Unit-9

Introduction to Production Management

Defintion:-The job of coordinating and controlling the activities required to make a product, typically involving effective control of scheduling, cost, performance, quality, and waste requirements.

Functions of Production Management:

The definitions discussed above clearly shows that the concept of production management is related mainly to the organizations engaged in production of goods and services. Earlier these organizations were mostly in the form of one man shops having insignificant problems of managing the productions.

But with development and expansion of production organizations in the shape of factories more complicated problems like location and lay out, inventory control, quality control, routing and scheduling of the production process etc. came into existence which required more detailed analysis and study of the whole phenomenon.

This resulted in the development of production management in the area of factory management. In the beginning the main function of production management was to control labour costs which at that time constituted the major proportion of costs associated with production.

But with development of factory system towards mechanization and automation the indirect labour costs increased tremendously in comparison to direct labour costs, e.g., designing and packing of the products, production and inventory control, plant layout and location, transportation of raw materials and finished products etc. The planning and control of all these activities required more expertise and special techniques.

In modern times production management has to perform a variety of functions, namely: 

(i) Design and development of production process.

(ii) Production planning and control.

(iii) Implementation of the plan and related activities to produce the desired output.

(iv) Administration and co-ordination of the activities of various components and departments responsible for producing the necessary goods and services.

However, the responsibility of determining the output characteristics and the distribution strategy followed by an organization including pricing and selling policies are normally outside the scope of Production Management.

Scope of Production Management:

The scope of production management is indeed vast. Commencing with the selection of location, production management covers such activities as acquisition of land, constructing building, procuring and installing machinery, purchasing and storing raw materials and converting them into saleable products. Added to the above are other related topics such as quality management, maintenance management, production planning and control, methods improvement and work simplification and other related areas.

unit-8

Unit- 8

What is Marketing ? definition and Meaning.

The application, tracking and review of a company's marketing resources and activities.
The scope of a business' marketing management depends on the size of the business and the industry in which the business operates. Effective marketing management will use a company's resources to increase its customer base, improve customer opinions of the company's products and services, and increase the company's perceived value.

The management process through which goods and services move from concept to the customer. It includes the coordination of four elements called the 4 P's of marketing:
(1) identification, selection and development of a product,
(2) determination of its price,
(3) selection of a distribution channel to reach the customer's place, and
(4) development and implementation of a promotional strategy.
For example, new Apple products are developed to include improved applications and systems, are set at different prices depending on how much capability the customer desires, and are sold in places where other Apple products are sold. In order to promote the device, the company featured its debut at tech events and is highly advertised on the web and on television.
Marketing is based on thinking about the business in terms of customer needs and their satisfaction. Marketing differs from selling because (in the words of Harvard Business School's retired professor of marketing Theodore C. Levitt) "Selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And it does not, as marketing invariable does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse and satisfy customer needs." In other words, marketing has less to do with getting customers to pay for your product as it does developing a demand for that product and fulfilling the customer's needs.

Meaning of Marketing Mix

A planned mix of the controllable elements of a product's marketing plan commonly termed as 4Ps:

1. product

2. price 

3. place and 

4.promotion.

These four elements are adjusted until the right combination is found that serves the needs of the product's customers, while generating optimum income. Sometimes the first P (Product) is substituted by presentation.

Concept of Marketing

Under the marketing management philosophy, we shall study the following five concepts:

(1) Production Concept

(2) Product Concept

(3) Selling Concept

(4) Marketing Concept

(5) Societal Marketing Concept

1. Production Concept

Those companies who believe in this philosophy think that if the goods/services are cheap and they can be made available at many places, there cannot be any problem regarding sale.

Keeping in mind the same philosophy these companies put in all their marketing efforts in reducing the cost of production and strengthening their distribution system. In order to reduce the cost of production and to bring it down to the minimum level, these companies indulge in large scale production.

This helps them in effecting the economics of the large scale production. Consequently, the cost of production per unit is reduced.

