking in the mirror, she reconsiders her
actions and always takes responsibility for them.

Question What is motivation?

Motivation is a force that makes people act, set goals, and achieve them. It is a psychophysiological
process that controls human behaviour, as well as sets its direction, actions, and constancy.
Motivation is heavily influenced by culture, society, and lifestyle. Different cultures have their own
motivation drivers. Education, social environment, and lifestyle affect it even more.

Question .Explain between intrinsic and extrinsic rewards of

motivation?
Ans: The main difference between intrinsic and extrinsic motivation is that intrinsic
motivation leads to performing an activity for its enjoyment, while extrinsic motivation
leads to doing it for a separable outcome or an outside incentive other than
enjoyment of the task.

Question .Explain various types of Motivation?

Intrinsic Motivation
Intrinsic motivation is the type of motivation that arises from internal factors. It
involves performing a task because it is fun or engaging. In intrinsic motivation, we
do a task because of its inherent satisfaction regardless of what consequences it may
have. 

Extrinsic Motivation in the Workplace

Extrinsic motivation is purely derived from external factors. In this type of
motivation, an employee concerns themselves with the reward that comes with
completing a task or the punishment it may follow. In this case, the punishment
refers to avoiding getting in trouble of some sort or avoiding criticism from a
manager. 
For example in a job, the external motivational factor is money. To motivate an
employee you can introduce a bonus. 

Intrinsic Motivation Examples

Some examples of intrinsic motivation are given below:
 Taking part in athletics because you like staying active
 Joining a gym because you like bodybuilding  
 Gardening
 Reading a book
 Taking a new learning course to expand your knowledge 
 Running or jogging to beat personal records
 Watching a movie because you enjoy it
 Painting a picture 

Extrinsic Motivation Examples

 Partaking in sports because you want to win a prize  
 Playing a card game because of the money that comes upon winning
 Spending time with someone because they’re resourceful
 Taking pictures for others to make money
 Doing your homework to avoid scolding from an elder  
 Learning a new language because it’s a requirement for a great job
Intrinsic and Extrinsic Motivation Examples in the
Workplace
Below are some ways to motivate your employees extrinsically:
 Setting up an award of the employee of the month for your employees is an ex -
ample of extrinsic motivation.
 Offering awards for a job well done.
 Praising the employees who’ve worked hard on a project.
 Fixing a bonus for completing a task on time.
  An incentive in the form of PTO  leave. 
Below are some ways to motivate your employees intrinsically:
 Find out the individual preferences of each employee and motivate them. For
example, a computer geek is likely to be highly motivated by cutting-edge tech -
nology.
 Help them learn more. For your employees who are keen on learning about new
stuff, offer them courses, introduce them to e books and online programs. En -
courage them to enroll in programs that enhance their skills.  
 Provide your employees with opportunities to expand on their present skill set
and learn things that will be necessary for their future endeavours.

Question . What is time management?

Time management is the process of planning and exercising conscious control of time spent on

specific activities, especially to increase effectiveness, efficiency, and productivity

Question What is work life Balance and Time Management?

As the term implies, work-life balance is a state of being where your professional matters

do not interfere with your personal relationships and vice versa. Essentially, it is the
intentional division of time and focuses one has in order to be productive at work and, at the

same time, happy outside the workplace

Important Additional Questions –

Question_Difference Between Agency Theory and Stewardship Theory

10

The key difference between agency theory and stewardship theory is that agency

theory is an economic model which describes the relationship between
principal and agent, whereas stewardship theory is a human model which
describes the relationship between principal and steward.

Both agency theory and stewardship theory are corporate governance principals in
the modern business world.  Although both theories have distinct features, the
ultimate objective is to improve organizational performance. Identifying the type of
corporate governance is the foundation of a successful business.

What is Agency Theory?

