SMART NOTES

ORGANISATION OF
COMMERCE & MANAGEMENT

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S.Y.J.C.

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MAHARASHTRA STATE BOARD

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(As per the new textbook published by Maharashtra State Bureau of Textbook Production and Curriculum Research,

Pune. w.e.f. Academic Year 2020-21)

Salient Features:
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 Based on the new textbook
 Exhaustive content coverage in Question & Answer format
 Answers presented exactly the way they are to be written in exams
 ‘Smart Codes’ and ‘Smart Recaps’ to memorize answers
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 ‘For your understanding’ section aids conceptual clarity
 Includes GG - our very own mascot that offers a practical touch to theory
 Includes QR codes for reference content
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 Replete with practical and real life examples

 Highlighted key words and sentences that aid recall as well as revision
 Tagging of board questions upto March 2020 exam for relevant questions
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 Assessment at the end of every chapter for self evaluation

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Printed at: Quarterfold Printabilities, Navi Mumbai

© Target Publications Pvt. Ltd.

No part of this book may be reproduced or transmitted in any form or by any means, C.D. ROM/Audio Video Cassettes or electronic,

mechanical including photocopying; recording or by any information storage and retrieval system without permission in writing from the Publisher.

Balbharati Registration No.: 2018MH0022 P.O. No. 00702

TEID: 1415
PREFACE
Organisation of Commerce & Management (O.C.M.) ‘Smart Notes’ is a book curated
to facilitate learning & instil conceptual understanding within students. This treasure

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trove of knowledge fosters robust conceptual clarity and inspires confidence within
the nimble mind of young learners.
This book not only provides answers to all textual questions but also addresses extra

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questions in each lesson with the aim of covering the entire topic and making
students ready to face the competition. Throughout this book, questions are answered
in a detailed, point-wise format which is exactly how the students are expected to
write their answers in the exam.

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We have incorporated ‘Smart Codes’ to facilitate easy answer recall. In case of long
and complex answers, we have provided ‘Smart Recap’ for quick revision. ‘For your
understanding’ section provides the required conceptual clarity to understand a
particular point. ‘Gyan Guru’, our very own mascot, offers a practical touch to theory
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by sharing interesting & real facts. ‘QR codes’ present throughout the book offer
students practical knowledge through reference content. We’re sure that students,
parents and teachers alike would love our value propostion and the unique
presentation of content.
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The journey to create a complete book is strewn with triumphs, failures and near
misses. If you think we’ve nearly missed something or want to applaud us for our
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triumphs, we’d love to hear from you.

Please write to us at : [email protected]

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From
Publisher
Edition: First
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Disclaimer
This reference book is transformative work based on 'Organisation of Commerce and Management; First Edition: 2020' published by the Maharashtra State Bureau of
Textbook Production and Curriculum Research, Pune. We, the publishers are making this reference book which constitutes as fair use of textual contents which are
transformed by adding and elaborating, with a view to simplify the same to enable the students to understand, memorize and reproduce the same in examinations.
This work is purely inspired upon the course work as prescribed by the Maharashtra State Bureau of Textbook Production and Curriculum Research, Pune. Every care
has been taken in the publication of this reference book by the Authors while creating the contents. The Authors and the Publishers shall not be responsible for any
loss or damages caused to any person on account of errors or omissions which might have crept in or disagreement of any third party on the point of view expressed
in the reference book.
© reserved with the Publisher for all the contents created by our Authors.
No copyright is claimed in the textual contents which are presented as part of fair dealing with a view to provide best supplementary study material for the benefit of
students.
Why to study O.C.M.?
Apart from the basic objective of doing well in your exams, there are various reasons
for studying O.C.M.:
1. As the name suggests, the subject mainly covers two aspects namely ‘Organisation

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of Commerce’ and ‘Management’. Both these aspects have extreme practical
relevance. They form the basis of any commercial activity i.e. employment, business
or profession that we undertake in our lives.

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2. The first two chapters deal with the ‘management’ part of this subject. They help
us learn the basic fundamentals of management and set a base for learning the
subject in greater depth in future.

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3. The other chapters deal with the ‘commerce’ part of the subject and give you a
detailed insight on various practical aspects that form a part of business &
commerce in today’s world.
4. The last chapter introduces you to the fascinating world of ‘Marketing’. All those
who wish to make a career in marketing will find this chapter very interesting.
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We’ve also added a dose of real-life examples to make it more relevant for you.
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How to study from this book ?

