Category: Commerce Notes PPT

Leadership is considered as an interpersonal process under which an executive seems to guide, direct as well as influence the workings and operations of his/her subordinates with the sole motive to accomplish certain objectives at a particular situation. Recently, in modern management leadership skills are very much required in a manager and is considered as an essential quality. A manager with good leadership quality can motivate his/her employees helping to boost up their efficiency and confidence. In order to get a more detailed understanding, let’s discuss more leadership and leadership continuum.

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Leadership Continuum by Tannenbaum and Schmidt

Leadership continuum theory was initially proposed by Tannenbaum and Schmidt in 1958 but later got updated in the year 1973.

The Tannenbaum and Schmidt leadership model was introduced in order to highlight the diverse range of various leadership styles that exist in this world. The inspiration drawn by the action range directly is considered to be from the degree of authority that got exercised by the manager. Such leaders while taking any important decisions take into account the freedom level of workers who seem to be engaged in non-managerial levels.

There is an illustration of various leadership styles in the leadership continuum that are present amongst the two ends of free reign and autocratic. The right side of the leadership continuum is meant for hunting the release of control and power by the managers whereas the left side of the leadership continuum shows the stringent levy of control.

However, the two ends of the leadership continuum either it is the absolute freedom or the authority are not considered as helpful for the organisation. Thus, it is very essential to hit the right chord of harmony between the two extremes for benefits.

Six Forms of Leadership 

A manager seems to get characterized on the basis of control exercised by him/her on the subordinates. This can get classified into these six possibilities:

• In an autocratic form of leadership, the manager seems to take all the decisions. Further, he/she communicates these decisions to his/her subordinates and orders them to implement it for achieving the objectives of the management.

• After taking the decision, the manager explains it to the subordinates so as to make them understand the benefits of the particular decision for their acceptance.

• The manager is also required to share his/her ideas with the subordinates and take their insights regarding those ideas. This will increase their involvement in the company. This practice encourages the employees to work more efficiently.

• When the manager is taking insights from the subordinates then there might occur some changes in the original idea or decision that got generated by the manager.

• A manager can ask his/her group to take a decision after giving them an idea about their limits.

• The last style gives the subordinates full power. Here the manager allows the subordinates to take every decision without any limits

Factors a Manager Should Keep in Mind While Taking Decisions

A manager is responsible for making different decisions to manage various situations in the organization. The success of the organisation depends upon the decision taken by the manager. Thus, it shows how much Important is the power that got bestowed on the hands of the manager. Therefore before making any decision, the manager should consider some factors thus, ensuring that the decision is perfect and appropriate for the organisation. Some of these factors that are needed to be considered while taking decisions are:-

The Force of Subordinates

The main factor that the manager has to consider is the forces of subordinates because they are the person whom the manager is about to guide. A good leader always understands his/her subordinates. The things that are considered before taking any decision are tolerance level of the subordinates toward ambiguity, the need of independence by the subordinates, the problems of subordinates that they are facing continuously, their desire to take different decisions, organisational goals and their expectations from the manager.

The Forces in the Manager

Under this factor, the manager’s value system gets included along with the confidence level of the subordinates, leadership inclinations and ambiguity tolerance.

The Forces in the Situation

Under this factor, general and environmental situations come into account. These situations include the nature of organizational problems, the pressure of time, various organizations, the effectiveness of the group, etc.

Conclusion

Tannenbaum and Schmidt concluded their leadership continuum theory by stating that leaders shift their behaviours according to the organisational metrics of a particular situation. They also need to change their behaviour according to their subordinates and different environmental factors.

What are the Financial Statements?

Financial statements refer to a detailed record of an organisation that contains financial information on every business aspect of a company. These are evaluated based on past, present and projected future performances.

Financial statements generally include three elements – balance sheets, income statements and cash flow statements.

These statements are analysed using quite a few procedures, which include horizontal analysis, vertical analysis, ratio analysis, trend analysis, etc. However, students must note, there are also quite a few limitations of financial statement analysis. These must also be learnt to understand this topic thoroughly.

Limitations of Financial Statements

While financial statements are vital to understanding associated prospects of a company, these have significant limitations too. Consequently, students of commerce must learn these limitations to get a complete idea of these statements. Additionally, understanding the limitations of conventional financial statements also helps a user to note devaluation or otherwise of invested capitals.

