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Master of Business Administration

(Retail Operations)



ROLL NO : 510919785
LC CODE : 01504

(3 credits)
Set 1
Marks 60

Question 1: What do you mean by research? Explain its significance in social and business

Answer: Meaning and definition of research: Research simply means a search for facts –
answers to questions and solutions to problems. It is a purposive investigation. It is an organized
inquiry. It seeks to find explanations to unexplained phenomenon to clarify the doubtful facts and
to correct the misconceived facts.

The search for facts may be made through either:

• Arbitrary (or unscientific) Method: It’s a method of seeking answers to question

consists of imagination, opinion, blind belief or impression. E.g. it was believed that the
shape of the earth was flat; a big snake swallows sun or moon causing solar or lunar
eclipse. It is subjective; the finding will vary from person to person depending on his
impression or imagination. It is vague and inaccurate. Or
• Scientific Method: this is a systematic rational approach to seeking facts. It eliminates the
drawbacks of the arbitrary method. It is objective, precise and arrives at conclusions on
the basis of verifiable evidences.

Therefore, search of facts should be made by scientific method rather than by arbitrary method.
Then only we may get verifiable and accurate facts. Hence research is a systematic and logical
study of an issue or problem or phenomenon through scientific method.

Young defines Research as “a scientific undertaking which, by means of logical and systematic
techniques, aims to:

a) Discover of new facts or verify and test old facts,

b) Analyze their sequences, interrelationships and causal explanations,

c) Develop new scientific tools, concepts and theories which would facilitate reliable and
valid study of human behaviour.

d) Kerlinger defines research as a “systematic, controlled, empirical and critical

investigation of hypothetical propositions about the presumed relations among natural

Significance of research in social and business sciences: According to a famous Hudson

Maxim, “All progress is born of inquiry. Doubt is often better than overconfidence, for it leads to
inquiry, and inquiry leads to invention”. It brings out the significance of research, increased
amounts of which makes progress possible. Research encourages scientific and inductive
thinking, besides promoting the development of logical habits of thinking and organization.

The role of research in applied economics in the context of an economy or business is greatly
increasing in modern times. The increasingly complex nature of government and business has
raised the use of research in solving operational problems. Research assumes significant role in
formulation of economic policy, for both the government and business. It provides the basis for
almost all government policies of an economic system. Government budget formulation, for
example, depends particularly on the analysis of needs and desires of the people, and the
availability of revenues, which requires research. Research helps to formulate alternative policies,
in addition to examining the consequences of these alternatives. Thus, research also facilitates the
decision making of policy-makers, although in itself it is not a part of research. In the process,
research also helps in the proper allocation of a country’s scare resources. Research is also
necessary for collecting information on the social and economic structure of an economy to
understand the process of change occurring in the country. Collection of statistical information
though not a routine task, involves various research problems. Therefore, large staff of research
technicians or experts is engaged by the government these days to undertake this work. Thus,
research as a tool of government economic policy formulation involves three distinct stages of
operation which are as follows:

• Investigation of economic structure through continual compilation of facts

• Diagnoses of events that are taking place and the analysis of the forces underlying them;
• The prognosis, i.e., the prediction of future developments

Research also assumes a significant role in solving various operational and planning problems
associated with business and industry. In several ways, operations research, market research, and
motivational research are vital and their results assist in taking business decisions. Market
research is refers to the investigation of the structure and development of a market for the
formulation of efficient policies relating to purchases, production and sales. Operational research
relates to the application of logical, mathematical, and analytical techniques to find solution to
business problems such as cost minimization or profit maximization, or the optimization
problems. Motivational research helps to determine why people behave in the manner they do
with respect to market characteristics. More specifically, it is concerned with the analyzing the
motivations underlying consumer behaviour. All these researches are very useful for business and
industry, which are responsible for business decision making.

Research is equally important to social scientist for analyzing social relationships and seeking
explanations to various social problems. It gives intellectual satisfaction of knowing things for the
sake of knowledge. It also possesses practical utility for the social scientist to gain knowledge so
as to be able to do something better or in a more efficient manner. This, research in social
sciences is concerned with both knowledge for its own sake, and knowledge for what it can
contribute to solve practical problems.


Question 2: What is meant by a research problem and what are the characteristics of a
good research problem?

Answer: Meaning of research problem: Research really begins when the researcher
experiences some difficulty, i.e., a problem demanding a solution within the subject-are of his
discipline. This general area of interest, however, defines only the range of subject-matter within
which the researcher would see and pose a specific problem for research. Personal values play an
important role in the selection of a topic for research. Social conditions do often shape the
preference of investigators in a subtle and imperceptible way.

The formulation of the topic into a research problem is, really speaking the first step in a
scientific enquiry. A problem in simple words is some difficulty experienced by the researcher in
a theoretical or practical situation. Solving this difficulty is the task of research.

R.L. Ackoffs analysis affords considerable guidance in identifying problem for research. He
visualizes five components of a problem.

1. Research-consumer: There must be an individual or a group which experiences some

2. Research-consumer’s Objectives: The research-consumer must have available, alternative
means for achieving the objectives he desires.
3. Alternative Means to Meet the Objectives: The research-consumer must have available,
alternative means for achieving the objectives he desires.
4. Doubt in Regard to Selection of Alternatives: The existence of alternative courses of
action in not enough; in order to experience a problem, the research consumer must have
some doubt as to which alternative to select.
5. There must be One or More Environments to which the Difficulty or Problem Pertains: A
change in environment may produce or remove a problem. A research-consumer may
have doubts as to which will be the most efficient means in one environment but would
have no such doubt in another.

Characteristics of a good research problem: Horton and Hunt have given following
characteristics of scientific research:

1. Verifiable evidence: That is factual observations which other observers can see and
2. Accuracy: That is describing what really exists. It means truth or correctness of a
statement or describing things exactly as they are and avoiding jumping to unwarranted
conclusions either by exaggeration or fantasizing.
3. Precision: That is making it as exact as necessary, or giving exact number or
measurement. This avoids colourful literature and vague meanings.
4. Systematization: That is attempting to find all the relevant data, or collecting data in a
systematic and organized way so that the conclusions drawn are reliable. Data based on
casual recollections are generally incomplete and give unreliable judgments and
5. Objectivity: That is free being from all biases and vested interests. It means observation
is unaffected by the observer’s values, beliefs and preferences to the extent possible and
he is able to see and accept facts as they are, not as he might wish them to be.
6. Recording: That is jotting down complete details as quickly as possible. Since human
memory is fallible, all data collected are recorded.
7. Controlling conditions: That is controlling all variables except one and then attempting
to examine what happens when that variable is varied. This is the basic technique in all
scientific experimentation – allowing one variable to vary while holding all other
variables constant.
8. Training investigators: That is imparting necessary knowledge to investigators to make
them understand what to look for, how to interpret in and avoid inaccurate data collection.


Question 3: What is hypothesis? Examine the procedures for testing hypothesis.

Answer: A hypothesis is an assumption about relations between variables. It is a tentative

explanation of the research problem or a guess about the research outcome. Before starting the
research, the researcher has a rather general, diffused, even confused notion of the problem. It
may take long time for the researcher to say what questions he had been seeking answers to.
Hence, an adequate statement about the research problem is very important. What is a good
problem statement? It is an interrogative statement that asks: what relationship exists between
two or more variables? It then further asks questions like: Is A related to B or not? How are A and
B related to C? Is A related to B under conditions X and Y? Proposing a statement pertaining to
relationship between A and B is called a hypothesis.

Meaning and examples of hypothesis: According to Theodorson and Theodorson, “a hypothesis

is a tentative statement asserting a relationship between certain facts. Kerlinger describes it as “a
conjectural statement of the relationship between two or more variables”. Black and Champion
have described it as “a tentative statement about something, the validity of which is usually
unknown”. This statement is intended to be tested empirically and is either verified or rejected. It
the statement is not sufficiently established, it is not considered a scientific law. In other words, a
hypothesis carries clear implications for testing the stated relationship, i.e., it contains variables
that are measurable and specifying how they are related. A statement that lacks variables or that
does not explain how the variables are related to each other is no hypothesis in scientific sense.

Concepts of Hypothesis Testing

Procedure for Testing Hypothesis: To test a hypothesis means to tell (on the basis of the data
researcher has collected) whether or not the hypothesis seems to be valid. In hypothesis testing
the main question is: whether the null hypothesis or not to accept the null hypothesis? Procedure
for hypothesis testing refers to all those steps that we undertake for making a choice between the
two actions i.e., rejection and acceptance of a null hypothesis. The various steps involved in
hypothesis testing are stated below:

Making a Formal Statement: The step consists in making a formal statement of the null
hypothesis (Ho) and also of the alternative hypothesis (Ha). This means that hypothesis should
clearly state, considering the nature of the research problem. For instance, Mr. Mohan of the Civil
Engineering Department wants to test the load bearing capacity of an old bridge which must be
more than 10 tons, in that case he can state his hypothesis as under:

Null hypothesis HO: µ =10 tons

Alternative hypothesis Ha: µ >10 tons

Take another example. The average score in an aptitude test administered at the national level is
80. To evaluate a state’s education system, the average score of 100 of the state’s students
selected on the random basis was 75. The state wants to know if there is a significance difference
between the local scores and the national scores. In such a situation the hypothesis may be state as

Null hypothesis HO: µ =80

Alternative hypothesis Ha: µ ≠ 80

The formulation of hypothesis is an important step which must be accomplished with due care in
accordance with the object and nature of the problem under consideration. It also indicates
whether we should use a tailed test or a two tailed test. If Ha is of the type greater than, we use
alone tailed test, but when Ha is of the type “whether greater or smaller” then we use a two-tailed

Selecting a Significant Level: The hypothesis is tested on a pre-determined level of significance

and such the same should have specified. Generally, in practice, either 5% level or 1% level is
adopted for the purpose. The factors that affect the level of significance are:

• The magnitude of the difference between sample ;

• The size of the sample;
• The variability of measurements within samples;
• Whether the hypothesis is directional or non – directional (A directional hypothesis is one
which predicts the direction of the difference between, say, means). In brief, the level of
significance must be adequate in the context of the purpose and nature of enquiry.

Deciding the Distribution to Use: After deciding the level of significance, the next step in
hypothesis testing is to determine the appropriate sampling distribution. The choice generally
remains between distribution and the t distribution. The rules for selecting the correct distribution
are similar to those which we have stated earlier in the context of estimation.

Selecting A Random Sample & Computing An Appropriate Value

Another step is to select a random sample(S) and compute an appropriate value from the sample
data concerning the test statistic utilizing the relevant distribution. In other words, draw a sample
to furnish empirical data.

Calculation of the Probability

One has then to calculate the probability that the sample result would diverge as widely as it has
from expectations, if the null hypothesis were in fact true.