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This book is divided into the following parts:

i) Theory questions ii) Interpretative based questions.
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Theory questions
Questions covered in theory section are in the flow of textbook. Thus, once you read all
the questions, it’s as good as reading an entire chapter from the textbook. We advise
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you to study from this section first.

Interpretative based questions
This section is at the end of the theory section. Questions covered in this section are
either objectives or application-based questions. Once you have read and understood the
theory, you are better equipped to solve and answer these questions. We have also
provided answers for you to enable self-evaluation.
The book is rife with bits of value addition. Take a look further to understanding it.
Smart Code SMART CODE A L S O R I S E
At times, answers are too lengthy and it’s difficult to
remember all the points. Hence, we have created Smart 1) ACCESS TO PROFESSIONAL, EXPERT AND
Codes for a few questions to aid you in remembering HIGH QUALITY SERVICES
and recollecting these points. Please do not memorize The tasks are outsourced to third parties who are

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each and every Smart Code. Instead of helping, it might skilled in that specific field. This allows the
end up confusing you. Memorize only those Smart Codes outsourcing companies to have access to high
wherein you find the answer difficult to comprehend. levels of services with fewer chances of errors.

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Smart Recap

Sr. On the In theory subjects, at times, answers are quite

Types Meaning
No. basis of long and complex. It’s difficult to remember the

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1. Area Local Market for commodities which entire answer. Hence, we have provided Smart
Covered Market are sold within the local Recap i.e. summary of the entire answer for
geographical limits of a region students to revise it immediately.
National Market for commodities which
Market are sold within the country
International market for commodities that
Market are produced in one country
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and sold in another country

For Your Understanding FOR YOUR UNDERSTANDING

Certain concepts are tricky and difficult to understand 1) AGMARK is a certification mark on
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with a limited amount of explanation. To explain these agricultural products in India, assuring that
concepts efficiently, we have provided a section named they conform to set of standards approved by
‘For your understanding’ that provides better conceptual the Directorate of Marketing and Inspection.
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clarity. Please note that the content provided in this

section need not be written in the examination. This is
purely for conceptual understanding.

GG – Gyan Guru
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Monaco, Nauru, Kiribati, Tuvalu, Palau, Gyan Guru, our very own mascot, keeps popping
Marshall Islands, Federated States of up throughout the book. He offers you a practical
Micronesia are some countries of the world and real-life example or an interesting fact,
which do not have a central bank. associated with the topic. Look out for him!
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(Source: Wikipedia)

QR Codes
[Note: Scan the QR Code to
O.C.M. has numerous real-life applications. A know more about Apple’s
newspaper article or video related to a particular Corporate Social Responsibility
concept will make the concept more relatable to (CSR) initiatives in the field
you. We have given such links via QR Code. of environmental protection.]
Variety of questions covered :

The new textbook has thrown a lot of new types of questions. In this book, you will be studying below types of questions:

Sr. Ch. Ch. Ch. Ch. Ch. Ch. Ch. Ch.

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Nature of Question
No. m 1 2 3 4 5 6 7 8

Theory section
1. Answer the following questions        
2. Distinguish between. NA  NA   NA  

Objective section

Select the correct answer from the options given below and
A.        
rewrite the statements.
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Match the pairs.
B.
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Write a word or a term or a phrase which can substitute
       
C.        
each of the following statements.
D. State whether the following statements are true or false.        
Find the odd one.
E.
F. Complete the sentences.
C 















G. Select the correct option from the bracket.        
H. Answer in one sentence.        
Correct the underlined word and rewrite the following
I. sentences.        
J. NA  NA   NA  
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Arrange in proper order
Explain the following terms / concepts.        
Justify the following statements.        
Study the following case / situation and express your opinion.        
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Note: All the above variety of questions are a part of textbook.
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INDEX
Page No. Page No.
Sr. NO. Titles
(Theory) (Objectives)

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1. Principles of Management 1 - 15 189 - 196
2. Functions of Management 16 - 38 197 - 204
3. Entrepreneurship Development 39 - 57 205 - 212

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4. Business Services 58 - 109 213 - 226
5. Emerging Modes of Business 110 - 127 227 - 234
6. Social Responsibilities of Business Organisations 128 - 147 235 - 243
7. Consumer Protection 148 - 166 244 - 252

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8. Marketing 167 - 188 253 - 261

Note: i. All textual questions are represented by (T) mark.