Agency theory refers to the relationship between business principals and their
agent. It is a management and economic theory. Basically, the principal is
the stakeholders or the owners of the organization while the agent is the company
executives hired on behalf of the principal. Principals delegate power to agents to
make decisions. It is to reduce the complexity of work and to streamline the
business operation. However, in case of a loss or risk, the principal has to bear it.
However, in certain cases, there can be problems and conflicts due to the decisions
made by agents. It can be due to mismatch of ideas, and preferences or priorities
between principals and agents. So, this is referred to as a principal-agent problem.
Further, agency theory describes disputes that might occur due to two main areas:
difference in objectives and difference in risk aversion.

For instance, company agents may look for new markets rather than improving the
existing market. However, this will affect the short term profitability, causing a
decline in the expected revenue growth. On the contrary, principals may seek short
term growth and stability in the existing market.

What is Stewardship Theory?

Stewardship theory is a theory that states employees are intrinsically motivated to

work for others or for organizations to complete the tasks and responsibilities with
which they have been assigned. It also states that people are employees are
collective minded and work proactively toward the attainment of the organizational
goals as gives them a sense of satisfaction.

According to stewardship theory, company executives protect the preferences of

the shareholders or owners and make decisions on their behalf. Their main aim is to
form and maintain a successful organization to achieve the shareholders’ vision. As
a result, organizations which follow the Stewardship principle selects the right
personality to lead the organization; this requires to place the CEO and Chairman
responsibilities under one Executive.

What is the Relationship Between Agency Theory and Stewardship Theory?

Both theories focus on the relationship between two parties: the owner and the
executive. Depending on the executive behaviour and the expectations of the
owner, these theories have significant characteristics. Although these theories have
distinct features, the ultimate objective is to improve organizational performance.

What is the Difference Between  Agency Theory and Stewardship Theory?

Even though these two theories focus on corporate governance and business
growth, there is a significant difference between agency theory and stewardship
theory. Agency theory refers to the relationship between the owner and the agent,
while stewardship theory refers to the relationship between the owner and the
steward. Moreover, the agency theory is based on management and economic
principles, whereas Stewardship theory is based on psychology and sociology.
Agency theory claims that improved performance is due to the implemented
governance structures by the principal to limit the opportunistic behaviour of the
agent. However, stewardship theory claims that the improved performance is due
to the principal encouraging governance structure that motivates pro-organizational
behaviour of the steward.

Furthermore, agency theory is driven by extrinsic motivation , whereas the

stewardship theory is driven by intrinsic motivation. Therefore, this is also a
significant difference between agency theory and stewardship theory. According to
agency theory, managers have a low level of identification with the organization,
thus allowing self serving-interests to be chosen over owners’ interests. In contrast,
according to stewardship theory, managers have a high level of identification with
the organization. Therefore, high-level identification empowers executives or
stewards to work hard, sorting out problems and finally gaining intrinsic rewards by
principals.
Summary – Agency Theory vs Stewardship Theory

In summary, both agency theory and stewardship theory are corporate governance
principals in the modern business world. However, the key difference between
agency theory and stewardship theory is that agency theory is an economic model,
whereas the stewardship theory is a psychological model.

Question Explain the term decision-making in organisation or

management decision making.

Steps in the Rational Decision-Making Model

Management Decision Making:

In simple terms, decision making is the process of making choices by recognizing

the problem, gathering information about feasible solutions, and finalizing the best
alternative.

This process is carried out through an intuitive or logical process, or a combination

of two. Intuition is all about using your gut feeling to take a stand on the possible
course of action. In contrast, a logical process uses facts and figures to make
scientifically sound decisions.

Intuition is an acceptable way of decision-making; nevertheless, it is often more

suited when the decision is easy, personal, or needs to be made quickly. More
complex judgments typically need a more formal, systematic approach that
incorporates both intuition and logical reasoning. It is critical to avoid rash reactions
or intuitions in such scenarios, majorly in business decisions. 

The Decision-Making Process

Decision makers should use a systematic process for making decisions.