Comparing the Probability

Yet another step consists in comparing the probability thus calculated with the specified value for
α, the significance level. If the calculated probability is equal to smaller than α value in case of
one tailed test (and α/2 in case of two-tailed test), then reject the null hypothesis (i.e. accept the
alternative hypothesis), but if the probability is greater then accept the null hypothesis. In case we
reject H0 we run a risk of (at most level of significance) committing an error of type I, but if we
accept H0, then we run some risk of committing error type II.

Flow Diagram for Testing Hypothesis

Committing type I error committing type II error

Testing of Hypothesis: The hypothesis testing determines the validity of the assumption
(technically described as null hypothesis) with a view to choose between the conflicting
hypotheses about the value of the population hypothesis about the value of the population of a
population parameter. Hypothesis testing helps to secede on the basis of a sample data, whether a
hypothesis about the population is likely to be true or false. Statisticians have developed several
tests of hypothesis (also known as tests of significance) for the purpose of testing of hypothesis
which can be classified as:

• Parametric tests or standard tests of hypothesis ;

• Non Parametric test or distribution – free test of the hypothesis.

Parametric tests usually assume certain properties of the parent population from which we draw
samples. Assumption like observations come from a normal population, sample size is large,
assumptions about the population parameters like mean, variants etc must hold good before
parametric test can be used. But there are situation when the researcher cannot or does not want to
make assumptions. In such situations we use statistical methods for testing hypothesis which are
called non parametric tests because such tests do not depend on any assumption about the
parameters of parent population. Besides, most non-parametric test assumes only nominal or
original data, where as parametric test require measurement equivalent to at least an interval
scale. As a result non-parametric test needs more observation than a parametric test to achieve the
same size of Type I & Type II error.

Important Parametric Tests

The important parametric tests are:

• z-test

• t-test

• x2-test

• f-test

All these tests are based on the assumption of normality i.e., the source of data is considered to be
normally distributed. In some cases the population may not be normally distributed, yet the test
will be applicable on account of the fact that we mostly deal with samples and the sampling
distributions closely approach normal distributions.

Z-test is based on the normal probability distribution and is used for judging the significance of
several statistical measures, particularly the mean. The relevant test statistic is worked out and
compared with its probable value (to be read from the table showing area under normal curve) at
a specified level of significance for judging the significance of the measure concerned. This is a
most frequently used test in research studies. This test is used even when binomial distribution or
t-distribution is applicable on the presumption that such a distribution tends to approximate
normal distribution as ‘n’ becomes larger. Z-test is generally used for comparing the mean of a
sample to some hypothesis mean for the population in case of large sample, or when population
variance is known as z-test is also used for judging the significance of difference between means
to of two independent samples in case of large samples or when population variance is known z-
test is generally used for comparing the sample proportion to a theoretical value of population
proportion or for judging the difference in proportions of two independent samples when happens
to be large. Besides, this test may be used for judging the significance of median, mode, co-
efficient of correlation and several other measures

T-test is based on t-distribution and is considered an appropriate test for judging the significance
of sample mean or for judging significance of difference between the two means of the two
samples in case of samples when population variance is not known (in which case we use
variance of the sample as an estimate the population variance). In case two samples are related,
we use paired t-test (difference test) for judging the significance of their mean of difference
between the two related samples. It can also be used for judging the significance of co-efficient of
simple and partial correlations. The relevant test statistic, t, is calculated from the sample data and
then compared with its probable value based on t-distribution at a specified level of significance
for concerning degrees of freedom for accepting or rejecting the null hypothesis it may be noted
that t-test applies only in case of small sample when population variance is unknown.

X2-test is based on chi-square distribution and as a parametric test is used for comparing a sample
variance to a theoretical population variance is unknown.

F-test is based on f-distribution and is used to compare the variance of the two-independent
samples. This test is also used in the context of variance (ANOVA) for judging the significance
of more than two sample means at one and the same time. It is also used for judging the
significance of multiple correlation coefficients. Test statistic, f, is calculated and compared with
its probable value for accepting or rejecting the H0.


Question 4: Write an essay on the need of the research design and explain the principles of
experimental designs.

Answer: Meaning of research design: The research designer understandably cannot hold all
his decisions in his head. Even if he could, he would have difficulty in understanding how these
are inter-related. Therefore, he records his decisions on paper or record disc by using relevant
symbols or concepts. Such a symbolic construction may be called the research design or model. A
research design is a logical and systematic plan prepared for directing a research study. It
specifies the objectives of the study, the methodology and techniques to be adopted for achieving
the objectives. It constitutes the blue print for the collection, measurement and analysis of data. It
is the plan, structure and strategy of investigation conceived so as to obtain answers to research
questions. The plan is the overall scheme or program of research. A research design is the
program that guides the investigator in the process of collecting, analyzing and interpreting
observations. It provides a systematic plan of procedure for the researcher to follow elltiz, Jahoda
and Destsch and Cook describe, “A research design is the arrangement of conditions for
collection and analysis of data in a manner that aims to combine relevance to the research purpose
with economy in procedure.”

Needs of research design: The need for the methodologically designed research:

a- In many a research inquiry, the researcher has no idea as to how accurate the results of his
study ought to be in order to be useful. Where such is the case, the researcher has to determine
how much inaccuracy may be tolerated. In a quite few cases he may be in a position to know
how much inaccuracy his method of research will produce. In either case he should design his
research if he wants to assure himself of useful results.

b- In many research projects, the time consumed in trying to ascertain what the data mean
after they have been collected is much greater than the time taken to design a research which
yields data whose meaning is known as they are collected.

c- The idealized design is concerned with specifying the optimum research procedure that
could be followed were there no practical restrictions.

Principles of experimental designs: Professor Fisher has enumerated three principles of

experimental designs:

1. The principle of replication: The experiment should be reaped more than once. Thus,
each treatment is applied in many experimental units instead of one. By doing so, the
statistical accuracy of the experiments is increased. For example, suppose we are to examine
the effect of two varieties of rice. For this purpose we may divide the field into two parts and
grow one variety in one part and the other variety in the other part. We can compare the yield
of the two parts and draw conclusion on that basis. But if we are to apply the principle of
replication to this experiment, then we first divide the field into several parts, grow one
variety in half of these parts and the other variety in the remaining parts. We can collect the
data yield of the two varieties and draw conclusion by comparing the same. The result so
obtained will be more reliable in comparison to the conclusion we draw without applying the
principle of replication. The entire experiment can even be repeated several times for better
results. Consequently replication does not present any difficulty, but computationally it does.
However, it should be remembered that replication is introduced in order to increase the
precision of a study; that is to say, to increase the accuracy with which the main effects and
interactions can be estimated.

2. The principle of randomization: It provides protection, when we conduct an

experiment, against the effect of extraneous factors by randomization. In other words, this
principle indicates that we should design or plan the ‘experiment in such a way that the
variations caused by extraneous factors can all be combined under the general heading of
“chance”. For instance if we grow one variety of rice say in the first half of the parts of a field
and the other variety is grown in the other half, then it is just possible that the soil fertility
may be different in the first half in comparison to the other half. If this is so, our results would
not be realistic. In such a situation, we may assign the variety of rice to be grown in different
parts of the field on the basis of some random sampling technique i.e., we may apply
randomization principle and protect ourselves against the effects of extraneous factors. As
such, through the application of the principle of randomization, we can have a better estimate
of the experimental error.

3. Principle of local control: It is another important principle of experimental designs. Under

it the extraneous factors, the known source of variability, is made to vary deliberately over as
wide a range as necessary and this needs to be done in such a way that the variability it causes
can be measured and hence eliminated from the experimental error. This means that we
should plan the experiment in a manner that we can perform a two-way analysis of variance,
in which the total variability of the data is divided into three components attributed to
treatments, the extraneous factor and experimental error. In other words, according to the
principle of local control, we first divide the field into several homogeneous parts, known as
blocks, and then each such block is divided into parts equal to the number of treatments. Then
the treatments are randomly assigned to these parts of a block. In general, blocks are the
levels at which we hold an extraneous factors fixed, so that we can measure its contribution to
the variability of the data by means of a two-way analysis of variance. In brief, through the
principle of local control we can eliminate the variability due to extraneous factors from the
experimental error.

Important Experimental Designs: Experimental design refers to the framework or structure of

an experiment and as such there are several experimental designs. We can classify experimental
designs into two broad categories, viz., informal experimental designs and formal experimental
designs. Informal experimental designs are those designs that normally use a less sophisticated
form of analysis based on differences in magnitudes, where as formal experimental designs offer
relatively more control and use precise statistical procedures for analysis.

Informal experimental designs:

• Before and after without control design: In such a design, single test group or area is
selected and the dependent variable is measured before the introduction of the treatment.
The treatment is then introduced and the dependent variable is measured again after the
treatment has been introduced. The effect of the treatment would be equal to the level of
the phenomenon after the treatment minus the level of the phenomenon before the
• After only with control design: In this design, two groups or areas (test and control area)
are selected and the treatment is introduced into the test area only. The dependent variable
is then measured in both the areas at the same time. Treatment impact is assessed by
subtracting the value of the dependent variable in the control area from its value in the test
• Before and after with control design: In this design two areas are selected and the
dependent variable is measured in both the areas for an identical time-period before the
treatment. The treatment is then introduced into the test area only, and the dependent
variable is measured in both for an identical time-period after the introduction of the
treatment. The treatment effect is determined by subtracting the change in the dependent
variable in the control area from the change in the dependent variable in test area.

Formal Experimental Designs

1. Completely randomized design (CR design): It involves only two principle viz., the
principle of replication and randomization. It is generally used when experimental areas
happen to be homogenous. Technically, when all the variations due to uncontrolled
extraneous factors are included under the heading of chance variation, we refer to the
design of experiment as C R Design.
2. Randomized block design (RB design): It is an improvement over the C Research
design. In the RB design the principle of local control can be applied along with the other
two principles.
3. Latin square design (LS design): It is used in agricultural research. The treatments in a
LS design are so allocated among the plots that no treatment occurs more than once in any
row or column.
4. Factorial design: It is used in experiments where the effects of varying more than one
factor are to be determined. They are especially important in several economic and social
phenomena where usually a large number of factors affect a particular problem.


Question 5: Distinguish between primary and secondary of data collection. Explain the
features, uses, advantages and limitations of secondary data. Which is the best
way of collecting the data for research “Primary or Secondary”? Support your

Answer: Data form the basis for testing the hypothesis formulated in a study. Data also provide
the facts and figures required for constructing measurement scales and tables, which are analyzed
with statistical techniques. Inferences on the results of statistical analysis and tests of significance
provide the answers to research questions. Thus, the scientific process of measurements, analysis,
testing and inferences depends on the availability of relevant data and their accuracy. Hence, the
importance of data for any research studies.