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ii. At the start of each chapter, we have provided a chapter index to enable
the students to get an overview of the chapter. We have also marked
the years in which the questions have been previously asked. Kindly note
that this marking is only indicative and not exhaustive.
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
Chapter 1: Principles of Management

1 Principles of Management

SR. NO. PARTICULARS BOARD EXAM

1. Explain the nature of principles of management. (T) Jul’ 18, Oct’ 15,

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Mar’ 15, Mar’ 13
2. What is the significance or importance of the principles Feb’ 20, Mar ’18, 17,
of management? 16, 14, Oct’ 14
3. Explain 14 principles of Henry Fayol in detail. (T) Feb’ 20,19, Jul’ 19

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Jul’ 17, Mar’ 16, 14, 13
4. Elaborate principles of scientific management. (T) Mar’ 15
5. What are the techniques of scientific management? Oct’ 14

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Explain in detail. (T)
6. Assessment

INTRODUCTION

Johnson and Johnson company introduced a product named ‘Tylenol’ which became a
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leading pain-killer medicine in the United States. In October 1982, Johnson and
Johnson faced tremendous crisis when seven people in Chicago were reported dead after
taking Tylenol capsules. Johnson & Johnson, recalled the capsules from the entire
country which amounted to about 31 million bottles. Additionally, they stopped all
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advertisement for the product. In total, it resulted in a loss of more than $100 million
dollars. The mission statement of Johnson and Johnson was “operate with honesty and
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integrity”. They could take such big decision because they followed their principles.
When the goals are clear, decision making becomes easy.
This chapter gives us an insight into various principles of management.
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MEANING & DEFINITION

1) MANAGEMENT
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Management is a process of co-ordination of resources by way of planning,

organising, directing and controlling them so as to attain some desired objectives.
2) PRINCIPLES
Principle is defined as “a fundamental truth or proposition that serves as the
foundation for a system of belief or behaviour or for a chain of reasoning”. In
simple words, techniques or systems which give one directional result are called as
principles.

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Std. XII: Organisation of Commerce

and Management

3) PRINCIPLES OF MANAGEMENT
The principles used for management of business organisations are called as principles
of management. These principles provide guidelines to managers to take decisions.
Management principles are formed to guide and influence the behaviour of employees.
They focus on improving the overall efficiency of the organisational resources.

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Q.1. Answer the following questions

1. Explain the nature of principles of management. (Jul’ 18, Mar’ 15, Mar’ 13, Oct’ 15) T

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Ans: The principles used for management of business organisations are called as principles of
management. These principles provide guidelines to managers to take decisions.
Management principles are formed to guide and influence the behaviour of employees.

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They focus on improving the overall efficiency of the organisational resources. The
nature of principles of management is explained as follows:

SMART CODE P U B G F C A

1)
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PRINCIPLES ARE FORMED BY PRACTICE AND EXPERIMENT
The management principles are developed gradually with thorough research work.
Systematic observations and experiments are conducted before developing them.
The results of such experiments are practiced in organisations and then principles
are developed.
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2) UNIVERSAL APPLICATION
The principles of management are universal in nature. They can be applied to:
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i. All types of organisation, irrespective of their size and nature

ii. All levels of management
Their results may vary and application may be modified but these are suitable for
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all kinds of organisations.

E.g.: Management is required in big companies like Reliance and also in a small
book store.
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3) BEHAVIOURAL IN NATURE
Management is group activity. Management aims at achieving certain goal through
group of human being. Management principles are designed to influence human beings.
These principles control a group of persons and direct them to achieve the objectives.
4) GENERAL GUIDELINES
Management principles provide general guidelines in handling organisational
situations and problems. They are not rigid. Which management principles are to

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Chapter 1: Principles of Management

be applied depends upon the situation, size and nature of organisation.

E.g.: When we say fair remuneration, then the term 'fair' can vary as per the
nature, size and financial condition of the organisation.
5) FLEXIBILITY
Management principles are flexible in nature. They can be modified according to

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the situation. As business situations keep on changing, the principles can be
modified and can be used in the organisation according to its need.
E.g.: With change in technology, application of management principles changes.
6) CAUSE AND EFFECT RELATIONSHIP

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Principles of management help to determine the cause or reason for particular
effect. Therefore, they are base for taking a decision.
E.g.: Payment of good wages and incentives (cause) helps in increasing the output

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of workers (effect) or making effective advertisement (cause) increases the sale
of a product. (effect).
7) ALL PRINCIPLES ARE OF EQUAL IMPORTANCE
All principles of management are of equal importance. They have to be practiced
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simultaneously for complete achievement of predefined goals. If any specific
principle is focused more and others are not followed with same focus, then it
affects the working of organisation.