• Too Much Dependence on Historical Costs: A significant issue that comes up with the reliance on financial statements is that of excessive reliance on historical costs. While every enterprise records their transactional details, the intrinsic value of assets changes over time.In the case of securities, these are generally modified according to market changes, though that is not the case for fixed assets. As a result, balance sheets and other records might turn out to be ambiguous since these are dependent on historical costs.

• Effect of Inflation: Related to the above mentioned disadvantage of financial statements, inflation has an immense impact on the cost and value of assets. However, with a dependence on historical costs, most fixed assets are not re-evaluated as per current market conditions. Commonly, that leads to transactional estimations that are inordinately lower when compared to current standards. This issue is mostly related to long-term assets.

• Lack of Accurate Records on Intangible Assets: Business enterprises have numerous intangible assets like brand value, Research & Developments, etc. Typically, these assets are recorded in expenditures. However, they are intangible and financial statements do not shed any light on such assets, therefore being quite misleading in this aspect. This can be a significant issue, especially for smaller enterprises that have generated intellectual assets without having adequate sales exposure.

• Time-specific: Financial reports like balance sheets, cash flow statements, income statements, etc. are extremely time-specific for every functional business enterprise. As a result, any individual looking at one of these reports might have a biased understanding of the financial standing of a company since a single report might vary vastly from the aggregate trend of an institution.As a limitation of financial statements, it is a particularly problematic issue. However, it can still be handled by getting detailed statements of extended periods.

• Subject to Fraud: There is always a chance of fraudulent activities on the part of a company to project their financial statements in a fashion that fits their ulterior motives. Often done by skewing results and doctoring aspects of these financial statements, these can be very misleading. These are done sometimes to avail payouts and bonuses that are subject to specific business numbers and revenue generations.

• Aggregate Information: Among the limitations of financial statements, a recurrent issue is that of aggregate data. Often, companies record their expense and revenue related statements on an aggregate basis, rather than that of a detailed entry. While this is not misleading in the first glance, lack of details can effectively project a financial condition that is far removed from reality.

• Missing of Data: Related to this issue mentioned above, often detailed data is not recorded by enterprises. Furthermore, data related to end of agreements, loss of markets or ventures etc. are not mentioned in financial statements. Consequently, that can be a severe hindrance in evaluating the current value of a business.

• Prevalent Conventions: Accounting conventions that are involved in the recording of financial statements also bring about certain inherent limitations of financial statements. In the event of liquidation or any such movement, many assets do not reach their declared value owing to their old records not accounting for depreciation.

• Interim Reports with no Predictive Value: Profit and loss statements and other similar statements are restricted to a specific time frame and do not represent the revenue-generating capability of an enterprise. Understandably, such a financial statement does not adequately represent future projections or aid in its estimation.

Much like financial statements and their limitations, there are many topics in standard 10 + 2 curricula for commerce students that are vital and complex. Consequently, offers detailed study materials on all these topics, which help students understand them in detail. Furthermore, students can also assess themselves with questionnaires provided by , which cover every important topic.

In case a student has some doubt, he/she can also attend ’s live classes for a clear understanding of these chapters.

The definition of management states that it is the act of coordinating and administrating a workforce to achieve a target. This includes building strategies and manoeuvring the workforce accordingly to optimize its potential. In recent years, the expansion of companies and their initiative to sell shares have separated ownership from day to day company activities. Management employees and managers have come through to fill this gap and ensure the smooth running of an organization. The duty of management professionals has evolved, and they are now the key to the success of any company. 

Along with directing the workforce collectively to meet company objectives, their job role extends further to ensure the well-being of employees as well.

What is a Profession?

A profession is an occupation that demands specialized knowledge of a subject matter alongside intense academic background. Moreover, competent authorities regulate the entry in a particular occupation, and they look for experience, ethics, and formal training. According to experts, a profession includes the following fundamentals.

1. Special Knowledge

The emergence of professions of any kind, stems from a body of particular knowledge, which individuals can study. Professionals need to make an effort to acquire this knowledge and its techniques. Management professionals need to do the same to secure employment at their level.