The sources of data may be classified into (a) primary sources and (b) secondary sources.
Primary Sources of Data: Primary sources are original sources from which the researcher
directly collects data that have not been previously collected e.g.., collection of data directly by
the researcher on brand awareness, brand preference, brand loyalty and other aspects of consumer
behaviour from a sample of consumers by interviewing them,. Primary data are first hand
information collected through various methods such as observation, interviewing, mailing etc.

Advantage of Primary Data

• It is original source of data

• It is possible to capture the changes occurring in the course of time.
• It flexible to the advantage of researcher.
• Extensive research study is based of primary data

Disadvantage of Primary Data

1. Primary data is expensive to obtain

2. It is time consuming
3. It requires extensive research personnel who are skilled.
4. It is difficult to administer.

Methods of Collecting Primary Data: Primary data are directly collected by the researcher from
their original sources. In this case, the researcher can collect the required date precisely according
to his research needs, he can collect them when he wants them and in the form he needs them.
But the collection of primary data is costly and time consuming. Yet, for several types of social
science research required data are not available from secondary sources and they have to be
directly gathered from the primary sources.

In such cases where the available data are inappropriate, inadequate or obsolete, primary data
have to be gathered. They include: socio economic surveys, social anthropological studies of rural
communities and tribal communities, sociological studies of social problems and social
institutions. Marketing research, leadership studies, opinion polls, attitudinal surveys, readership,
radio listening and T.V. viewing surveys, knowledge-awareness practice (KAP) studies, farm
managements studies, business management studies etc.

There are various methods of data collection. A ‘Method’ is different from a ‘Tool’ while a
method refers to the way or mode of gathering data, a tool is an instruments used for the method.
For example, a schedule is used for interviewing. The important methods are

(a) observation, (b) interviewing, (c) mail survey, (d) experimentation,

(e) simulation and (f) projective technique. Each of these methods is discussed in detail in the
subsequent sections in the later chapters.

Secondary Sources of Data: These are sources containing data which have been collected and
compiled for another purpose. The secondary sources consists of readily compendia and already
compiled statistical statements and reports whose data may be used by researchers for their
studies e.g., census reports , annual reports and financial statements of companies, Statistical
statement, Reports of Government Departments, Annual reports of currency and finance
published by the Reserve Bank of India, Statistical statements relating to Co-operatives and
Regional Banks, published by the NABARD, Reports of the National sample survey
Organization, Reports of trade associations, publications of international organizations such as
UNO, IMF, World Bank, ILO, WHO, etc., Trade and Financial journals newspapers etc.

Secondary sources consist of not only published records and reports, but also unpublished
records. The latter category includes various records and registers maintained by the firms and
organizations, e.g., accounting and financial records, personnel records, register of members,
minutes of meetings, inventory records etc.

Features of Secondary Sources: Though secondary sources are diverse and consist of all sorts of
materials, they have certain common characteristics.

First, they are readymade and readily available, and do not require the trouble of constructing
tools and administering them.

Second, they consist of data which a researcher has no original control over collection and
classification. Both the form and the content of secondary sources are shaped by others. Clearly,
this is a feature which can limit the research value of secondary sources.

Finally, secondary sources are not limited in time and space. That is, the researcher using them
need not have been present when and where they were gathered.

Use of Secondary Data: The second data may be used in three ways by a researcher. First, some
specific information from secondary sources may be used for reference purpose. For example, the
general statistical information in the number of co-operative credit societies in the country, their
coverage of villages, their capital structure, volume of business etc., may be taken from published
reports and quoted as background information in a study on the evaluation of performance of
cooperative credit societies in a selected district/state.

Second, secondary data may be used as bench marks against which the findings of research may
be tested, e.g., the findings of a local or regional survey may be compared with the national
averages; the performance indicators of a particular bank may be tested against the corresponding
indicators of the banking industry as a whole; and so on.

Finally, secondary data may be used as the sole source of information for a research project. Such
studies as securities Market Behaviour, Financial Analysis of companies, Trade in credit
allocation in commercial banks, sociological studies on crimes, historical studies, and the like,
depend primarily on secondary data. Year books, statistical reports of government departments,
report of public organizations of Bureau of Public Enterprises, Censes Reports etc, serve as major
data sources for such research studies.

Advantages of Secondary Data

Secondary sources have some advantages:

1. Secondary data, if available can be secured quickly and cheaply. Once their source
of documents and reports are located, collection of data is just matter of desk
work. Even the tediousness of copying the data from the source can now be
avoided, thanks to Xeroxing facilities.
2. Wider geographical area and longer reference period may be covered without
much cost. Thus, the use of secondary data extends the researcher’s space and time
3. The use of secondary data broadens the data base from which scientific
generalizations can be made.
4. Environmental and cultural settings are required for the study.
5. The use of secondary data enables a researcher to verify the findings bases on
primary data. It readily meets the need for additional empirical support. The
researcher need not wait the time when additional primary data can be collected.

Disadvantages of Secondary Data

The use of a secondary data has its own limitations.

6. The most important limitation is the available data may not meet our specific
needs. The definitions adopted by those who collected those data may be different;
units of measure may not match; and time periods may also be different.
7. The available data may not be as accurate as desired. To assess their accuracy we
need to know how the data were collected.
8. The secondary data are not up-to-date and become obsolete when they appear in
print, because of time lag in producing them. For example, population census data
are published tow or three years later after compilation, and no new figures will be
available for another ten years.
9. Finally, information about the whereabouts of sources may not be available to all
social scientists. Even if the location of the source is known, the accessibility
depends primarily on proximity. For example, most of the unpublished official
records and compilations are located in the capital city, and they are not within the
easy reach of researchers based in far off places.


Question 6: Describe interview method of collecting data. State the conditions under
which it is considered most suitable. You have been assigned to conduct a
survey on reading habits of house wives in the middle class family. Design a
suitable questionnaire consisting of 20 questions you propose to use in survey.

Answer: Meaning of Interview: Interviewing is one of the prominent methods of data

collection. It may be defined as a two way systematic conversation between an investigator and
an informant, initiated for obtaining information relevant to a specific study. It involves not only
conversation, but also learning from the respondent’s gesture, facial expressions and pauses, and
his environment. Interviewing requires face to face contact or contact over telephone and calls for
interviewing skills. It is done by using a structured schedule or an unstructured guide.

Interviewing may be used either as a main method or as a supplementary one in studies of

persons. Interviewing is the only suitable method for gathering information from illiterate or less
educated respondents. It is useful for collecting a wide range of data from factual demographic
data to highly personal and intimate information relating to a person’s opinions, attitudes, values,
beliefs past experience and future intentions. When qualitative information is required or probing
is necessary to draw out fully, and then interviewing is required. Where the area covered for the
survey is a compact, or when a sufficient number of qualified interviewers are available, personal
interview is feasible.
Interview is often superior to other data-gathering methods. People are usually more willing to
talk than to write. Once report is established, even confidential information may be obtained. It
permits probing into the context and reasons for answers to questions.

Interview can add flesh to statistical information. It enables the investigator to grasp the
behavioural context of the data furnished by the respondents.

Suitable conditions for successful interview: The requirements or conditions necessary for a
successful interview are:

Data availability: The needed information should be available with the respondent. He should be
able to conceptualize it in terms to the study, and be capable of communicating it.

Role perception: The respondent should understand his role and know what is required of him.
He should know what is a relevant and how complete it should be. He can learn much of this
from the interviewer’s introduction, explanations and questioning procedure.

The interviewer should also know his role: He should establish a permissive atmosphere and
encourage frank and free conversation. He should not affect the interview situation through
subjective attitude and argumentation.

Respondent’s motivation: The respondent should be willing to respond and give accurate
answer. This depends partly on the interviewer’s approach and skill. The interview has interest in
it for the purpose of his research, but the respondent has no personal interest in it. Therefore, the
interviewer should establish a friendly relationship with the respondent, and create in him an
interest in the subject-matter of the study. The interviewer should try to reduce the effect of
demotivating factors like desire to get on with other activities, embarrassment at ignorance,
dislike of the interview content, suspicious about the interviewer, and fear of consequence, He
should also try to build up the effect of motivating actors like curiosity, loneliness, politeness,
sense of duty, respect of the research agency and liking for the interviewer. The above
requirement reminds that the interview is an interaction process. The investigator should keep this
in mind and take care to see that his appearance and behaviour do not distort the interview

(3 credits)
Set 2
Marks 60

Question 1: Write a short note on the following

(a) Null Hypothesis
(b) What is exploratory research?
(c) What is random sampling?
(d) Rank Order Correlation

Answer: (a)Null Hypothesis: A null hypothesis is a hypothesis (within the frequentist

context of statistical hypothesis testing) that might be falsified using a test of observed data.[1]
Such a test works by formulating a null hypothesis, collecting data, and calculating a measure of
how probable those data were assuming the null hypothesis were true. If the data appear very
improbable (usually defined as a type of data that should be observed less than 5% of the time)
then the experimenter concludes that the null hypothesis is false. If the data look reasonable under
the null hypothesis, then no conclusion is made. In this case, the null hypothesis could be true, or
it could still be false; the data give insufficient evidence to make any conclusion. The null
hypothesis typically proposes a general or default position, such as that there is no relationship
between two quantities, or that there is no difference between a treatment and the control The
term was originally coined by English geneticist and statistician Ronald Fisher.

In some versions of statistical hypothesis testing (such as developed by Jerzy Neyman and Egon
Pearson), the null hypothesis is tested against an alternative hypothesis. This alternative may or
may not be the logical negation of the null hypothesis. The use of alternative hypotheses was not
part of Ronald Fisher's formulation of statistical hypothesis testing, though alternative hypotheses
are standardly used today.

For instance, one might want to test the claim that a certain drug reduces the chance of having a
heart attack. One would choose the null hypothesis "this drug does not reduce the chances of
having a heart attack" (or perhaps "this drug has no effect on the chances of having a heart
attack"). One should then collect data by observing people both taking the drug and not taking the
drug in some sort of controlled experiment. If the data are very unlikely under the null hypothesis
one would reject the null hypothesis, and conclude that its negation is true. That is, one would
conclude that the drug does reduce the chances of having a heart attack. Here "unlikely data"
would mean data where the percentage of people taking the drug who had heart attack was
significantly (according to statistical standards) less than the percentage of people not taking the
drug who had heart attacks. Of course one should use a known statistical test to decide how
unlikely the data were and hence whether or not to reject the null hypothesis.