2. What is the significance or importance of the principles of management?

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(Feb’ 20, Mar’ 18, 17, 16, 14, Oct’ 14)
Ans: The principles used for management of business organisations are called as principles of
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management. These principles provide guidelines to managers to take decisions.

Management principles are formed to guide and influence the behaviour of employees. They
focus on improving the overall efficiency of the organisational resources. The significance of
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the principles of management can be explained with the help of the following points:

SMART CODE P U S H E D H
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1) PROVIDES USEFUL INSIGHT TO MANAGERS

Principles of management help the manager:
i. In understanding the organisation better
ii. In understanding the situations and problems
iii. In finding solutions to various situations and problems
Management principles are based on the experience of various professional people.
Managers can use their experience in solving organisation problems by applying the

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Std. XII: Organisation of Commerce

and Management

management principles. This type of timely guidance reduces wastage of resources

and helps to achieve the organisational goals in an appropriate manner.
2) UNDERSTANDING SOCIAL RESPONSIBILITY
Management principles are not developed only from view point of handling the
resources effectively but they guide management in understanding social

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responsibility of the organisation. This helps the management to focus on providing
quality products at reasonable prices, avoiding artificial monopolistic situations in
market, fair competition, fair remuneration, change in environment, healthy working
place, standard tools and machinery etc.

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E.g.: Business organisation should focus on developing eco-friendly products.
3) SCIENTIFIC DECISIONS
In business organisation, a scientific decision means systematic or balanced

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decision. Management principles train the managers to take scientific decisions so
that they don’t have to follow the trial and error method every time. With the use
of various management principles, managers can analyze various situations and find
various alternatives to get desired results.
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HELPFUL IN EFFICIENT UTILIZATION OF RESOURCES
In every organisation two types of resources are used i.e. physical resources
(material, machines, money etc.) and human resources (manpower). The basic
function of the management is optimum utilisation of these resources and
controlling wastage. Managers use the principles of management to maintain
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discipline and healthy working environment. It helps in developing cordial
relationship between management and employees which increases the efficiency
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level of employees and also affects the effective administration.

E.g.: Use of standard tools and machinery helps in increasing quality or
productivity as well as in increasing level of efficiency of human resources.
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5) ENCOURAGES RESEARCH AND DEVELOPMENT (R AND D)

Management principles enable the managers to bring consistent improvement in
them. As a result, managers adopt new trends at the work place automatically.
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They develop scientific approach towards research and development and growth and
development of the organisation.
E.g.: R & D department always works on finding new techniques in the field of
production, finance, marketing, human resources etc.
6) DEVELOPS OBJECTIVE APPROACH
Managers have to take many decisions on daily basis. If they approach every issue
subjectively (i.e. from a personal point of view), they may be biased while taking

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Chapter 1: Principles of Management

a decision. However, management principles help managers to develop an objective

approach which considers factual evidence while making decisions. This helps to
make the managers more efficient and decision making becomes smooth. It builds
confidence in the minds of the managers.
7) HELPS TO COORDINATE AND CONTROL

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It is difficult to create coordination and cooperation among different employees
working in different departments. It is also difficult task for manager to keep
control on the performance of all team members. Management principles provide
guidelines for better co-ordination and control within the organisation.

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3. Explain 14 principles of Henry Fayol in detail.
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(Feb’ 20,19, Jul’ 19, Jul’ 17, Mar’ 16, 14, 13)

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Ans: Henry Fayol (1841-1925) was a French mining engineer who rose to the position of the
Chief Managing Director. He conducted many experiments in management and
developed fourteen principles of management. These principles have been explained in his
book “General and Industrial Administration”. Due to his contribution to management,
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he is called the “Father of Modern Management”. His statements serve as a guideline
for decision-making and management actions.
The following are the principles of management laid down by Fayol:

SMART CODE D A D I S O U S R E S C U E
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1) PRINCIPLE OF DIVISION OF WORK
As per this principle, the work in an organisation should be divided into small sub
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parts. This work should be assigned to the employees depending on their interest,
skill and capabilities. Usually, one type of work is allotted to one employee. This
helps in increasing efficiency and leads to specialization.
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E.g.: In a college, there are different professors for different subjects. Each
professor teaches the subject assigned to him/her according to his qualification
and interest.
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Mr. Henry Ford (Founder of Ford Motors) introduced

the concept of assembly line to the world. Earlier, only one worker used to
assemble a vehicle from its beginning to the end. However, Mr. Ford
introduced assembly line which involved building various workstations. Each
workstation had to assemble just one particular spare part. This helped to
complete the job much faster and in an efficient manner.