2. Dedicated Training and Education

The knowledge is not enough to succeed in any profession; one needs to know its technical nits and grits. In this regard, training, particular to a job, comes in handy. Also, one cannot become an expert without a dedicated course of education. Thus, going through them is vital.

3. Code of Conduct

There is a code of conduct, commonly known as work ethics, in every profession, and members associated with it must abide by it. Typically, this code varies from one company to another. This code of conduct includes the rules and regulations of a firm.

4. Social Obligations

Social obligation is an unseen part of every profession. Professionals seek motivation from their desire to serve society, and social norms influence their actions.

5. Representation

Every profession has a competent authority at its forefront, which regulates that sector. These associations are in charge of regulating and developing criteria for a particular profession.

Discussion of Management as a Profession

Management, as a profession has existed for years. Consequently, management is a true profession comment is evaluated based on the fundamentals of the profession. Here is a detailed explanation of the same.

1. Specialized Knowledge

Management professionals need specialized knowledge to work in their respective fields. They can gather their knowledge from books and other study materials that are carefully curated. Therefore, in this light one can say that management is a profession.

2. Training and Education

Modern management science allows aspirants to gain their necessary knowledge and training. There are many management education and training institutions in this country that can help an individual in this process. In the current market, companies prefer to hire individuals who have a degree to manage certain positions.

Thus, management professional meaning refers to individuals with appropriate training and education, which qualifies them as a profession.

3. Code of Conduct

Every professional working in this domain needs to abide by specific rules and regulations or codes of conduct. Primarily, such norms are at the discretion of the organization they are working for, and it alters from time to time. However, professional morality, integrity, and honesty are some fundamentals that individuals must abide by irrespective of their role. Keeping this into consideration, one can quickly identify management as a profession.

4. Social Obligations

The social obligation of any job prevails in management as well. Even though there are no such written norms, but in reality, the focus on social responsibility exists. Therefore, it is not hard to consider management as a profession.

5. Associations

There are professional management association in almost every country, and their job is –

• To regulate the behaviour of the members

• Creating norms for the professionals

• To study and develop new ideas for the betterment of management as a profession

For instance, in India, the All India Management Association works in tandem with the local association to improve this sector via research and analysis.

Keeping these pointers in mind, it is not hard to regard management as a profession, but a contrasting opinion also co-exists.

Can Management Be Strictly Categorized As A Profession?

Management is a profession this statement is of no value when one considers the following pointers.

1. Even though the factor of education and training exists, there are no particular rules about it. Often individuals who acquire a seat in the management of an organization do not have the formal qualification or training to be there. Since there is no prescribed qualification for managers, the entry here is not restricted.

2. The social responsibility of management professionals has some constraints. They are answerable to the shareholder, owner, or board of directors. Hence, even if they want to give back to the community, they need to seek permission.

3. The evaluation of management individuals is based on their performance, not on their degrees.

Management is not a profession; by all means, it satisfies certain fundamentals of it. The old saying of ‘managers are born, and not made’ holds no value in modern times. In the contemporary world, individuals can get themselves trained via a dedicated course of study to become a manager.

Aspiring management professionals can learn more about this topic on – India’s leading e-learning platform. Individuals can get in touch with subject experts to clear doubts and enhance their preparations.

The most important component in selling goods is marketing promotion. Marketing is a process in which a plan has to be started from the beginning of the process that is the initial phase of it.  Marketing is needed from a small business to big companies. Until the promotion of the product is not done, a company’s sale cannot be improved no matter how good the staff is.

What is Marketing Promotion?

There are many different definitions of marketing. The best way to define Marketing is that Marketing is an activity, set of institutions and a process for creating, communicating, delivering and exchanging offerings. These offerings have value for customers, clients, partners and society at large. There are four different types of elements in this process, which is called 4 Ps of marketing:

1. Product: Products are of basically two types, namely tangible products and Intangible products. Tangible products are those products which we can both touch and feel. Intangible products are something which we can only feel or experience.

There are three levels of a product. First one is the core product. This is not a physical object but consists of the problem-solving benefits that satisfy consumer needs. Products are based on the consumers’ perspective. At the second level, marketers must convert the core benefits into a physical or actual product that have the attributes to satisfy customer needs and wants. If the company wants to deliver its core benefits, it must have five attributes, i.e. name, parts, packaging, features and styles combined. After physical goods, the next level is an augmented product that includes after-sales services, installation and warranty.