One must take care in choosing a null hypothesis, as different choices lead to different answers.
This is demonstrated in the following example: You are asked to decide if the coin is fair (i.e. that
on average it will come up heads 50% of the time). You flip it 5 times and it comes up heads all 5
times. Do you conclude it is not a fair coin? Well, you might say your alternate hypothesis is "this
coin is biased towards heads". The null hypothesis would be "this coin is not biased towards
heads", which is to say it is at least as likely to come up tails as heads. Under this null hypothesis,
the data are indeed unlikely (it should happen about 3% of the time). You would reject the null
hypothesis and conclude the coin was biased. However, you could instead choose the alternate
hypothesis "this coin is biased", and the null hypothesis, "this coin is fair". Then the data are not
so unlikely; similar data should happen about 6% of the time, where 3% of the time you get all
heads and 3% of the time you get all tails. You would then not reject the null hypothesis, so you
would make no conclusion. In this case, the second null hypothesis would be correct: you were
originally asked to decide if the coin is fair, not if it is biased towards heads. You would want
more data to make any such conclusion (and really you should have wanted more data to begin

This second example illustrates one hazards of hypothesis testing: if one tests a given set of data
with respect to a large number of null hypotheses, all of which are true, one is nonetheless likely
to reject some of them, making false conclusions. However, if one follows the scientific method
and formulates the null hypothesis before collecting data, one only makes a small number of type
1 errors (i.e. one only rejects a true null hypothesis a small percentage of the time). Of course,
even if used carefully and correctly, any statistical test gives some incorrect conclusions.

(b)Exploratory research: It is also known as formulative research. It is preliminary study of an

unfamiliar problem about which the researcher has little or no knowledge. It is ill-structured and
much less focused on pre-determined objectives. It usually takes the form of a pilot study. The
purpose of this research may be to generate new ideas, or to increase the researcher’s familiarity
with the problem or to make a precise formulation of the problem or to gather information for
clarifying concepts or to determine whether it is feasible to attempt the study. Katz conceptualizes
two levels of exploratory studies. “At the first level is the discovery of the significant variable in
the situations; at the second, the discovery of relationships between variables.”

Exploratory research provides insights into and comprehension of an issue or situation. It should
draw definitive conclusions only with extreme caution. Exploratory research is a type of research
conducted because a problem has not been clearly defined. Exploratory research helps determine
the best research design, data collection method and selection of subjects. Given its fundamental
nature, exploratory research often concludes that a perceived problem does not actually exist.

Exploratory research is not typically generalizable to the population at large.

A defining characteristic of causal research is the random assignment of participants to the

conditions of the experiment; e.g., an Experimental and a Control Condition.. Such assignment
results in the groups being comparable at the beginning of the experiment. Any difference
between the groups at the end of the experiment is attributable to the manipulated variable.
Observational research typically looks for difference among "in-tact" defined groups. A common
example compares smokers and non-smokers with regard to health problems. Causal conclusions
can't be drawn from such a study because of other possible differences between the groups; e.g.,
smokers may drink more alcohol than non-smokers. Other unknown differences could exist as
well. Hence, we may see a relation between smoking and health but a conclusion that smoking is
a cause would not be warranted in this situation.

(c)Random sampling: Probability sampling is based on the theory of probability. It is also

known as random sampling. It provides a known nonzero chance of selection for each population
element. It is used when generalization is the objective of study, and a greater degree of accuracy
of estimation of population parameters is required. The cost and time required is high hence the
benefit derived from it should justify the costs.

The following are the types of probability sampling:

i. Simple Random Sampling: This sampling technique gives each element an equal and
independent chance of being selected. An equal chance means equal probability of
selection. An independent chance means that the draw of one element will not affect the
chances of other elements being selected. The procedure of drawing a simple random
sample consists of enumeration of all elements in the population.

1. Preparation of a List of all elements, giving them numbers in serial order 1, 2, B,

and so on, and
2. Drawing sample numbers by using (a) lottery method, (b) a table of random
numbers or (c) a computer.

Suitability: This type of sampling is suited for a small homogeneous population.

Advantages: The advantage of this is that it is one of the easiest methods, all the elements
in the population have an equal chance of being selected, simple to understand, does not
require prior knowledge of the true composition of the population.

Disadvantages: It is often impractical because of non-availability of population list or of

difficulty in enumerating the population, does not ensure proportionate representation and it
may be expensive in time and money. The amount of sampling error associated with any
sample drawn can easily be computed. But it is greater than that in other probability
samples of the same size, because it is less precise than other methods.

ii. Stratified Random Sampling: This is an improved type of random or probability

sampling. In this method, the population is sub-divided into homogenous groups or strata,
and from each stratum, random sample is drawn. E.g., university students may be divided
on the basis of discipline, and each discipline group may again be divided into juniors and
seniors. Stratification is necessary for increasing a sample’s statistical efficiency, providing
adequate data for analyzing the various sub-populations and applying different methods to
different strata. The stratified random sampling is appropriate for a large heterogeneous
population. Stratification process involves three major decisions. They are stratification
base or bases, number of strata and strata sample sizes.

Stratified random sampling may be classified into:

a) Proportionate stratified sampling: This sampling involves drawing a sample from

each stratum in proportion to the latter’s share in the total population. It gives proper
representation to each stratum and its statistical efficiency is generally higher. This
method is therefore very popular. E.g., if the Management Faculty of a University
consists of the following specialization groups:

Specialization stream No. of students Proportion of each stream

Production 40 0.4

Finance 20 0.2

Marketing 30 0.3

Rural development 10 0.1

100 1.0

The research wants to draw an overall sample of 30. Then the strata sample sizes would

Strata Sample size

Production 30 x 0.4 12

Finance 30 x 0.2 6

Marketing 30 x 0.3 9

Rural development 30 x 0.1 3


Advantages: Stratified random sampling enhances the representativeness to each

sample, gives higher statistical efficiency, easy to carry out, and gives a self-weighing

Disadvantages: A prior knowledge of the composition of the population and the

distribution of the population, it is very expensive in time and money and identification
of the strata may lead to classification of errors.

b) Disproportionate stratified random sampling: This method does not give

proportionate representation to strata. It necessarily involves giving over-representation
to some strata and under-representation to others. The desirability of disproportionate
sampling is usually determined by three factors, viz, (a) the sizes of strata, (b) internal
variances among strata, and (c) sampling costs.

Suitability: This method is used when the population contains some small but
important subgroups, when certain groups are quite heterogeneous, while others are
homogeneous and when it is expected that there will be appreciable differences in the
response rates of the subgroups in the population.

Advantages: The advantages of this type is it is less time consuming and facilitates
giving appropriate weighing to particular groups which are small but more important.
Disadvantages: The disadvantage is that it does not give each stratum proportionate
representation, requires prior knowledge of composition of the population, is subject to
classification errors and its practical feasibility is doubtful.

iii. Systematic Random Sampling: This method of sampling is an alternative to random

selection. It consists of taking kth item in the population after a random start with an item
form 1 to k. It is also known as fixed interval method. E.g., 1st, 11th, 21st ……… Strictly
speaking, this method of sampling is not a probability sampling. It possesses characteristics
of randomness and some non-probability traits.

Suitability: Systematic selection can be applied to various populations such as students

in a class, houses in a street, telephone directory etc.

Advantages: The advantages are it is simpler than random sampling, easy to use, easy to
instruct, requires less time, it’s cheaper, easier to check, sample is spread evenly over the
population, and it is statistically more efficient.

Disadvantages: The disadvantages are it ignores all elements between two kth elements
selected, each element does not have equal chance of being selected, and this method
sometimes gives a biased sample.

(d)Rank Order Correlation: Charles Edward Spearman, a British psychologist devised a

method for measuring correlation between two variables based on ranks given to the
observations. This method is adopted when the variables are not capable of quantitative
measurements like intelligence, beauty etc. in such cases, it is impossible to assign
numerical values for change taking place in such variables. It is in such cases rank
correlation is useful.

Spearman’s rank correlation coefficient is given by

rk = 1- 6 ∑D2 / n (n2-1)

Where D is the difference between ranks and n, number of pairs correlated.


Question 2: Elaborate the format of a research report touching briefly on the mechanics of

Answer: The outline of a research report is given below:

I. Prefatory Items

• Title page
• Declaration
• Certificates
• Preface/ acknowledgements
• Table of contents
• List of tables
• List of graphs/ figures/ charts
• Abstract or synopsis

II. Body of the Report

• Introduction
• Theoretical background of the topic
• Statement of the problem
• Review of literature
• The scope of the study
• The objectives of the study
• Hypothesis to be tested
• Definition of the concepts
• Models if any
• Design of the study
• Methodology
• Method of data collection
• Sources of data
• Sampling plan
• Data collection instruments
• Field work
• Data processing and analysis plan
• Overview of the report
• Limitation of the study
• Results: findings and discussions
• Summary, conclusions and recommendations

III. Reference Material

• Bibliography
• Appendix
• Copies of data collection instruments
• Technical details on sampling plan
• Complex tables
• Glossary of new terms used.

Styles of Reporting

Communicate to a Specific Audience: The first step is to know the audience, its background,
and its objectives. Most effective presentations seem live conversations or memos to a particular
person as opposed to an amorphous group. Audience identification affects presentation decisions
such as selecting the material to be included and the level of presentation. Excessive detail or
material presented at too low a level can be boring. The audience can become irritated when
material perceived as relevant is excluded or the material is presented at too high level. In an oral
presentation, the presenter can ask audience whether they already know some of the material.

Frequently, a presentation must be addressed to two or more different audiences. There are ways
to deal with such a problem. In a written presentation, an executive summary at the outset can
provide an overview of the conclusions for the benefit of those in the audience who are not
interested in details. The presentation must respect the audience’s time constraints. An appendix
can be used to reach some people selectively, without distracting the others. Sometimes
introduction to a chapter or a section can convey the nature of the contents, which certain
audiences may bypass. In an oral presentation, the presence of multiple audiences should be

Structure the Presentation: Each piece of presentation should fit into the whole, just as
individual pieces fit into a jigsaw puzzle. The audience should not be muttering. The solution to
this is to provide a well-defined structure. The structure should include an introduction, a body,
and a summary. Further, each of the major sections should be structured similarly. The precept is
to tell the audience what you are going to say, say it and then tell them what you said. Sometimes
you want to withhold the conclusion to create interest.

Introduction should play several roles. First, it should provide audience interest. A second
function is to identify the presentation’s central idea or objective. Third, it should provide a road
map to the rest of the presentation so that the audience can picture its organisation and flow.

It is better to divide the body of the presentation into two to five parts. The audience will be able
to absorb only so much information. If that information can be aggregated into chunks, it will be
easier to assimilate. Sometimes the points to be made cannot be combined easily or naturally. In
that case, it is necessary to use a longer list. One way to structure the presentation is by the
research questions. Another method that is often useful when presenting the research proposal is
to base it on the research process. The most useful presentations will include a statement of
implications and recommendations relevant to the research purpose. However, when researcher
lacks information about the total situation because the research study addresses only a limited
aspect of it, the ability to generate recommendations may be limited.

The purpose of the presentation summary is to identify and underline the important points of the
presentations and to provide some repetition of their content. The summary should support the
presentation communication objectives by helping the audience to retain the key parts of the
content. The audience should feel that there is a natural flow from one section to another.