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Std. XII: Organisation of Commerce

and Management

2) PRINCIPLE OF AUTHORITY AND RESPONSIBILITY

Authority means the right to give orders and get work done. A manager can work
properly only if he is given authority to take decisions. However, with authority
comes responsibility. When authority has been given to the manager, he is
responsible for that work. If the work is not completed, the manager is to be held

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responsible if the work is not completed in time or not done properly.
E.g.: Virat Kohli (Captain of Indian Cricket Team) is given the authority to choose
his team and decide the batting order. However, when the team loses a match, he
is held responsible for the defeat.

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3) PRINCIPLE OF DISCIPLINE
According to Fayol, discipline is the most essential thing in the organisation.
Employees must respect and obey the rules of the organisation. Discipline helps to

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achieve the goals set in the organisation. Good leaders can properly maintain
discipline in an organisation. There should be proper understanding between
management and employees regarding the rules so that the discipline is
maintained. Discipline should be observed at all levels of management.
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E.g.: Management should clearly convey office timings to its employees and the
employees need to adhere to these.
4) PRINCIPLE OF INITIATIVE
Initiative means taking the first step. Managers should encourage employees to
take initiative and come up with new ideas. According to this principle, managers
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should welcome such ideas even if they may be wrong or impractical. This
approach helps to build a healthy organisational culture. More importantly, it
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creates a sense of belonging in the minds of the employees.

5) PRINCIPLE OF SUBORDINATION OF INDIVIDUAL INTEREST TO
ORGANISATIONAL INTEREST
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According to this principle, the interest of the individual is to be given lesser

importance as compared to the interest of the organisation. The manager must
consider the interest of the whole organisation rather than the interest of single
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employee while taking any decision. The employees too should give higher
importance to the interest of the organisation than their own self. When the
organisation grows, the employees will prosper automatically.
E.g.: M.S. Dhoni stepped down as the captain of the Indian Cricket Team in 2017
and allowed Virat Kohli to take over as the captain inspite of still being in the
team. He gave more importance to the team’s interest rather than his individual
interest.

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
Chapter 1: Principles of Management

6) PRINCIPLE OF ORDER
This principle is based on 'A place for everything and everything in its place'.
Human resources and materials should be in the right place at the right time for
maximum efficiency. The principle focuses on the proper utilization of physical and
human resources.

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E.g.: An accounts expert should be in accounts department and not in marketing
department.
7) PRINCIPLE OF UNITY OF COMMAND
Each employee in an organisation should receive orders only from one superior.

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This principle helps in managing conflicts and disputes among people in the
organisation. If an employee receives orders from more than one superior, he will
get confused. He will not understand whose orders to follow first. This will hamper

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the work. Each employee should know his immediate superior and should receive
orders only from him. For this, the organisational hierarchy should be well defined.
E.g.: If employee is on two projects with two different bosses, both of them may
ask the employee to finish work on the same day. In that case, employee will
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either have to work long hours which will affect his efficiency or he may have to
finish the task in an improper manner.
8) PRINCIPLE OF STABILITY OF TENURE
When an employee is recruited, the management should assure them about the
stability of their job. It helps to create a sense of belongingness among the
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employees. An employee who is secured about his job will put his maximum
efforts. It will also help to minimize employee turnover ratio.
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9) PRINCIPLE OF REMUNERATION
As per this principle, employees must be paid fair amount of salary/wages for the
services they provide to the organisation. Fair remuneration keeps employees
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satisfied financially and retains them for a longer time with the organisation. It
helps to increase the productivity and efficiency as well. The remuneration should
be fixed by taking into consideration the skill, expertise, knowledge, tenure, cost of
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living, market trend, profitability of organisation etc.

10) PRINCIPLE OF EQUITY
Management should be fair as well as friendly to the subordinates. While allocating
any work, delegating the authorities, deciding the monetary terms etc., there should
not be any discrimination between the employees. Further, the salary/wages of
employees working at the same level should be the same even though they belong
to different departments. This will help to avoid conflicts within the organisation.