The decision-making process can be broken down into a series of six
steps, as follows:
1. Recognize that a decision needs to be made.
2. Generate multiple alternatives.
3. Analyse the alternatives.
4. Select an alternative.
5. Implement the selected alternative.
6. Evaluate its effectiveness.

While these steps may seem straightforward, individuals often skip steps or
spend too little time on some steps. In fact, sometimes people will refuse to
acknowledge a problem (Step 1) because they aren’t sure how to address
it.
The Decision-Making Process 
Conclusion for the above answer _Decision Making-

Decision-making is the action or process of thinking through possible op-

tions and selecting one. It is important to recognize that managers are con-
tinually making decisions, and that the quality of their decision-making has
an impact—sometimes quite significant—on the effectiveness of the organ-
ization and its stakeholders. Stakeholders are all the individuals or groups
that are affected by an organization (such as customers, employees, share-
holders, etc.).

Members of the top management team regularly make decisions that affect
the future of the organization and all its stakeholders, such as deciding
whether to pursue a new technology or product line. A good decision can
enable the organization to thrive and survive long-term, while a poor de-
cision can lead a business into bankruptcy. Managers at lower levels of the
organization generally have a smaller impact on the organization’s survival,
but can still have a tremendous impact on their department and its workers.
Poor decision-making by lower-level managers is unlikely to drive the entire
firm out of existence, but it can lead to many adverse outcomes. Therefore,
increasing effectiveness in decision making is critical, and using a model
can help.

Question: Explain the concept of Corporate Governance.

What Is Corporate Governance?
Corporate governance is the system of rules, practices, and processes  by
which a firm is directed and controlled. Corporate governance essentially
involves balancing the interests of a company's many stakeholders, such
as shareholders, senior management executives, customers, suppliers,
financiers, the government, and the community.
Since corporate governance provides the framework for attaining a com-
pany's objectives, it encompasses practically every sphere of manage-
ment, from action plans and internal controls to performance measurement
and corporate disclosure.
KEY TAKEAWAYS
 Corporate governance is the structure of rules, practices, and pro-
cesses used to direct and manage a company.
 A company's board of directors is the primary force influencing cor-
porate governance.
 Bad corporate governance can cast doubt on a company's opera-
tions and its ultimate profitability.
  Corporate governance covers the areas of environmental aware-
ness, ethical behavior, corporate strategy, compensation, and risk
management.
 The basic principles of corporate governance are accountability,
transparency, fairness, responsibility, and risk management.
Understanding Corporate Governance
Governance refers specifically to the set of rules, controls, policies, and
resolutions put in place to direct corporate behavior. A board of directors is
pivotal in governance. Proxy advisors and shareholders are important
stakeholders who can affect governance.
Communicating a firm's corporate governance is a key component of com-
munity and investor relations. For instance, Apple Inc.'s investor relations
site outlines its corporate leadership (its executive team and board of dir-
ectors). It provides corporate governance information including its commit-
tee charters and governance documents, such as bylaws, stock ownership
guidelines, and articles of incorporation.1

Benefits of Corporate Governance

 Good corporate governance creates transparent rules and controls,
provides guidance to leadership, and aligns the interests of share-
holders, directors, management, and employees.
 It helps build trust with investors, the community, and public officials.
 Corporate governance can provide investors and stakeholders with a
clear idea of a company's direction and business integrity.
 It promotes long-term financial viability, opportunity, and returns.
 It can facilitate the raising of capital.
 Good corporate governance can translate to rising share prices.
 It can lessen the potential for financial loss, waste, risks, and corrup-
tion.
 It is a game plan for resilience and long-term success.
Corporate Governance and the Board of Directors
The board of directors is the primary direct stakeholder influencing corpor-
ate governance. Directors are elected by shareholders or appointed by
other board members. They represent shareholders of the company.
The board is tasked with making important decisions, such as corporate
officer appointments, executive compensation, and dividend policy.
In some instances, board obligations stretch beyond financial optimization,
as when shareholder resolutions call for certain social or environmental
concerns to be prioritized.
Boards are often made up of insiders and independent members. Insiders
are major shareholders, founders, and executives. Independent directors
do not share the ties that insiders have. They are chosen for their experi-
ence managing or directing other large companies. Independents are con-
sidered helpful for governance because they dilute the concentration of
power and help align shareholder interests with those of the insiders.
The board of directors must ensure that the company's corporate gov-
ernance policies incorporate corporate strategy, risk management, ac-
countability, transparency, and ethical business practices.
 