Create Audience Interest: The audience should be motivated to read or listen to the
presentation’s major parts and to the individual elements of each section the audience should
know why the presentation is relevant to them and why each section was included. A section that
cannot hold interest should be excluded or relegated to appendix. The research purpose and
objectives are good vehicles to provide motivation. The research purpose should specify
decisions to be made and should relate to the research questions. A presentation that focuses on
those research questions and their associated hypothesis will naturally be tied to relevant
decisions and hold audience interest. In contrast, a presentation that attempts to report on all the
questions that were included in the survey and in the cross-tabulations often will be long,
uninteresting and of little value.

As the analysis proceeds and presentation is being prepared, the researcher should be on the
lookout for results that are exceptionally persuasive, relevant, interesting, and unusual.
Sometimes, the deviant respondent with strange answers can provide the most insight in his or her
responses that are pursued and not discarded.

Be Specific and Visual: Avoid taking or writing in the abstract. If different members of the
audience have different or vague understandings of important concepts, there is a potential
problem. Terms that are ambiguous or not well known should be defined and illustrated or else
omitted. The most interesting presentations usually use specific stories, anecdotes, studies, or
incidents to make points.

Address Validity and Reliability Issues: The presentation should help the audience avoid
misinterpreting the results. The wording of the questions, the order in which they are asked, and
the sampling design are among the design dimensions that can lead to biased results and
misinterpretations. The presentation should not include an exhaustive description of all the design
considerations. Nobody is interested in a textbook discussion of the advantages of telephone over
mail surveys, or how you locate homes in an area sampling design.

The presentation should include some indication of the reliability of the results. At the minimum,
it always should be clear what sample size was involved. The key results should be supported by
more precise information in the form of interval estimates or a hypothesis test. The hypothesis
test basically indicates, given the sample size, what probability exists that the results were merely
an accident of sampling. If the probability of the latter is not low, then the results probably would
not be repeated. Do not imply more precision than is warranted.

Steps in Drafting the Research Report: Along with the related skill of working with and
motivating people, the ability to communicate effectively is undoubtedly the most important
attribute a manager can have. Effective communication between research users and research
professional is extremely important to the research process. The formal presentation usually plays
a key role in the communication effort. Generally, presentations are made twice during the
research process. First, there is the research proposal presentation. Second, there is the
presentation of the research results.


Question 3: Discuss the importance of case study method.

Answer: Case study of particular value when a complex set of variables may be at work in
generating observed results and intensive study is needed to unravel the complexities. For
example, an in-depth study of a firm’s top sales people and comparison with worst salespeople
might reveal characteristics common to stellar performers. Here again, the exploratory
investigation is best served by an active curiosity and willingness to deviate from the initial plan
when findings suggest new courses of inquiry might prove more productive. It is easy to see how
the exploratory research objectives of generating insights and hypothesis would be well served by
use of this technique

Making Case Study Effective: Let us discuss the criteria for evaluating the adequacy of the case
history or life history which is of central importance for case study. John Dollard has proposed
seven criteria for evaluating such adequacy as follows:

i) The subject must be viewed as a specimen in a cultural series. That is, the case drawn out from
its total context for the purposes of study must be considered a member of the particular cultural
group or community. The scrutiny of the life histories of persons must be done with a view to
identify thee community values, standards and their shared way of life.
ii) The organic motto of action must be socially relevant. That is, the action of the individual
cases must be viewed as a series of reactions to social stimuli or situation. In other words, the
social meaning of behaviour must be taken into consideration.

iii) The strategic role of the family group in transmitting the culture must be recognized. That is,
in case of an individual being the member of a family, the role of family in shaping his behaviour
must never be overlooked.

iv) The specific method of elaboration of organic material onto social behaviour must be clearly
shown. That is case histories that portray in detail how basically a biological organism, the man,
gradually blossoms forth into a social person, are especially fruitful.

v) The continuous related character of experience for childhood through adulthood must be
stressed. In other words, the life history must be a configuration depicting the inter-relationships
between thee person’s various experiences.

vi) Social situation must be carefully and continuously specified as a factor. One of the important
criteria for the life history is that a person’s life must be shown as unfolding itself in the context
of and partly owing to specific social situations.

vii) The life history material itself must be organised according to some conceptual framework,
this in turn would facilitate generalizations at a higher level.


Question 4: Give the importance of frequency tables and discuss the principles of table
construction, frequency distribution and class intervals determination.

Answer: Frequency tables provide a “shorthand” summary of data. The importance of

presenting statistical data in tabular form needs no emphasis. Tables facilitate comprehending
masses of data at a glance; they conserve space and reduce explanations and descriptions to a
minimum. They give a visual picture of relationships between variables and categories. They
facilitate summation of item and the detection of errors and omissions and provide a basis for

It is important to make a distinction between the general purpose tables and specific tables. The
general purpose tables are primary or reference tables designed to include large amount of source
data in convenient and accessible form. The special purpose tables are analytical or derivate ones
that demonstrate significant relationships in the data or the results of statistical analysis. Tables in
reports of government on population, vital statistics, agriculture, industries etc., are of general
purpose type. They represent extensive repositories and statistical information. Special purpose
tables are found in monographs, research reports and articles and reused as instruments of
analysis. In research, we are primarily concerned with special purpose.

Components of a Table

The major components of a table are:

A Heading:
(a) Table Number
(b) Title of the Table
(c) Designation of units

B Body

Sub-head, Heading of all rows or blocks of stub items

Body-head: Headings of all columns or main captions and their sub-captions.
Field/body: The cells in rows and columns.

C Notations:

Footnotes, wherever applicable.

Source, wherever applicable.

Principles of Table Construction

There are certain generally accepted principles of rules relating to construction of tables. They

1. Every table should have a title. The tile should represent a succinct description of the
contents of the table. It should be clear and concise. It should be placed above the body of
the table.
2. A number facilitating easy reference should identify every table. The number can be
centred above the title. The table numbers should run in consecutive serial order.
Alternatively tables in chapter 1 be numbered as 1.1, 1.2, 1….., in chapter 2 as 2.1, 2.2,
2.3…. and so on.
3. The captions (or column headings) should be clear and brief.
4. The units of measurement under each heading must always be indicated.
5. Any explanatory footnotes concerning the table itself are placed directly beneath the table
and in order to obviate any possible confusion with the textual footnotes such reference
symbols as the asterisk (*) DAGGER (+) and the like may be used.
6. If the data in a series of tables have been obtained from different sources, it is ordinarily
advisable to indicate the specific sources in a place just below the table.
7. Usually lines separate columns from one another. Lines are always drawn at the top and
bottom of the table and below the captions.
8. The columns may be numbered to facilitate reference.
9. All column figures should be properly aligned. Decimal points and “plus” or “minus”
signs should be in perfect alignment.
10. Columns and rows that are to be compared with one another should be brought closed
11. Totals of rows should be placed at the extreme right column and totals of columns at the
12. In order to emphasize the relative significance of certain categories, different kinds of
type, spacing and identifications can be used.
13. The arrangement of the categories in a table may be chronological, geographical,
alphabetical or according to magnitude. Numerical categories are usually arranged in
descending order of magnitude.
14. Miscellaneous and exceptions items are generally placed in the last row of the table.
15. Usually the larger number of items is listed vertically. This means that a table’s length is
more than its width.
16. Abbreviations should be avoided whenever possible and ditto marks should not be used in
a table.
17. The table should be made as logical, clear, accurate and simple as possible.

Text references should identify tables by number, rather than by such expressions as “the table
above” or “the following table”. Tables should not exceed the page size by photo stating. Tables
those are too wide for the page may be turned sidewise, with the top facing the left margin or
binding of the script. Where tables should be placed in research report or thesis? Some writers
place both special purpose and general purpose tables in an appendix and refer to them in the text
by numbers. This practice has the disadvantages of inconveniencing the reader who wants to
study the tabulated data as the text is read. A more appropriate procedure is to place special
purpose tables in the text and primary tables, if needed at all, in an appendix.

Frequency Distribution and Class Intervals: Variables that are classified according to
magnitude or size are often arranged in the form of a frequency table. In constructing this table, it
is necessary to determine the number of class intervals to be used and the size of the class

A distinction is usually made between continuous and discrete variables. A continuous variable
has an unlimited number of possible values between the lowest and highest with no gaps or
breaks. Examples of continuous variable are age, weight, temperature etc. A discrete variable can
have a series of specified values with no possibility of values between these points. Each value of
a discrete variable is distinct and separate. Examples of discrete variables are gender of persons
(male/female) occupation (salaried, business, profession) car size (800cc, 1000cc, 1200cc)

In practice, all variables are treated as discrete units, the continuous variables being stated in
some discrete unit size according to the needs of a particular situation. For example, length is
described in discrete units of millimeters or a tenth of an inch.

Class Intervals: Ordinarily, the number of class intervals may not be less than 5 not more than
15, depending on the nature of the data and the number of cases being studied. After noting the
highest and lower values and the feature of the data, the number of intervals can be easily

For many types of data, it is desirable to have class intervals of uniform size. The intervals should
neither be too small nor too large. Whenever possible, the intervals should represent common and
convenient numerical divisions such as 5 or 10, rather than odd division such as 3 to 7. Class
intervals must be clearly designated in a frequency table in such a way as to obviate any
possibility of misinterpretation of confusion. For example, to present the age group of a
population, the use of intervals of 1-20, 20-50, and 50 and above would be confusing. This may
be presented as 1-20, 21-50, and above 50.

Every class interval has a mid point. For example, the midpoint of an interval 1-20 is 10.5 and the
midpoint of class interval 1-25 would be 13. Once class intervals are determined, it is routine
work to count the number of cases that fall in each interval.

Question 5: Write a short note on the following:
(A) Type I error and Type II error
(B) One tailed and Two tailed test
(C) Selecting the significance level

Answer: (A) Type I Error and Type II Error: In the context of testing of hypothesis there are
basically two types of errors that researchers make. We may reject H0 when H0 is true & we may
accept H0 when it is not true. The former is known as Type I & the later is known as Type II. In
other words, Type I error mean rejection of hypothesis which should have been accepted & Type
II error means accepting of hypothesis which should have been rejected. Type I error is donated
by α (alpha), also called as level of significance of test; and Type II error is donated by β(beta).

Accept H0 Reject H0
H0 (true) Correct decision Type I error (α error)
Ho (false) Type II error (β error) Correct decision

The probability of Type I error is usually determined in advance and is understood as the level of
significance of testing the hypothesis. If type I error is fixed at 5%, it means there are about
chances in 100 that we will reject H0 when H0 is true. We can control type I error just by fixing it
at a lower level. For instance, if we fix it at 1%, we will say that the maximum probability of
committing type I error would only be 0.01.