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Std. XII: Organisation of Commerce

and Management

E.g.: Sr. Executive – Accounts, Sr. Executive – Production, Sr. Executive – Sales
should all have equal pay.
11) PRINCIPLE OF SCALAR CHAIN
Scalar chain refers to the hierarchy of authority from the top level to the lower
level, for the purpose of communication. Traditionally, organisations used to frame

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large scalar chain which is time consuming.
E.g.: If there is any financial decision taken by the top management which
requires an effect in the accounting system, then the CFO will first inform the
Manager- Accounts, then Manager-Accounts will inform the Head-Accounts. The

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Head-Accounts will then inform the Account Executive and finally the work will
get done.
However, in order to avoid this longer chain and to take speedy decisions, cross

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communication or direct communication is followed in various organisation. It is
known as Gang Plank. For direct communication, proper permission of authorities
in necessary.
12) PRINCIPLE OF CENTRALIZATION
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Centralization refers to the concentration of powers and authority in one or few
hands. According to this principle, there must be a proper balance between
centralization and decentralization in the organisation. This is to be done
according to the size of the organisation, nature of the activity etc. Centralisation
is successful in small organisations only. Large organisations mostly have
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decentralization of power and authority.
13) PRINCIPLE OF UNITY OF DIRECTION
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It states that 'there should be one head and one plan' in every organisation. Each
group in the organisation should have the same objective and the group should be
directed by one manager using single plan.
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E.g.: The Finance Head, Marketing Head, HR Head, IT Head etc. in an

organisation are all directed by the Chief Executive Officer (CEO)

Note: The difference between unity of direction and unity of command is:
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- Principle of unity of command: One individual, one superior

- Principle of unity of direction: One group, one objective, one superior.

14) PRINCIPLE OF ESPRIT DE CORPSE (TEAM WORK)

Espirit de Corpse means union is strength. Power of many is always more than
power of one. The manager should create a spirit of team work among the

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
Chapter 1: Principles of Management

employees. They should be made to realize that the organisation goals are achieved
only due to the combined efforts of all the employees. Manager should build a
sense of togetherness among the employees. The goals can be achieved smoothly
and easily, if the workers work with unity.
Above 14 principles of Henry Fayol are very useful to manage the organisation

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efficiently and effectively. These are also supportive to the functions of
management. These principles are very logical and hence, applicable in modern
management era.

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Sr. No. Principle Meaning

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1. Principle of Division of Work Work in an organisation should be divided
into small parts and assigned to different
employees depending on their interest, skill
and capabilities.
2. Principle of Authority and Manager should be given complete authority
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Responsibility to take decisions in order to complete task.
Also, he should be responsible for success /
failure of that task.
3. Principle of Discipline Proper discipline has to be maintained within
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an organisation.
4. Principle of Initiative Managers to encourage employees to take
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initiative and come up with new ideas.

5. Principle of Subordination of Interest of the individual is to be given
Individual Interest to lesser importance as compared to the
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organisational Interest interest of the organisation.

6. Principle of Order Material and people must be at the right
place and at the right time.
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7. Principle of Unity of Command One employee should receive order from one
superior only.
8. Principle of Stability of Tenure Manager should ensure that the employees
get a sense of security in their job.
9. Principle of Remuneration Employees should be remunerated fairly
10. Principle of Equity All the employees should be treated fairly
and equally.

9
Std. XII: Organisation of Commerce

and Management

11. Principle of Scalar Chain Organisation should decide what type of

communication is suitable under certain
situations.
12. Principle of Centralization There needs to be a proper balance between
centralization and decentralization.

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13. Principle of Unity of Direction A group of people working to achieve a
common goal must work under the direction
of one single person.
14. Principle of Espirit de Corpse Manager to create a spirit of team work

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among the employees as goals are achieved
only due to the combined efforts of all the
employees.

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INTRODUCTION OF F.W. TAYLOR
Frederick Winslow Taylor (1856 – 1915), was an American who started his career as a
machinist in Midvale Steelworks, Philadelphia. He gradually rose to the position of the
Chief Engineer. He introduced his observations and experiments based on scientific data.
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Taylor’s approach towards management is termed as scientific management. For this
contribution in development of management thoughts, he is known as the “Father of
Scientific Management”. According to Taylor, problems should be solved by scientific
techniques rather than rule of thumb and trial & error approach.
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4. Elaborate principles of scientific management. [Mar’ 15] T

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Ans: According to Taylor, “Scientific Management consists of knowing what you (i.e.
management) want men to do exactly; and seeing it that they do it in the best and
the cheapest manner.”
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Taylor’s principles of scientific management are as follows:

1) SCIENCE, NOT RULE OF THUMB
'Rule of Thumb' decisions, based on personal judgments of the manager, affect the
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efficiency of the organisation negatively. Taylor insisted upon scientific method for
every small work. It involves selecting the best way of performing a job after
scientific analysis of that job and not by trial and error method. Standard required
time and standard output should be defined by the manager so that time and
human energy is saved, and expected standard output is achieved. Taylor believes
that even a small production activity, like loading iron sheets into box cars, can be
scientifically planned.