2. Price: At how much are you going to sell your product? The price of your product greatly affects your sales. If the product will be affordable, it is obvious that people will want to buy that. However, cheap products also mean that there is a possibility that the quality of that product will not be good. While deciding the price, you must keep these things in mind:

• How much total money did you spend to make that product? If you make the product in less amount of money, you can sell that product at a low price so that everyone can buy your product.

• To know at what price your competitors sell that type of product. It will help you know the market value and market price of the product.

• How much money can your customer pay for your product? 

3. Place: Where will customers buy your product? Will you sell the product directly to your customer, or will you sell it to a wholesaler or retailer in the middle? Will you sell it online or offline? These are the questions you must think before selling the product.

4. Promotion: How will people know about your product? If anyone wants to buy your product, he/she must know about the product. Customers must think positively about that product and the review of that product must be good. They must know when the product is coming to the market so that they can be ready to buy that product. These things depend on how well you promote your product. 

It is essential to know what are the different ways of promoting products. Following are some ways:

• Digital marketing like PPC advertising, Social media, and SEO

• Traditional advertising like TV, Magazine, Newspaper or Radio

Whatever method of advertising you use, your goal should be to show your product to a large set of audience and sell it.

Types of Marketing Promotion

1. Advertising: It is a non-personal form of communicating information related to the promotion of ideas, presentation of goods and services and to create demand. Advertisement can be done through newspapers, magazines, television, radio, outdoor advertising or direct mail. There are a few new media such as search results, blogs, social media, websites or text messages.

2. Direct Marketing: Direct marketing is a form of advertising where the organisation engages customers through a variety of media including text messaging, email, website, online advertising, database marketing, fliers, catalogue distribution, promotion letter and target television, newspaper and magazine advertising.

3. Sales Promotion: Sales promotion is a way of marketing in which products are sold utilising short term attractive offers. These kinds of strategies are brought into use when they have to lift the sales temporarily, attract more customers, introduce new products or sell out existing inventories. Sales promotion is one of the core elements of the promotion mix. To build a long-lasting relationship with users, you need to find out the type of sales that work with your target audience. At that time, you should provide customers with value that’s relative to your fields of expertise.

4. Personal Selling: Personal selling is selling the products face to face to the customer or via talking to the customer directly on the phone. The great advantage of a personal sale is the customer gets all the details and queries of products are solved instantly. Effective personal selling addresses the buyer’s needs and preferences without making him or her feel pressured. Good salespeople offer advice and recommendations and they can help buyers save money and time during the decision process. 

The seller should give honest responses to any questions or objections buyers have and show that he cares more about meeting the buyer’s needs than making the sale. These aspects of personal selling contribute to a strong relationship between buyer and seller.

5. Sponsorship: Sponsorship Advertising is a type of advertising where a company pays to be associated with a specific event. Sponsorship advertising is prevalent at charitable events. Besides charitable events, companies may sponsor local sporting teams, sports tournaments, fairs and other community events. The idea is to get your name out and be viewed positively as a participating member of your community. 

The company must have a reasonable basis to believe that the sponsorship will create a tangible business result. It doesn’t necessarily have to produce a profit, but it should at least increase brand awareness or help foster a positive view of the company.

Business ethics means ethical or moral standards that drive corporate culture. Also referred to as corporate ethics, it encompasses ethical issues arising in a commercial or professional environment. In today’s world of the free and open market, globalization and explosion in communication, ethics play a vital role.

 

Importance of Business Ethics

Whether you own a startup, small organization or are a corporate giant, the same level of ethics govern all businesses. A recent incidence of wall street collapse emphasizes how following the principles of business ethics is essential for improving the profitability of the business and improving employees’ productivity. Major organizations like HealthSouth, Enron, Arthur Andersen, Freddie Mac, AIG and Fannie Mae were damaged and destroyed by their executives. The main culprit for their downfall was their massive ambition and intelligence which lacked the moral compass. Charisma cannot solely run a business successfully in this ultra high tech, competitive and interdependent business world. Intelligence and business acumen needs to be backed by conscience and strong ethical notions. Else it will lead to epic failures in both personal and economic goals. Former US president Theodore Roosevelt rightly said that if you educate a mind that is without morals is like educating and promoting menace in society.