But with a fixed sample size, n when we try to reduce type I error, the probability of committing
type II error increases. Both types of errors can not be reduced simultaneously. There is a trade-
off in business situations, decision-makers decide the appropriate level of type I error by
examining the costs of penalties attached to both types of errors. If type I error involves time &
trouble of reworking a batch of chemicals that should have been accepted, where as type II error
means taking a chance that an entire group of users of this chemicals compound will be poisoned,
then in such a situation one should prefer a type I error to a type II error means taking a chance
that an entire group of users of this chemicals compound will be poisoned, then in such a situation
one should prefer a type II error. As a result one must set very high level for type I error in one’s
testing techniques of a given hypothesis. Hence, in testing of hypothesis, one must make all
possible effort to strike an adequate balance between Type I & Type II error.

(B) Two Tailed Test & One Tailed Test: In the context of hypothesis testing these two terms
are quite important and must be clearly understood. A two-tailed test rejects the null hypothesis
if, say, the sample mean is significantly higher or lower than the hypnotized value of the mean of
the population. Such a test inappropriate when we haveH0: µ= µ H0 and Ha: µ≠µ H0 which may
µ>µ H0 or µ<µ H0. If significance level is % and the two-tailed test to be applied, the probability
of the rejection area will be 0.05 (equally split on both tails of curve as 0.025) and that of the
acceptance region will be 0.95. If we take µ = 100 and if our sample mean deviates significantly
from µ, in that case we shall accept the null hypothesis. But there are situations when only one-
tailed test is considered appropriate. A one-tailed test would be used when we are to test, say,
whether the population mean in either lower than or higher than some hypothesized value.

(C) Selecting the Significance Level: The hypothesis is tested on a pre-determined level of
significance and such the same should have specified. Generally, in practice, either 5% level or
1% level is adopted for the purpose. The factors that affect the level of significance are:

• The magnitude of the difference between sample ;

• The size of the sample;
• The variability of measurements within samples;
• Whether the hypothesis is directional or non – directional (A directional hypothesis is one
which predicts the direction of the difference between, say, means). In brief, the level of
significance must be adequate in the context of the purpose and nature of enquiry.

Question 6: Explain Karl Pearson Co-efficient of correlation. Calculate Karl Pearson co-
efficient for the following data:

X(height- 174 175 176 177 178 182 183 186 189 193
Y(weight- 61 65 67 68 72 74 80 87 92 95

Answer: Karl Pearson’s Co-Efficient of Correlation

Karl Pearson’s Co-Efficient of Correlation is a mathematical method for measuring correlation.

Karl Pearson developed the correlation from the covariance between two sets of variables. Karl
Pearson’s Co-Efficient of Correlation is denoted by symbol r. The formula for obtaining Karl
Pearson’s Co-Efficient of Correlation is:

Direct method

y/N)Σ x/N X Σ xy / N – (Σ Covariance between x and y =

SDx = standard deviation of x series =  xΣ (2 x/N)Σ / N) – ( 2

SDy = standard deviation of y series =  yΣ (2 y/N)Σ / N) – ( 2

Shortcut Method using Assumed Mean

If short cut method is used using assumed mean, the formula for obtaining Karl Pearson’s Co-
Efficient of Correlation is:

dy/N)Σ dx/N X Σ dxdy / N – (Σ Covariance between x and y =

SDx =  dxΣ (2 dx /N)Σ / N) – ( 2

SDy =  dyΣ (2 dy /N)Σ / N) – ( 2

Steps in calculating Karl Pearson’s Correlation Coefficient using Shortcut Method

o Assume means of x and y series

o Take deviations of x and y series from assumed mean and get dx and dy
o Square the dx and dy and find the sum of squares and get dx2 and dy2.
o Multiply the corresponding deviations of x and y series and total the products to
get dxdy.

If the deviations are taken from the arithmetic mean dx = 0 and dy =0 and the formula

Shortcut Method using Arithmetic Mean

If short cut method is used using actual mean, the formula for obtaining Karl Pearson’s Co-
Efficient of Correlation is:

Interpreting Co-Efficient of Correlation

The Co-Efficient of Correlation measures the correlation between two variables. The value of Co-
Efficient of Correlation always lies between +1 and –1. It can be interpreted in the following

If the value of Co-Efficient of Correlation r is 1 it is interpreted as perfect positive correlation.

If the value of Co-Efficient of Correlation r is -1, it is interpreted as perfect negative correlation.

If the value of Co-Efficient of Correlation r is 0 < r < 0.5, it is interpreted as poor positive

If the value of Co-Efficient of Correlation r is 0.5 < r < 1, it is interpreted as good positive

If the value of Co-Efficient of Correlation r is 0 > r > -0.5, it is interpreted as poor negative

If the value of Co-Efficient of Correlation r is –0.5 > r > -1, it is interpreted as good negative
If the value of Co-Efficient of Correlation r is 0, it is interpreted as zero correlation.

Calculation of Karl Pearson co-efficient of correlation:

x Y Dx Dy dx2 dy2 dxdy

174 61 -4 -11 16 121 44
175 65 -3 -7 9 49 21
176 67 -2 -5 4 25 10
177 68 -1 -4 1 16 4
178 72 0 0 0 0 0
182 74 4 2 16 4 8
183 80 5 8 25 64 40
186 87 8 15 64 225 120
189 92 11 20 121 400 220
193 95 15 23 225 529 345
Total 33 41 481 1433 812

Karl Pearson’s co-efficient of correlation is:

R= covariance between x and y

∑ Dx × ∑ Dy

= ∑dxdy/N-(∑dx/N × ∑dy/N)
√ (∑dx /N)-( ∑dx/N)2 × √(∑dy2 /N)-( ∑dy/N)2

= 812/10-(33/10 × 41/10)
√ (481 /10)-(33/10)2 × √ (1433 /10)-( 41/10)2

= 81.2-(3.3 × 4.1)
√ (48.1-10.89) × √ (143.3-16.81)

= 81.2-13.53
6.1 × 11.25

= 67.67

= 0.9860
Interpretation: There is good positive correlation between x and y variable.


(4 credits)
Set 1
Marks 60

Question 1: All contracts are agreements but all agreements are not contracts. Discuss.

Answer :
Contract: Sec. 2 (h) ‘An agreement enforceable by law is a contract’. To make a contract, there
must be (I) an agreement and (ii) the agreement should be enforceable by law.

Agreement: Agreement is defined as ‘every promise and every set of promises forming
consideration for each other ‘. A promise is defined as “an accepted proposal.” Thus, every
agreement in its ultimate analysis is made of a proposal from one side and its acceptance by the

To become a contract an agreement must be enforceable by law. Sec. 10 of the Act lays down the
condition of enforceability. An agreement becomes enforceable only when it is coupled with
obligation. An obligation is the legal bond, which binds the parties to a contract. The obligations
springing from agreements should be legal obligations and not moral, social or religious

Essentials of a Valid Contract: All contracts are agreements but all agreements need not be
contracts. The agreements that create legal obligations only are contracts. The validity of an
enforceable agreement depends upon whether the agreement satisfies the essential requirements
laid down in the Act. Section 10 lays down that ‘all the agreements are contracts if they are made
by the free consent of the parties competent to contract for a lawful object and are not hereby
expressly declared to be void.


Question 2: “Not all persons have the capacity to enter into the contract.” Discuss the

Answer: Legal disability of the parties would render the agreement entered into between them
unenforceable in a court of law. In fact, even a desirable person may enter into an agreement.
Law does not infringe his freedom of making an agreement with anybody he likes. But by
declaring certain classes of persons having no contractual capacity, law seeks to protect their
interests from being exploited by unscrupulous persons.

Definition: Section II lays down that “Every person is competent to contract who is of the age of
majority according to the law to which he is subject and who is of sound mind and is not
disqualified from contracting by any law to which he is subject.” This section declares following
persons to be incompetent: (1) Minors (2) persons of unsound mind and (3) persons disqualified
by law to which they are subject.

Minors: A minor is a person who has not attained the age of majority. According to Indian
Majority Act, 1875 the age of 18 years is a major. However, if a guardian is appointed by the
court or if the minor or his property is under the supervision of a court of wards, the age of
majority is 21 years.

Principles governing minor’s contracts: The law protects minor’s persons, preserves both their
rights and estates, excuses their shortcomings and negligences and assists them in their pleadings,
the judges are their counsellors, the jury are their servants and law is their guardian.

In pursuing the above objective, the law should not cause unnecessary hardship to those who deal
with minors.

Sec. II of the Act is silent as regards the legal effects of an agreement entered into by or with a
minor. In Mohari Bibi Vs. Dharmo Das Ghosh case it was held that a minor’s agreement is void-

Persons of Unsound Mind: A person is said to be of sound mind for the purpose of making a
contract if at the time when he makes it, he is capable of understanding it and of forming a
rational judgment as to its effects upon his interests. A person who is usually of sound mind but
occasionally of unsound mind may not make a contract when he is of unsound mind (Sec. 12).

Two tests are laid to determine the soundness of mind while making a contract. They are (i) the
person making a contract should be capable of understanding it and (ii) should be capable of
forming a rational judgment as to its effects upon his interests. In English Law, a person of
unsound mind is competent to contract. He may avoid his contract by satisfying the court that he
was incapable of understanding the contract at the time of its formation and the other party knew
it. The contract is voidable at his option.

Under Indian Law, the agreement of a person of unsound mind is absolutely void. A person of
unsound mind, however, may make a contract when he is of sound mind. Sec. 12 also puts the
persons such as drunkard or a person who is delirious from fever in the same category as a person
of unsound mind.


Question 3: Discuss how a contract can be discharged by breach.

Answer: Discharge of contract means parties to the contract are no more liable to the contract.
In other words, the liability of the parties to the contract will come to an end.

Discharge by breach of contract: Breach of contract by a party thereto is also a method of

discharge of a contract, because “breach” also brings to an end the obligations created by a
contract on the part of each of the parties. Of course the aggrieved party i.e., the party not at fault
can sue for damages for breach of contract as per law; but the contract as such stands terminated.

Breach of contract may be of two kinds: (1) Anticipatory breach; and (2) Actual breach.

1. Anticipatory breach: An anticipatory breach of contract is a breach of contract occurring

before the time fixed for performance has arrived. It may take place in two ways: (a)
Expressly by words spoken or written. Here a party to the contract communicates to the
other party, before the due date of performance, his intention not to perform it. (b)
Impliedly by the conduct of one of the parties. Here a party by his own voluntary act
disables himself from performing the contract. When a party to a contract has refused to
perform or disabled himself from performing, his promise in its entirity, the promisee may
put an end to the contract, unless he has signed, by words or conduct his acquiscence in its
2. Actual breach: Actual breach may also discharge a contract. It occurs when a party fails
to perform his obligations upon the date fixed for performance by the contract. Actual
breach entitles the party not in default to elect to treat the contract as discharged and to
sue the party at fault for damages for breach of contract.