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Chapter 1: Principles of Management

2) HARMONY, NOT DISCORD

There should be harmony between the employees and management. This will help
in minimizing conflicts between them. There should be perfect understanding
between the employees and the management. It will help to create healthy work
environment, for achieving the desired goal i.e. success. Organisation should think

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about maximum prosperity of employees also.
3) MENTAL REVOLUTION
Taylor introduced the concept of "Mental Revolution". It focuses on change in the
attitude of employees and management towards each other. Both should realize

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their equal importance in an organisation and give full cooperation for achieving
goals of organisation. This will increase productivity and profits.
4) COOPERATION, NOT INDIVIDUALISM

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This principle emphasizes on mutual cooperation between employees and
management. Cooperation, trust, team spirit etc. can turn internal competition also
into healthy work environment. Management should value the suggestions given by
employees in decision making process. Employees should be treated as an integral
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part of organisation in all respects. At the same time employees should resist
themselves from going on strikes and making unnecessary demands from
management. They should treat each other as two pillars of organisation.
5) DIVISION OF RESPONSIBILITY
Proper division of work should happen with division of responsibilities between the
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managers and employees. Major planning is done by the top and middle level
management authorities whereas employees are concentrating on its execution. The
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reporting is done as per the instructions given by their superiors. Managers should
always help, encourage and guide the employees. It helps for best performances of
managers as well as employees.
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6) DEVELOPMENT OF EMPLOYER AND EMPLOYEES FOR GREATER EFFICIENCY

AND MAXIMUM PROSPERITY
The best performance of an organisation depends on the skills and capabilities of
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its employees to a great extent. So, training and development programmes for the
employees are very essential. It ultimately affects the profitability of the
organisation. Each employee should be given proper opportunity to attain greater
efficiency and maximum prosperity.

5. What are the techniques of scientific management? Explain in detail. [Oct’14] T

Ans: According to Taylor, “Scientific Management consists of knowing what you (i.e.

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Std. XII: Organisation of Commerce
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and Management

management) want men to do exactly; and seeing it that they do it in the best and
the cheapest manner.”
Some of the major techniques of scientific management are as follows:

Techniques of Scientific Management

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Standardization of Scientific Task Scientific Differential
Work Study Functional
Tools & Equipment Setting Selection & Piece-Rate
Organisation

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Training Wage Plan

Time Method Motion Fatigue

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Study Study Study Study At planning At implementation
level level

1) WORK STUDY
Management should do proper work study before assigning the work to the
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workforce. Work study consists of an organised, systematic and critical assessment
of the various activities or functions. Work study is based on the techniques such
as time study, motion study, method study and fatigue study.
i. Time study
The management should observe and record the time taken by an employee to
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complete a given task. With the help of time study, the precise time required
for each element of work is determined. This will help to fix a standard time
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required to do a particular task under given condition. It is useful to measure

the efficiency of an employee and to control the cost of work.
E.g.: A worker completing the job within standard time can be given more
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pay as an incentive and a worker completing the job after standard time can
be given less pay as penalty.
ii. Method study
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There are always various methods of completing the task. However, for best
quality and cost effectiveness, the best method of doing a particular job
needs to be identified. It helps to save time and raw material.
iii. Motion study
The management must study the body movement of an employee or the
machines, while completing a particular task. If there are some movements
which are unnecessary, they can be eliminated. It also helps in improving the

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Chapter 1: Principles of Management

efficiency of the employees. Motion technique helps to know if some elements of a

job can be eliminated or their sequence can be changed for a smooth task flow.
iv. Fatigue study
Generally, long working hours without sufficient breaks, target pressure, heavy
working tools, and poor working conditions result into physical and mental stress

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i.e. fatigue. It has an adverse effect on the health and efficiency of the
employees. The management must study the factors that are causing fatigue
and take steps to reduce the fatigue in order to maintain operational effectiveness.
2) STANDARDIZATION OF TOOLS AND EQUIPMENTS

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Taylor conducted some experiments at his workplace and the results of the
experiments inspired him to advocate this technique. It involves standardization of
working environment and methods of production. The employees should be provided