The utility of this philosophy is apparent only when demand exceeds supply. Its greatest drawback is that it is not always necessary that the customer every time purchases the cheap and easily available goods or services.

2. Product Concept

Those companies who believe in this philosophy are of the opinion that if the quality of goods or services is of good standard, the customers can be easily attracted. The basis of this thinking is that the customers get attracted towards the products of good quality. On the basis of this philosophy or idea these companies direct their marketing efforts to increasing the quality of their product.

It is a firm belief of the followers of the product concept that the customers get attracted to the products of good quality. This is not the absolute truth because it is not the only basis of buying goods.

The customers do take care of the price of the products, its availability, etc. A good quality product and high price can upset the budget of a customer. Therefore, it can be said that only the quality of the product is not the only way to the success of marketing.

3. Selling Concept

Those companies who believe in this concept think that leaving alone the customers will not help. Instead there is a need to attract the customers towards them. They think that goods are not bought but they have to be sold.

The basis of this thinking is that the customers can be attracted. Keeping in view this concept these companies concentrate their marketing efforts towards educating and attracting the customers. In such a case their main thinking is ‘selling what you have’.

This concept offers the idea that by repeated efforts one can sell-anything to the customers. This may be right for some time, but you cannot do it for a long-time. If you succeed in enticing the customer once, he cannot be won over every time.

On the contrary, he will work for damaging your reputation. Therefore, it can be asserted that this philosophy offers only a short-term advantage and is not for long-term gains.

4. Marketing Concept

Those companies who believe in this concept are of the opinion that success can be achieved only through consumer satisfaction. The basis of this thinking is that only those goods/service should be made available which the consumers want or desire and not the things which you can do.

In other words, they do not sell what they can make but they make what they can sell. Keeping in mind this idea, these companies direct their marketing efforts to achieve consumer satisfaction.

In short, it can be said that it is a modern concept and by adopting it profit can be earned on a long-term basis. The drawback of this concept is that no attention is paid to social welfare.

5. Societal Marketing Concept

This concept stresses not only the customer satisfaction but also gives importance to Consumer Welfare/Societal Welfare. This concept is almost a step further than the marketing concept. Under this concept, it is believed that mere satisfaction of the consumers would not help and the welfare of the whole society has to be kept in mind.

For example, if a company produces a vehicle which consumes less petrol but spreads pollution, it will result in only consumer satisfaction and not the social welfare.

Primarily two elements are included under social welfare-high-level of human life and pollution free atmosphere. Therefore, the companies believing in this concept direct all their marketing efforts towards the achievement of consumer satisfaction and social welfare.

Conclusion

In short, it can be said that this is the latest concept of marketing. The companies adopting this concept can achieve long-term profit.

Meaning/ Definition of Demand Forecasting

Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data from test markets.

Estimate of expected demand over a specified future period. Also called forecast demand.

Methods of Demand Forecasting

Demand forecasting is essential to running a profitable business. Forecast too little and the shelves empty out; forecast too much and the warehouse stays full. There are various demand forecasting methods, from do-it-yourself to sophisticated software programs. Working with two or more approaches will provide you with the best results.

1.Assumptions:- For many goods, the length of the product cycle is shrinking. Not only does this make it more difficult to build a historical database, it accentuates the need to forecast correctly. Computer technology makes it possible to adjust pricing instantly and to modify sales promotions on the run. Without accurate historical information to measure the impact of price changes, the business owner may be forced to experiment. Sales performance of other goods with similar product attributes may serve as proxies for a current product with no track record.

2.Trend Analysis:- If you have historical data -- or if you can create it from related products -- trend analysis is the first step in demand forecasting. Plotting sales over time will reveal the presence of a sales trend if one exists. If there are aberrations -- “hiccups” in the trend -- you can look for explanations, which could include price, weather or demographic changes. If you are proficient with spreadsheet programs, you can chart data points and insert a trend line over the data. A more sophisticated approach is using least squares regression analysis which can also be done with standard spreadsheet software.