Remedies for Breach of Contract

Whenever there is breach of a contract, the injured party becomes entitled to any one or more of
the following remedies against the guilty party:
Rescission of the contract.
Suit for damages.
Suit upon quantum merit.
Suit for specific performance of the contract.
Suit for an injunction.


Question 4: Discuss the essentials of a contract of guarantee.

Answer: Definition of Contract of Guarantee: It is a contract to perform the promise or

discharge the liability of a third person in case of his default (S. 126). Surety is a person who
gives the guarantee. The person in respect of whose default the guarantee is given is called
‘principal debtor.’ The person to whom the guarantee is meant for is called the ‘Creditor’.

Essential of Contract of Guarantee:

1. From: A contract of guarantee is just like any other contract which may be either oral or
in writing.

2. Tripartite agreement: Every contract of guarantee involves three agreements between

(i) the creditor and principal debtor, (ii) the surety and the creditor, and (iii) the surety and the
principal debtor.

Consent of the parties: There must be consent of all the three parties.

Example: X sells and delivers goods to Y. X afterwards requests Z to pay in default of Y. Z

agrees to do so. Here, Z cannot become surety without the consent of Y.

3. Secondary Liability: The test which applied to determine whether the contract is one of
guarantee or indemnity is whether the obligation has been undertaken at the debtor’s request
in which case the contract is one of guarantee. If the obligation is undertaken without any
request of the debtor, the contract is one of indemnity. The intention of the parties is also
important whether one making oneself primarily or collaterally liable. Hence, the promise to
be primarily and independently liable is not a guarantee, though it may be an indemnity.
Hence in a contract of guarantee, the primary liability is with the principal debtor.

4. Existing liability: It is not necessary that the principal contract must be in existence at the
time the contract of guarantee is made; the original contract by which the principal debtor
undertakes to repay the money to the creditor may be about to come into existence.
Example: X took a loan of Rs.10,000 from Y on 1st Jan. 1999 and paid nothing on account of
interest and principal. On 2nd Jan. 2002, Z gave the guarantee to Y for the payment of
Rs.10,000 due from X. This is not a valid contract of guarantee because the primary liability
between X and Y is a time barred debt which is not enforceable by law.

1. The promise to pay must be conditional: In other words, the liability of the surety
should arise only when the principal debtor makes a default.
2. Consideration: Something done for the benefit of the principal debtor is considered as
consideration for the guarantee to make the contract valid. The legal detriment incurred by
the promisee at the promisor’s request is sufficient to constitute the element of
3. Competency: The principal debtor, surety and creditor must be a person competent to
contract. However, under certain circumstances, a surety is liable though the principal
debtor is not i.e. the original contract is void as is the case of a contract with a minor in
which the surety is liable not only as surety but also as principal debtor. A person of
unsound mind or an undischarged insolvent cannot give a valid guarantee.
4. Consent: There must be free consent; otherwise the contract of guarantee may become
void or voidable. Generally a contract of guarantee is not the contract of utmost good faith
i.e., uberrimae fidei, but it is sometimes a first cousin to it. Mere non-disclosure will not
affect the contract of surety unless there is an intentional concealment.


Question 5: How can negotiable instruments be endorsed? Discuss in detail.

Answer : According to Section 14, “When a promissory note, bill of exchange or cheque is
transferred to any person, so as to constitute that person the holder thereof, the instrument is said
to be negotiated.” Thus negotiation implies a transfer of negotiable instrument so as to constitute
the transferee a holder thereof, who should be entitled in his own name to sue on the instrument
and recover the amount due thereon. There must be a transfer with intention to pass title and in
the manner prescribed by the Act.

Every maker, drawer, payee or indorsee, and if there are several makers, drawers, payees or
indorsees, all of them jointly can negotiate an instrument, provided the negotiability of such
instrument has not been restricted or excluded by any express words used in the instrument. But
the maker, drawer, payee or indorsee cannot negotiate an instrument, unless he is in lawful
possession or is holder thereof.

A negotiable instrument may be negotiated until payment or satisfaction thereof by the maker,
drawee or acceptor at or after maturity, but not after such payment or satisfaction. Thus,
negotiability of an instrument stops only when the party ultimately liable thereon pays it at or
after maturity. It can be negotiated even at or after maturity if it has not been paid or satisfied. A
payment before maturity does not stop negotiability. The acceptor or maker who receives the
instrument after payment but before maturity may reissue it.

Modes of Negotiation

There are two ways of negotiating or transferring a negotiable instrument:

1. Negotiation by mere delivery: A negotiable instrument payable to bearer is negotiable
by delivery thereof. Thus, a bearer instrument may be negotiated by delivery only. It does
not require signature of the transferor (i.e. indorsement) and the transferee becomes the
holder thereof by mere possession. The transferor of a bearer instrument is not liable on its
2. Negotiation by indorsement and delivery: A negotiable instrument payable to order is
negotiable by the holder by indorsement and delivery thereof. Thus the negotiation of an
order instrument requires two formalities, namely, first the holder should indorse it and
then deliver to his indorsee.

In both the modes of negotiation stated above, delivery with the intention of transferring the
ownership of the instrument to the transferee is essential. Mere delivery without the intention of
passing the property is not sufficient to constitute a complete negotiation.

Indorsement: Section 15 defines indorsement as follows: “When the maker or holder of a

negotiable instrument signs the same, otherwise than as such maker, for the purpose of
negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the
same purpose a stamped paper intended to be completed as negotiable instrument, he is said to
indorse the same, and is called the indorser.”

Thus, an indorsement consists of the signature of the holder usually made on the back of the
negotiable instrument with the object of transferring the instrument. If no space is left on the back
of the instrument for the purpose of indorsement, further indorsements are signed on a slip of
paper attached to the instrument. Such a slip is called ‘allonge’ and becomes part of the
instrument. The person making the indorsement is called an ‘indorser’ and the person to whom
the instrument is indorsed is called an ‘indorsee.’

Kinds of Indorsements: Indorsements may be of the following kinds:

1. Blank or general indorsement: If the indorser signs his name only and does not specify
the name of the indorsee, the indorsement is said to be in blank. The effect of a blank
indorsement is to convert the order instrument into bearer instrument which may be
transferred merely by delivery.
2. Indorsement in full or special indorsement: If the indorser, in addition to his signature,
also adds a direction to pay the amount mentioned in the instrument to, or to the order of,
a specified person, the indorsement is said to be in full.
3. Partial indorsement: Section 56 provides that a negotiable instrument cannot be indorsed
for a part of the amount appearing to be due on the instrument. In other words, a partial
indorsement which transfers the right to receive only a part payment of the amount due on
the instrument is invalid.
4. Restrictive indorsement: An indorsement which, by express words, prohibits the
indorsee from further negotiating the instrument or restricts the indorsee to deal with the
instrument as directed by the indorser is called ‘restrictive’ indorsement. The indorsee
under a restrictive indorsement gets all the rights of an indorser except the right of further
5. Conditional indorsement: If the indorser of a negotiable instrument, by express words in
the indorsement, makes his liability, dependent on the happening of a specified event,
although such event may never happen, such indorsement is called a ‘conditional’
In the case of a conditional indorsement the liability of the indorser would arise only upon the
happening of the event specified. But the indorsee can sue other prior parties, e.g., the maker,
acceptor etc., if the instrument is not duly met at maturity, even though the specified event did not


Question 6: Why do you think an agreement to take a person to moon for a holiday can not
be a contract?

Answer: The essential of a valid contactor state that the terms of the agreement should be
capable of being performed and should be certain´ taking a person to the moon for a holiday
cannot be a valid contract because neither the activity is being capable of being performed in the
near future nor it is certain that someone making such kind of promise will be able to fulfill. We
all know that moon missions are multi-billion projects and are funded by governments, so
someone making such a promise would only be a fraud. The governments’ laws have also not yet
authorized any agency or person to make such contracts so any agency or person promising
someone a holiday on the moon is unlawful which is also an essential term of a valid contract.

A contract is an agreement between parties that is legally enforceable.

A Contract is enforceable by law while an Agreement is not enforceable by law. In this case of
taking a person to moon it cannot be enforced by law. It’s just a mutual agreement.

A valid contract must contain the ten valid elements which is not possible in
Terms of taking a person to moon:
· Offer and Acceptance
· Intention to Create Legal Relations
· Lawful Consideration
. Capacity of Parties
· Free Consent
. Lawful Object
· Writing and Registration
· Certainty
· Possibility of Performance
. Not Expressly Declared Void

Moreover the company which agrees to take the person to moon cannot make it in a contract that
they will take him on what specific date or method or which space vehicle.

(4 credits)
Set 2
Marks 60

Question 1: What is the process for an enterprise to get incorporated as a company?

Answer: Incorporation of a company: Any seven or more persons or where the company to be
formed will be a private company, any two or more persons, associated for any lawful purpose
may, by subscribing their name to a memorandum of associations and otherwise complying with
the requirement of this Act in respect of registration, form an incorporated company, with or
without limited liability.

Documents to be filed for registration: After ascertaining the availability of name, the promoter
should proceed to prepare the following documents and file with the Registrar of companies:

1. Memorandum of Association: The memorandum of association is the charter of the

company. This includes its objectives, its name, the address of its registered office, the
capital which the company is authorised by law, the nature of liability of members as well
as the names, addresses and agreement of people who agree to form a company.
2. Articles of Association: The other important document is the articles of association
which contains the rules and regulations relating to the internal management of the
company. However, it is not necessary for a public company limited by shares to file the
Articles of Association. If such public company does not file Articles of Association, it is
deemed to have adopted “Table A” of schedule I of the Act.
3. Copy of proposed agreement: If a company purposes to enter into an agreement with
any individual for appointment as a Managing Director, or a whole-time director or
manager, a copy of such an agreement should also be filed with the Registrar of
4. Consent of the Directors: According to Section 266, in the case of a public limited
company having share capital, a person cannot be appointed as a Director by the Articles
of Association unless, he has, before the registration of the articles, either himself or
through his agent, signed and filed, with the Registrar his consent in writing to act as

Certificate of Commencement of Business: A private company can commence business

immediately after incorporation. However, in the case of companies other than the private
company and a company having no share capital, further requirement is to be complied with,
namely, obtaining ‘a certificate of commencement of business’ before it can commence its

Memorandum of Association: Section 2(28) defines it as “The Memorandum of Association of

a company as originally framed or as altered from time to time in pursuance of any previous
companies or of this Act”. It sets out the constitution of the company and defines the scope of the
activities of the company. It is the foundation on which the structure of the company depends. It
also defines the relationship of the company with the public. As the interests of the shareholders,
creditors and other members of the public are to be protected by law, this document cannot be
altered easily. It was regarded as an unalterable charter of a company in England, until the year
1980, when the Act was amended to allow alterations in certain cases and to a certain extent.
Section 16 of the Indian Companies Act lays down that the conditions in the memorandum cannot
be altered except in the cases and in the manner and to the extent provided in the Act.