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with good working conditions and good tools & equipment. It helps to reduce
spoilage and wastage of material, cost of production, and workers’ fatigue. It
improves quality of work.
3) SCIENTIFIC TASK SETTING
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Taylor emphasized the need for fixing a fair day's work. This technique is important
to prevent the employees from doing work much below their capacity. This technique
will enable the employees to complete the task according to given standards. Also,
management can keep proper control on optimum utilization of workforce.
4) SCIENTIFIC SELECTION AND TRAINING
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This technique helps the management to select right persons for the right jobs. It
needs to fix job specifications as per requirement. Employees are selected according
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to predetermined standards in an impartial way. After selection, management

should provide proper training programmes to increase their efficiency.
5) FUNCTIONAL ORGANISATION
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This concept separates planning from implementation. This means that planning is
done by different people and actual work is supervised by different people. Thus, every
worker is supervised by two different sets of supervisors. He recommended total eight
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foremen to control the various aspects of production. They are categorized as follows:
i. At Planning Level
a. Route Clerk- tells how work moves from one machine to other.
b. Instruction Clerk- records instructions to complete the work.
c. Time and Cost Clerk- determines the time required for a work and
workouts the cost.
d. Discipline- ensures that the workers are working as per factory rules.

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Std. XII: Organisation of Commerce
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and Management

ii. At Implementation Level

a. Gang Boss- actually gets the work done.
b. Speed Boss- ensures that the work is completed in specified time.
c. Repair Boss- handles security and maintenance of machine
d. Inspector- ensures that the work is done as per the specified standards.

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Note: Foreman refers to male worker who supervises and directs other workers.

6) DIFFERENTIAL PIECE-RATE WAGE PLAN

Taylor suggested the differential piece-wage system. Under this system, higher

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rates are offered to employees who complete more work than the standard
quantity. On the other hand, employees performing below the standard get lower
rate of wages. This technique motivates the employees to attain higher standard

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performance and earn higher wages.

FOR YOUR UNDERSTANDING

This technique has a drawback. In order to produce more and thereby earn more,
workers may not pay attention to the quality of the product. Thus, strict measures need
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to be taken to maintain quality alongwith increasing quantity.

CHAPTER ASSESSMENT
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Time: 1 hour Marks: 25 marks

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Q.1. A) Select the correct answer from the options and rewrite the statements: [2]
1. Principle of _______ is based on 'A place for everything and everything in its place'.
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a. discipline b. order c. equity

2. _______ was regarded as Father of Scientific Management.
a. Henry Fayol b. F W Taylor c. Philip Kotler
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B) Write a word or a phrase or a term which can substitute each one of the
following: [2]
1. The study of movement of an employee as well as machine while completing a
particular task.
2. The term which means direct or cross communication in an organisation to avoid
long scalar chain and to take speedy decisions.

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Chapter 1: Principles of Management

C) Find the odd one: [2]

1. Fatigue Study, Principle of Unity of Command, Work Study, Motion Study.
2. Principe of Authority & Responsibility, Motion Study, Principle of Division of Work,
Principle of Discipline.

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D) State whether the following statements are true or false: [3]
1. The principles of management are universal in nature.
2. F.W. Taylor has proposed 14 principles of management.
3. Method study is the technique used for fixing the standard time required to do a

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particular task.

Q.2. Explain the following terms/concepts (Any 1 out of 2) [2]

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1. Differential Piece Rate System 2. Principle of Order

Q.3. Study the following case/situation and express your opinion: [4]
1. Anirudh is the CEO of Blue Waters Pvt. Ltd. It is an creative design firm. A client
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contacted Anirudh requesting for certain changes in the design. Ideally, Anirudh
should inform the Design Head who will pass on the information to the Design
Assistant. However, Anirudh feels that the exact changes may not get passed on
properly. So, he contacts the Design Assistant directly.
i. Which is the principle of management which Anirudh should ideally follow?
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ii. What is the term to describe the direct communication between Anirudh and
Design Assistant?
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iii. What is the pre-requisite of such direct communication?

Q.4. Justify the following statements (Any 1 out of 2) [2]

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1. Management principles are helpful in optimum utilisation of resources.

2. Principle of equity is important.
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Q.5. Answer the following (Any 1 out of 2) [8]

1. What are techniques of scientific management? Explain in detail.
2. Explain in detail any five Henry Fayol’s principles of management.

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Download the answers of the Chapter Assessment by
scanning the given Q.R. Code.

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