A board of directors should consist of a diverse group of individuals,
including those who have skills and knowledge of the business and those
who can bring a fresh perspective from outside of the company and
industry.
The Principles of Corporate Governance
While there can be as many principles as a company believes make
sense, some of the more well-known include the following.
Fairness
The board of directors must treat shareholders, employees, vendors, and
communities fairly and with equal consideration.
Transparency
The board should provide timely, accurate, and clear information about
such things as financial performance, conflicts of interest, and risks to
shareholders and other stakeholders.
Risk Management
The board and management must determine risks of all kinds and how
best to control them. They must act on those recommendations to manage
them. They must inform all relevant parties about the existence and status
of risks.
Responsibility
The board is responsible for the oversight of corporate matters and man-
agement activities. It must be aware of and support the successful, ongo-
ing performance of the company. Part of its responsibility is to recruit and
hire a CEO. It must act in the best interests of a company and its investors.
Accountability
The board must explain the purpose of a company's activities and the res-
ults of its conduct. It and company leadership are accountable for the as-
sessment of a company's capacity, potential, and performance. It must
communicate issues of importance to shareholders.
Question Explain:Corporate Social Responsibilty

Corporate Social Responsibility (CSR) or Social Impact is a form

of international private business self-regulation which aims to contribute
to societal goals of a philanthropic, activist, or charitable nature by
engaging in, with, or supporting professional service volunteering through
pro bono programs, community development, administering monetary
grants to non-profit organizations for the public benefit, or to conduct
ethically oriented business and investment practices.
KEY TAKEAWAYS
 Corporate social responsibility is a business model by which com-
panies make a concerted effort to operate in ways that en-
hance rather than degrade society and the environment.
 CSR helps both improve various aspects of society as well as pro-
mote a positive brand image of companies.
 Corporate responsibility programs are also a great way to raise mor-
ale in the workplace.1 
 CSRs are often broken into four categories: environmental impacts,
ethical responsibility, philanthropic endeavors, and financial respons-
ibilities.
 Some examples of companies that strive to be leaders in CSR in-
clude Starbucks and Ben & Jerry's.
Understanding Corporate Social Responsibility
(CSR)
Corporate social responsibility is a broad concept that can take many
forms depending on the company and industry. Through CSR programs,
philanthropy, and volunteer efforts, businesses can benefit society while
boosting their brands.
For a company to be socially responsible, it first needs to be accountable
to itself and its shareholders. Companies that adopt CSR programs have
often grown their business to the point where they can give back to
society. Thus, CSR is typically a strategy that's implemented by large
corporations. After all, the more visible and successful a corporation is, the
more responsibility it has to set standards of ethical behavior for its peers,
competition, and industry.
Small and midsize businesses also create social responsibility programs,
although their initiatives are rarely as well-publicized as those of larger
corporations.
Types of Corporate Social Responsibility
In general, there are four main types of corporate social responsibility. A
company may choose to engage in any of these separately, and lack of
involvement in one area does not necessarily exclude a company from
being socially responsible.
Environmental Responsibility
Environmental responsibility is the pillar of corporate social responsibility
rooted in preserving mother nature. Through optimal operations and
support of related causes, a company can ensure it leaves natural
resources better than before its operations. Companies often pursue
environmental stewardship through:
 Reducing pollution, waste, natural resource consumption, and emis-
sions through its manufacturing process.
 Recycling goods and materials throughout its processes including
promoting re-use practices with its customers.
 Offsetting negative impacts by replenishing natural resources or sup-
porting causes that can help neutralize the company's impact. For
example, a manufacturer that deforests trees may commit to planting
the same amount or more.
 Distributing goods consciously by choosing methods that have the
least impact on emissions and pollution.
 Creating product lines that enhance these values. For example, a
company that offers a gas lawnmower may design an electric lawn-
mower.
Ethical Responsibility
Ethical responsibility is the pillar of corporate social responsibility rooted in
acting in a fair, ethical manner. Companies often set their own standards,
though external forces or demands by clients may shape ethical goals.
Instances of ethical responsibility include:
 Fair treatment across all types of customers regardless of age, race,
culture, or sexual orientation.
 Positive treatment of all employees including favorable pay and be-
nefits in excess of mandated minimums. This includes fair employ-
ment consideration for all individuals regardless of personal differ-
ences.
 Expansion of vendor use to utilize different suppliers of different
races, genders, Veteran statuses, or economic statuses.
 Honest disclosure of operating concerns to investors in a timely and
respectful manner. Though not always mandated, a company may
 choose to manage its relationship with external stakeholders beyond
what is legally required.
Philanthropic Responsibility
Philanthropic responsibility is the pillar of corporate social responsibility
that challenges how a company acts and how it contributes to society. In
its simplest form, philanthropic responsibility refers to how a company
spends its resources to make the world a better place. This includes:
 Whether a company donates profit to charities or causes it believes
in.
 Whether a company only enters into transactions with suppliers or
vendors that align with the company philanthropically.
 Whether a company supports employee philanthropic endeavors
through time off or matching contributions.
 Whether a company sponsors fundraising events or has a presence
in the community for related events.
Financial Responsibility
Financial responsibility is the pillar of corporate social responsibility that
ties together the three areas above. A company make plans to be more
environmentally, ethically, and philanthropically focused; however, the
company must back these plans through financial investments of
programs, donations, or product research. This includes spending on:
 Research and development for new products that encourage sus-
tainability.
 Recruiting different types of talent to ensure a diverse workforce.
 Initiatives that train employees on DEI, social awareness, or environ-
mental concerns.
 Processes that might be more expensive but yield greater CSR res-
ults.
 Ensuring transparent and timely financial reporting including external
audits.
 