3.Qualitative Forecasting:-A more subjective approach uses expert opinions to predict demand. Especially useful when there is a lack of historical data, relying on the collective opinion of experts makes sense. Begin with an analysis of the marketplace, reviewing the economic conditions. Obtain as much information about competitors’ performance as you can. Then gather opinions from a variety of sources within your business. Include the owner, sales manager, accountant, attorney and any others whose opinion you value. If you wish, you can get outside opinions as well. Qualitative forecasting is based on the consensus view of your panel as you digest and aggregate their opinions.

4.Forecasting with Economic Indicators:-
Depending on the products you sell and the customers who buy them, basing your demand forecast on one or more economic indicators may be an effective method. This style of demand forecasting works better with industrial buyers rather than retail. First, find the indicators that relate to your business. For example, small businesses in construction-related work can look to housing starts, building permits, loan applications and interest rates for solid indicators of the future. Businesses in agriculture can find clues to the future from farm income, interest rates and weather forecasts. The Departments of Commerce and Agriculture release statistics on an ongoing basis. Agricultural Extension Services and other state agencies provide complementary data.

 

What is Market Segmentation ?

Market segmentation is a marketing strategy which involves dividing a broad target market into subsets of consumers, businesses, or countries who have, or are perceived to have, common needs, interests, and priorities, and then designing and implementing strategies to target them.

The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
Few companies are big enough to supply the needs of an entire market; most must breakdown the total demand into segments and choose those that the company is best equipped to handle.
Four basic factors that affect market segmentation are

1. clear identification of the segment,
2. measurability of its effective size,
3. its accessibility through promotional efforts, and
4. its appropriateness to the policies and resources of the company.

The four basic market segmentation-strategies are based on

1. behavioral,
2. demographic,
3. psychographic, and
4. geographical differences

Introduction to Finance Management

Definition:- The planning, directing, monitoring, organizing, and controlling of the monetary resources of an organization

Financial Management: Definition, Aims, Scope and Functions!

Introduction :-Financial Management is a related aspect of finance function. In the present business administration financial management is an important branch. Nobody will think over about-business activity without finance implication.

Financial management includes adoption of general management principles for financial implementation. The following may be said as the related aspects of financial management raising of funds, using of these funds profitably, planning of future activities, controlling of present implementations and future developments with the help of financial accounting, cost accounting, budgeting and statistics.

It acts as guidance where more opportunities for investment is available. Financial management is useful as a tool for allotment of resources to various projects depending on their importance and repayment capacity.

Definition:

James Van Morne defines Financial Management as follows:

“Planning is an inextricable dimension of financial management. The term financial management connotes that funds flows are directed according to some plan”. Financial managements can be said a good guide for allotment of future resources of an organisation.

Preparing and implementation of some plans can be said as financial management. In other words, collection of funds and their effective utilisation for efficient running of and organization is called financial management. Financial management has influence on all activities of an organisation. Hence it can be said as an important one.

Its main responsibility is to complete the finance function successfully. It also has relations with other business functions. All business decisions also have financial implications. According to Raymond Chambers, Management of finance function is the financial management’.

However, financial management shall not be considered as the profit extracting device. If finance is properly utilised through plans, they lead to profits. Besides, without profits there won’t be finance generation. All these are facts. But this is not complete.

The implication of financial management is not only attaining efficiency and getting profits but also maximising the value of the firm. It facilitates to protect the interests of various classes of people related to the firm.

Hence, managing a firm for profit maximisation is not the meaning for financial management. Financial management is applicable to all kinds of organisations. According to Raymond Chambers, ‘the word financial management is applicable to all kinds of firms irrespective of their objectives’.

Aims of Financial Management:

The aims of financial management should be useful to the firm’s proprietors, managers, employees and consumers. For this purpose the only way is maximisation of firm’s value.

The following aspects have place in maximising firm’s value:

1. Rice in profits:

If the firm wants to maximise its value, it should’ increase its profits and revenues. For this purpose increase of sales volume or other activities can be taken up. It is the general feature of any firm to increase profits by proper utilisation of all opportunities and plans.