Principles of Business Ethics

Now that we know what is meant by business ethics, we must identify and understand the 12 pillars or principles of ethics for business executives:

1. Honest: Businesses must show honesty in all their communications and conducts. Abraham Lincoln has drawn a comparison between character and reputation as a tree and its shadow. To build a reputation, one must have character and honesty at the forefront of it. Honesty has to be accompanied with forthrightness and candidness. 

2. Integrity: You demonstrate integrity when your thoughts, words and actions are in line with each other. Ethical executives earn trust by having the integrity of character. Integrity often requires walking the extra mile with moral courage and inner strength to do the right thing even if it costs some personal losses.

3. Keeping Promises: An executive who makes all efforts to fulfil the spirit of their commitments and promises earns trust and respect. They do not manipulate agreements or misinterpret them to avoid compliance with the commitment.

4. Loyalty: Executives must be loyal with their organizations as well as people or other organizations they work with. They must strive to protect the lawful interests of their companies and colleagues. They need to safeguard information learned in confidence and not use it for personal gains.

5. Fairness: Fairness means not to exercise power arbitrarily to gain or maintain any advantage. This also means to not take undue advantage of another person’s mistakes or difficulties.

6. Caring: A genuine compassion should be shown towards other’s well being. An ethical business person would meet his/her business objectives without causing harm to others and considering their good.

7. Respect For Others: Every person with whom a business executive interacts with must be treated with respect, autonomy and dignity.

8. Law-abiding: All laws, rules and regulations related to one’s business activities must be followed.

9. Commitment to Excellence: Excellence in their job is key to an organization’s success. Ethical executives must be well-informed and constantly work towards improving their proficiency in diverse areas.

10. Leadership: An ethical role model would strive to be a role model for his or her subordinates or employees. They promote ethical decision making principled reasoning.

11. Reputation and Morale: Reputation of a company and the pride and morale of their employees is of the utmost importance to an ethical businessman. They are constantly trying to build the reputation and morale of their business and people with their affirmative words and actions.

12. Accountability: A business person must own the outcome of their decisions and accountability of the ethical quality of decisions they make.

So now if anyone asks you “What do you mean by business ethics”, you can say that ethics refers to how humans conduct themselves morally within the business and also outside of it. Ethical principles are universal standards that differentiate right from wrong. They define the kind of behaviour a human should or should not engage in. Ethics and character count in every aspect of life but business ethics definition has another level of connotation attached to it.

The art of predicting the demand for a service or product in the future market is known as demand forecasting. This forecast is based on historical data, past customer behavior trends, and patterns of the present market. In short, it is the scientific estimation of future demand for products and not just merely guessing it. It also gives crucial insights into cash flows, risk maintenance, budgeting, margins, inventory turnover, and more. There is no perfect demand forecasting method so every company needs a prediction solution. Here we shall discuss some of those methods. The efficiency of these methods can be increased by making them more accurate with the application of various methodologies.

 

Various Demand Forecasting Methods

Forecasting the demand is not easy. Proper scientific formulas and sound judgment are required to accurately forecast the demand for a service or product in the future. Let us take a look at the various methods of demand forecasting.

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Here the estimated sales for the future are predicted by the salesperson of a firm, from a particular region. All these individual estimates are combined to calculate the total estimated sales. The consumers are closest to the salesperson. Hence it is believed that they would understand the needs and trends amongst customers much better.

The estimates are based on market competition, product usage, customer behavior, advertisements, the population of the region, and more. This method is not scientific as it depends on the experience of the salesperson and his personal opinions on customer relations.

This method uses the projection of past demand for products and services into the future. The future trends are predicted with the help of economic indicators. The various types of economic indicators include lagging indicators, leading indicators, and coincident indicators.

The ones that move up or down in the lead of some other series are the leading indicators. The ones that follow the change after a time gap are the lagging indicators. While the ones that move up and down depending on economic activities are the coincident indicators.

Demand forecasting can also be done with the help of the market experts as they know about the demand affecting factors in detail. The Delphi Technique is one such method. It is a pretty reasonable and speedy technique where the experts are provided with a critical questionnaire from which they are supposed to forecast the demand. They are provided with data to conclude. However, they are also required to provide suitable reasons for how they concluded.