Some corporate social responsibility models replace financial responsibility
with a sense of volunteerism. Otherwise, most models still include
environmental, ethical, and philanthropic as types of CSR.
Benefits of Corporate Social Responsibility
As important as CSR is for the community, it is equally valuable for a
company. CSR activities can help forge a stronger bond between
employees and corporations, boost morale, and aid both employees and
employers in feeling more connected to the world around them. Aside from
the positive impacts to the planet, here are some additional reasons
businesses pursue corporate social responsibility.
Brand Recognition
According to a study published in the Journal of Consumer Psychology,
consumers are more likely to act favorably towards a company that has
acted to benefit its customers as opposed to companies that have
demonstrated an ability to delivery quality products.3 Customers are
increasingly becoming more aware of the impacts companies can have on
their community, and many now base purchasing decisions on the CSR
aspect of a business. As a company engages more in CSR, they are more
likely to receive favorable brand recognition.
Investor Relations
In a study by Boston Consulting Group, companies that are considered
leaders in environmental, social, or governance matters had an
11% valuation premium over their competitors.4 For companies looking to
get an edge and outperform the market, enacting CSR strategies tends to
positively impact how investors feel about an organization and how they
view the worth of the company.
Employee Engagement
In yet another study by professionals from Texas A&M, Temple, and the
University of Minnesota, it would found that CSR-related values that align
firms and employees serve as non-financial job benefits that strengthen
employee retention.5 Works are more likely to stick around a company
that they believe in. This in turn reduces employee turnover, disgruntled
workers, and the total cost of a new employee.
Risk Mitigation
Consider adverse activities such as discrimination against employee
groups, disregard for natural resources, or unethical use of company
funds. This type of activity is more likely to lead to lawsuits, litigation, or
legal proceeds where the company may be negatively impacted financially
and be captured in headline news. By adhering to CSR practices,
companies can mitigate risk by avoiding troubling situations and complying
with favorable activities.
CSR strategies may be difficult to strategically assess because not all
benefits may be financially translatable back to the company. For
example, it might be very difficult to assess the positive impact to a
company's brand image that planting 1 million trees may have.
Examples of Corporate Social Responsibility
Starbucks
Starbucks has long been known for its keen sense of corporate social
responsibility and commitment to sustainability and community welfare.
According to its 2020 Global Social Impact Report, these milestones
include reaching 100% of ethically sourced coffee, creating a global
network of farmers and providing them with 100 million trees by 2025,
pioneering green building throughout its stores, contributing millions of
hours of community service, and creating a groundbreaking college
program for its employees.7
Home Depot
As part of its annual reporting on ESG, Home Depot highlighted its
achievements on focusing on its employees, operating sustainably, and
strengthening its communities. In fiscal year 2020, it invested over $2
billion in increased salaries and benefits to enhance its employee well-
being. It also reduced energy consumption by 14% from the year prior and
are on track to reduce company-wide emissions by 40% by 2030