Theoretically, firm gets maximum profits if it is under equilibrium. At that stage the average cost is minimal and the marginal cost and the marginal revenues are equal. Here, we can’t say the sales because there must be suitable market for the increased sales. Further, the above costs must also be controlled.

2. Reduction in cost:

Capital and equity funds are utilised for production. So all types of steps should be taken to reduce firm’s cost of capital.

3. Sources of funds:

It should be decided by keeping in view the value of the firm to collect funds through issue of shares or debentures.

4. Reduce risks:

There won’t be profits without risk. But for this reason if more risk is taken, it may become danger to the existence of the firm. Hence risk should be reduced to minimum level.

5. Long run value:

It should be the feature of financial management to increase the long-run value of the firm. To earn more profits in short time, some firms may do the activities like releasing of low quality goods, neglecting the interests of consumers and employees.

These trials may give good results in the short run. But for increasing the value of the firm in the long run, avoiding; such activities are more essential.

Scope and functions of financial management:

The scope of financial management includes three groups. First – relating to finance and cash, second – rising of fund and their administration, third – along with the activities of rising funds, these are part and parcel of total management, Isra Salomon felt that in view of funds utilisation third group has wider scope.

It can be said that all activities done by a finance officer are under the purview of financial management. But the activities of these officers change from firm to firm, it become difficult to say the scope of finance. Financial management plays two main roles, one – participating in funds utilisation and controlling productivity, two – Identifying the requirements of funds and selecting the sources for those funds. Liquidity, profitability and management are the functions of financial management. Let us know very briefly about them.

1. Liquidity:-Liquidity can be ascertained through the three important considerations.

i) Forecasting of cash flow:-Cash inflows and outflows should be equalized for the purpose of liquidity.

ii) Rising of funds:-Finance manager should try to identify the requirements and increase of funds.

iii) Managing the flow of internal funds:-Liquidity at higher degree can be maintained by keeping accounts in many banks. Then there will be no need to depend on external loans.

2. Profitability:-While ascertaining the profitability the following aspects should be taken into consideration:

1) Cost of control:-For the purpose of controlling costs, various activities of the firm should be analyzed through proper cost accounting system,

ii) Pricing:-Pricing policy has great importance in deciding sales level in company’s marketing. Pricing policy should be evolved in such a way that the image of the firm should not be affected.

iii) Forecasting of future profits:-Often estimated profits should be ascertained and assessed to strengthen the firm and to ascertain the profit levels.

iv) Measuring the cost of capital:-Each fund source has different cost of capital. As the profit of the firm is directly related to cost of capital, each cost of capital should be measured.

3. Management:-It is the duty of the financial manager to keep the sources of the assets in maintaining the business. Asset management plays an important role in financial management. Besides, the financial manager should see that the required sources are available for smooth running of the firm without any interruptions.

A business may fail without financial failures. Financial failures also lead to business failure. Because of this peculiar condition the responsibility of financial management increased. It can be divided into the management of long run funds and short run funds.

Long run management of funds relates to the development and extensive plans. Short run management of funds relates to the total business cycle activities. It is also the responsibility of financial management to co­ordinate different activities in the business. Thus, for the success of any firm or organization financial management is said to be a must.

Sources of Finance Management 

Introduction:- Sourcing money may be done for a variety of reasons. Traditional areas of need may be for capital asset acquirement - new machinery or the construction of a new building or depot. The development of new products can be enormously costly and here again capital may be required. Normally, such developments are financed internally, whereas capital for the acquisition of machinery may come from external sources. In this day and age of tight liquidity, many organisations have to look for short term capital in the way of overdraft or loans in order to provide a cash flow cushion. Interest rates can vary from organisation to organisation and also according to purpose.

Sources of funds

A company might raise new funds from the following sources:

· The capital markets:

i) new share issues, for example, by companies acquiring a stock market listing for the first time ii) rights issues

· Loan stock
· Retained earnings
· Bank borrowing
· Government sources
· Business expansion scheme funds
· Venture capital
· Franchising.