This method is a time-consuming and expensive one in which market studies are conducted based on consumer trends and patterns. Certain factors are considered constant as some determinants may vary while doing calculations.

One of the best demand forecasting methods is asking the customers about the needs and expectations regarding the kind of products they are expecting. Whenever the forecast is to be made within a short period, customers should be directly interviewed. On the other hand, businesses should not depend on customer views as they may misjudge the demands or change their preferences with time. Hence, use your judgment while forecasting also.

These are the most bias-free, reliable, and scientifically proven methods. The two most famous types of statistical methods are trend projection and regression analysis methods. These are entirely dependent on future demand predictions.

Major Types of Demand Forecasting

Demand forecasting can be done in various different ways and you may choose any type of demand forecasting method and can perform it using any method that the company desires. The six major types of demand forecasting are

1. Passive Demand Forecasting: In this type of forecasting, sales data from the past is used to predict the future of the company. In case of seasonal fluctuations, be sure that you use data from the same season in order to project sales in the future. It is one of the simplest and easier methods for demand forecasting.

2. Active Demand Forecasting: This type of demand forecasting is a good choice for new start-ups. This model takes marketing campaigns, market research, and expansion plans into account. 

3. Short-Term Projections: This forecasting method analyzes for a short-term of 3 to 12 months helps in managing a just-in-time supply chain and also allows the company to adjust their projections based on real-time sales data.

4. Long-Term Projections: This forecasting method analyzes for a long-term of one to four years and helps us in focusing and shaping the growth of business trajectory, planning out the company’s marketing, capital investments, and supply chain operations. The method is based on sales data and market research.

5. External Macro Forecasting: This company incorporates the trends that persist in a broader economy, that is, it analyzes how the trends affect the goals of a company and give us a direction that can help us meet our career goals.

6. Internal Business Forecasting: Internal capacity is one of the limiting factors for the growth of your business. This type of forecasting helps you predict the limitations that might slow down the growth of your business. It also helps reveal the untouched areas of opportunity within the organization. The major factors in internal forecasting are business financing, profit margins, cash on hand, and supply chain operations. Therefore, this forecasting helps you make realistic projections and gives you time to build the capacity that can help you meet expansion goals.

How Can We Create Forecasts?

There are many different ways that can be utilized to create forecasts. The five major methods used for making demand forecasts are:

1. Trend Projection: It is the simplest and most straightforward method to forecast demand that involves the use of previous sales data in order to predict future sales. It is an example of passive demand forecasting.

2. Market Research: This type of forecasting is based on the data that is collected through customer surveys. The method is time-consuming and tedious as one needs to send surveys to the customer and then tabulate data accordingly. The information gathered from this method cannot be collected from any other method, therefore, the efforts required by this method are worth it. It is an example of active demand forecasting.

3. Salesforce Composite: This method utilizes the feedback obtained from the sales group in order to forecast the demands of the customer. The method also helps in connecting the sales division with the managers of the company to keep the flow of information open. It is an example of short-term projections.

4. Delphi Method: This method involves experts and skilled facilitators from outside in order to obtain an expert opinion on the market forecast of your company.

5. Econometric: This method involves the use of mathematical formulas to predict the future of customer demand. The method is based on the relationship between various economic factors that can affect the demand for a certain company’s products.

 

Solved Examples

1. What are the major types of Statistical Forecasting?

Statistical Forecasting is basically of six types in general. They are linear regression, multiple linear regression, time series analysis, productivity ratios, and stochastic analysis.

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2. Name four common types of forecasting.

The main four forms of forecasting are econometric models, the Delphi method, judgmental forecasting, and the time series model.

Fun Facts

• Forecasting is broadly classified into qualitative and quantitative forecasting.

• Cash flow statements, income statements, and balance sheets are the three fundamental components of financial forecasting.

• Often we tend to apply wrong planning for strategic decision making. These are some of the biggest challenges in demand forecasting.

• It is not like only the customers need the products; the business also needs the customers. Hence, they continuously interact with their consumers to make them happy and satisfy their needs. This place is where survey forecasting comes into play.