Question: Explain the role of Henry Fayol in Management theory

Ans: HenriFayol is often known as the father of modern management

theory. In 1916, he published a book called “ Administration Industrielle et
Generale ” (General and Industrial Management), in which he outlined five
essential functions of management: Planning, Organizing, Staffing,
Leading, and Controlling.

Question: What are theories of Agency and stewardship?

Agency theory refers to the relationship between business principals and their
agent. It is a management and economic theory. Basically, the principal is
the stakeholders or the owners of the organization while the agent is the company
executives hired on behalf of the principal. Principals delegate power to agents to
make decisions. It is to reduce the complexity of work and to streamline the
business operation. However, in case of a loss or risk, the principal has to bear it.

Stewardship theory is a theory that states employees are intrinsically motivated to

work for others or for organizations to complete the tasks and responsibilities with
which they have been assigned. It also states that people are employees are
collective minded and work proactively toward the attainment of the organizational
goals as gives them a sense of satisfaction.

Notes For Management FA Wednesday 29/March/2023

Question 1.Explain the Approaches to Business Ethics?
There a 3 main approaches discuss
Normative Ethics:-Ethics is a normative science. It means it lay down the norms or
standard of what is good and what is bad. It specifies what we ought to do and what
we ought not to do, in a certain situation. Normative ethics is the branch of
philosophical ethics that investigates the set of Questions that arise when we think
about the question “how should one act, morally speaking?”
Prescriptive Ethics:- Business ethics is a branch of ethics which prescribes standards
of how the business is to be carried out. It lays down guidelines for the company’s
response and accountability to its various stakeholders. It has to maintain a fine
balance and take care of the interest of the shareholders on one hand and other like
the employees, suppliers, customers and community at large on the other hand. All
the stakeholders have different objective of what they expect from the company and
at times these objectives may be conflicting in nature
Applied Ethics:-
 Applied ethics is a branch of ethics that deals with specific, often controversial moral
issues such as abortion, female feticide and infanticide, displacement of tribal people
due to huge hydro- electric projects, cloning, testing drugs on animals, etc. Business
too faces many controversial moral choices such as misleading advertising, insider
trading bribery, corruption etc.

Question 2. Ethical issues in Branding.

Branding is what your business needs to break through the clutter and grab your ideal
customer’s attention. It’s what transforms first-time buyers into lifetime customers and turns an
indifferent audience into brand evangelists. It’s what you need to stand out, make an impact and
take your business to the next level.

Branding can help you establish a theme and reputation for your business or product, and well-
branded items are easily recognized by consumers. But when a branding strategy is unethical —
or is perceived as unethical by consumers — it can backfire, resulting in significant negative
publicity for your business. In some cases, unethical branding can even subject you to a lawsuit.

These are the 4 major issues in Branding.

a)Trademarks and Copyrights

A trademark offers legal protection to logos and identifying marks, while copyrights afford
protection to creative works fixed in a tangible form, such as records, books or movies. When
establishing the materials associated with branding your product, check to make sure none of the
images you use are copyrighted, and never use someone else’s images, movies or writing.
Copyright holders don’t have to register their items or publish a copyright symbol to be afforded
copyright protection, so don’t take someone else’s item even if you don’t think it’s copyrighted.
Likewise, verify that no one has registered a trademark for the logo or design mark you want to
use in branding. The U.S. Patent and Trademark Office has a free trademark search tool you can
use to ensure no one else is using the logo you want to use.
b) Dishonesty

While you might consider an over-the-top claim to simply be hyperbole, consumers are more
likely to see it as lying. Marketers sometimes brand their products as “the best,” “the safest” or
“the most scientifically sound,” but these claims must be true. Likewise, logos or images that
imply a product will do something it won’t or that create a brand reputation that is false are
prohibited. False advertising is a civil offense, and consumers can sue when advertising is false,
misleading or dangerous. The Federal Trade Commission investigates claims of false advertising
and may levy fines against companies involved in the practice.

c) Marketing to Children

Many parents view all marketing toward children as suspect because it can alter a child’s
opinions, viewpoints and self-image. Advertisers should tread carefully when establishing
branding strategies and avoid tactics that will be annoying to parents. Offensive images,
branding a product as something children can do to annoy their parents or siblings and branding
a product as something for problem children can all prove problematic. Misleading branding
strategies are also a problem and are often investigated more intensively when they involve
children.

The FTC can heavily penalize false marketing to children. Marketers who use sexualized
branding tactics — such as creating a lingerie brand for young girls — could be slapped with
fines and negative publicity. Avoid branding strategies that encourage children to eat unhealthy
foods, such as branding a snack as healthy or as a replacement for a wholesome meal. In her
book “Can’t Buy My Love,” advertising expert Jean Kilbourne advises against marketing to
children under the age of 8, as they might be unable to critically evaluate marketing claims.

d) Controversial Branding

Controversial branding strategies can draw attention to your company if they’re lighthearted and
unoffensive. But when companies cross the line into offensive advertising, they could lose
business, incur negative publicity or be sued. Avoid branding strategies that capitalize on
stereotypes, racism or sexism, as well as advertisements that encourage or endorse criminal or
unethical behavior.

Question 3. What is the role of ethics in corporate governance?

Today’s business industry, according to many public opinion polls, is not “highly
trusted.”2 Therefore, it’s more important than ever for today’s companies to set well-
defined, actionable governance plans that are rooted in the ethical values of integrity,
honesty, and openness as they conduct their operations. 2

Doing so encourages positive behaviors that lead to long-term business success and
sustainability. It also helps companies gain increased trust, the intangible—but very
valuable—social and cultural currency by which companies can:
  Become authorities in the space to drive business and capture market share
 Garner repeat business
 Gather support, funding, and positive public opinion

All of these measures can boost a company's revenues and long-term viability

Question 4. Discuss few examples of good and bad corporate

Governance

Examples of Good Corporate Governance

1. Clearly defined, up-to-date, widely-shared corporate governance plans
2. Incentives for environmentally-beneficial behaviors
3. Routine internal audits with external oversight
4. Shareholder and stakeholder engagement
5. Long-term sustainability planning
6. Compensation rewards for ethical business behavior

Examples of Bad Corporate Governance

1. Boards structures that prevent ineffective members from being ousted
2. Non-compliance with auditors and regulators
3. Compensation packages that fail to create incentives for corporate officers to adhere
to ethical governance
4. Operations that allow conflicts of interest to flourish
5. Lack of transparency

While once-thriving companies like Enron and Worldcom undertook poor, unethical
governance which eventually led to their downfall, active proponents of ethically-
based corporate governance practices have been rewarded with ongoing business
success, including Pepsico.