Question 2: Describe in detail the clauses in the Memorandum of Association.

Answer: Contents of Memorandum of Association (Section 13):

i) Name clause: A company may have any name which is not undesirable in the view of the
Central Government. For example, the name cannot be identical or similar to the name of
another existing company. It must contain at its end, the word ‘Limited’ if it is a public
limited company or the words ‘Private Limited’ if it is a private limited company. But
companies formed for the promotion of art, science, etc., may be exempted from adding
words “Limited” or “Private Limited” as the case may be, by means of general or special
order granted by the Central Government under Section 25. Section 147(1) lays down that
the name must appear on the outside of every office or place of business in a conspicuous
manner and on all bills, notices, etc., of the company.

ii) The Situation Clause: It shows the State in which the registered office of the company is

iii) The Objects Clause: It states separately (1) the main objects and objects ancillary or
incidental to the main objects to be pursued by the company and (2) other objects. It defines
the powers of the company beyond which, the company cannot act. But it cannot contain the
objects or powers which are contrary to the provisions of the Act.

IV) The Liability Clause: It states whether the liability of the members is limited to the
extent of the nominal value of the shares or the extent of the amount guaranteed by the
members or unlimited.

v) The Capital Clause: It states the amount of the capital and the way in which it is to be
divided into shares.

vi) The Association and Subscription Clause: All the signatories of the memorandum
make a declaration that they are desirous of forming themselves into a company and that
they agree to take the number of shares mentioned against their respective names given
therein, with their addresses and occupations.

Articles of Association: They are the rules, regulations and bye-laws for the internal
management of the company. They bind the company and its members. They also bind the
members inter sec. But they do not constitute a contract between the company and the public.
Articles of association are filed with the Registrar for the incorporation of a company. Where they
are not filed, the rules contained in Table A of the Companies Act shall apply. In the case of
companies with unlimited liability or with liability limited to the guarantee and a private company
limited by shares, the articles of association are compulsory.

The usual contents of the articles of association relate to the following:

a) Share capital and variation of rights.

b) The company’s lien on the shares.

c) Calls on shares.

d) Transfer and transmission of shares.

e) Forfeiture and re-issue of forfeited shares.

f) Conversion of shares into stock and re-conversion of stock into shares.

g) Rules regarding the holding and conducting of the general meetings and board meetings.
h) Rules regarding the appointment of directors, managing agents, secretaries and treasurers,
Managing Director and secretary their remuneration, powers and duties etc.

i) Alteration of share capital.

j) Borrowing powers.

k) Accounts and audit.

l) The common seal etc.

1. List of persons who act as directors.

2. The consent of directors in writing to act as such.
3. Director’s undertaking to take up and pay for qualification shares. This undertaking is to
be given by all the Directors jointly or individually and signed by each one of them and
should contain their names, occupations, etc.

The articles are subservient to the memorandum. It must not contain anything inconsistent with
the memorandum. It defines the relationship between the company and members as well members
inter se. The memorandum defines the relation of the company with the public. An act ultra vires
the articles but intra vires the memorandum can be ratified by the company. But an act ultra vires
the memorandum cannot be ratified.


Question 3: Discuss the need for the development of cyber laws.

Answer: In the 49th year of Indian independence, Internet was commercially introduced in India.
The beginnings of Internet were small and the growth of subscribers painfully slow.

However, as Internet has grown, the need has been felt to enact the relevant Cyber laws, which
are necessary to regulate Internet in India. This need for Cyber laws was propelled by numerous

Firstly, India has an extremely detailed and well-defined legal system in place. Numerous laws
have been enacted and implemented and the paramount among them is The Constitution of India.
We have various laws like Indian Penal Code, 1860, The Indian Evidence At, 1872, The Banker’s
Book Evidence Act, 1891, The Reserve Bank of India Act, 1934, The Companies Act, 1956, and
so on. However, the arrival of Internet signaled the beginning of the rise of new and complex
legal issues. It may be pertinent to mention that all the existing laws in place in India were
enacted keeping in mind the relevant political, social, economic, and cultural scenario of that
time. Nobody then could really visualize the emergence of the Internet. Despite the brilliant
acumen of our master draftsmen, the requirements of cyberspace could hardly be anticipated. The
advancement of Internet led to the emergence of numerous ticklish legal issues and problems,
which necessitated the enactment of Cyber Laws.

Secondly, the existing laws of India could not be interpreted in the light of the emerging
cyberspace, to include all aspects relating to different activities in cyberspace.

Thirdly, none of the existing laws gave any legal validity or sanction to the activities in
Cyberspace. For example, the Net is used by a large majority of users for email purposes. Yet, e-
mail was not “legal” in our country. There was no law in the country, which accorded legal
sanctity to e-mail and the electronic format. The judiciary in our country had been reluctant to
grant judicial recognition to the legality of e-mail in the absence of any specific law having been
enacted by Parliament on the subject. Thus the need arose for enacting Cyber Law in our country.

Fourthly, Internet requires an enabling and supportive legal infrastructure in time with the times.
This legal infrastructure can only be given by the enactment of the relevant Cyber Laws as the
traditional laws have failed to provide it. E-commerce, the biggest future of Internet, can only be
possible if necessary legal infrastructure complements the same to enable its vibrant growth. As
such, an urgent need was felt for enacting Cyber Law in our country.

Definition of Cyber Crime: Cyber crime refers to all the activities done with criminal intent in
cyberspace or using the medium of Internet. These could be either the criminal activities in the
conventional sense or activities, newly evolved with the growth of the new medium. Any activity,
which basically offends human sensibilities, can be included in the ambit of Cyber crimes.

Because of the anonymous nature of Internet, it is possible to engage in a variety of criminal

activities with impunity, and people with intelligence, have been grossly misusing this aspect of
the Internet to commit criminal activities in cyberspace. The field of cyber crime is just emerging
and new forms of criminal activities in cyberspace are coming to the forefront each day. For
example, child pornography on Internet constitutes one serious cyber crime. Similarly, online
pedophiles, using Internet to induce minor children into sex, are as much cyber crimes as any

Categories of cyber crimes:

Cyber crimes can be basically divided in to three major categories:

1. Cyber crimes against persons;

2. Cyber crimes against property; and
3. Cyber crimes against government.

1. Cyber crimes against persons: Cyber crimes committed against persons include various
crimes like transmission of child-pornography, harassment of any one with the use of a computer
and cyber stalking.

The trafficking, distribution, posting, and dissemination of obscene material including

pornography, indecent exposure, and child pornography constitute the most important cyber
crimes known today. These threaten to undermine the growth of the younger generation and also
leave irreparable scars on the minds of the younger generation, if not controlled.

Similarly, cyber harassment is a distinct cyber crime. Various kinds of harassments can and do
occur in cyberspace, or through the use of cyberspace. Harassment can be sexual, racial,
religious, or of any other nature. Cyber harassment as a crime also brings us to another related
area of violation of privacy of citizens. Violation of privacy of online citizens is a cyber crime of
a grave nature.

Cyber stalking: The Internet is a wonderful place to work, play and study. The net is merely a
mirror of the real world, and that means it also contains electronic versions of real life problems.
Stalking and harassment are problems that many persons especially women, are familiar within
real life. These problems also occur on the Internet, in the form of “cyber stalking” or “online

2. Cyber crimes against property: The second category of Cyber crimes is Cyber crimes against
all forms of property. These crimes include unauthorized computer trespassing through
cyberspace, computer vandalism, and transmission of harmful programs and unauthorized
possession of computerized information.

3. Cyber crimes against Government: The third category of Cyber crimes is Cyber crimes
against Government. Cyber Terrorism is one distinct kind of crime in this category. The growth
of Internet has shown that the medium of cyberspace is being used by individuals and groups to
threaten international governments as also to terrorize the citizens of a country. This crime
manifests itself into Cyber Terrorism when an individual “cracks” into a government or military
maintained website, for the purpose of perpetuating terror.

Since Cyber crime is a newly emerging field, a great deal of development has to take place in
terms of putting into place the relevant legal mechanism for controlling and preventing cyber
crime. The courts in United States of America have already begun taking cognizance of various
kinds of fraud and cyber crimes being perpetrated in cyberspace. However, much work has to be
done in this field. Just as the human mind is ingenious enough to devise new ways for
perpetrating crime, similarly, human ingenuity needs to be canalized into developing effective
legal and regulatory mechanisms to control and prevent cyber crimes. A criminal mind can
assume very powerful manifestations if it is used on a network, given the reachability and size of
the network.


Question 4: What do you mean by award with reference in arbitration?

Answer: Decision of Arbitral Tribunal is termed as ‘Arbitral Award’. Arbitrator can decide the
dispute ex aequo et bono (In justice and in good faith) if both the parties expressly authorize him
to do so [Section 28(2)]. The decision of Arbitral Tribunal will be by majority. The arbitral award
shall be in writing and signed by the members of the tribunal [Section 29]. The award must be in
writing and signed by the members of Arbitral Tribunal [Section 31(1)]. It must state the reasons
for the award unless the parties have agreed that no reason for the award is to be given [Section
31(3)]. The award should be dated and place where it is made should be mentioned. Copy of
award should be given to each party. Tribunal can make interim award also [Section 31(6)].

Cost of Arbitration: Cost of arbitration means reasonable cost relating to fees and expenses of
arbitrators and witnesses, legal fees and expenses, administration fees of the institution
supervising the arbitration and other expenses in connection with arbitral proceedings. The
tribunal can decide the cost and share of each party [Section 31(8)]. If the parties refuse to pay the
costs, the Arbitral Tribunal may refuse to deliver its award. In such case, any party can approach
Court. The Court will ask for deposit from the parties and on such deposit, the award will be
delivered by the Tribunal. Then Court will decide the costs of arbitration and shall pay the same
to Arbitrators. Balance, if any, will be refunded to the party [Section 39].
Intervention by Court: One of the major defects of earlier arbitration law was that the party
could access court almost at every stage of arbitration – right from appointment of arbitrator to
implementation of final award. Thus, the defending party could approach court at various stages
and stall the proceedings. Now, approach to court has been drastically curtailed. In some cases, if
an objection is raised by the party, the decision on that objection can be given by Arbitral
Tribunal itself. After the decision, the arbitration proceedings are continued and the aggrieved
party can approach Court only after Arbitral Award is made. Appeal to court is now only on
restricted grounds. Of course, Tribunal cannot be given unlimited and uncontrolled powers and
supervision of Courts cannot be totally eliminated.

Arbitration Act has Over-Riding Effect: Section 5 of Act clarifies that notwithstanding
anything contained in any other law for the time being in force, in matters governed by the Act,
the judicial authority can intervene only as provided in this Act and not under any other Act.

Modes of Arbitration

(a) Arbitration without the intervention of the court. [Sec.3 to 19]

(b) Arbitration with the intervention of the court when there is no suit pending [Sec.20]

(c) Arbitration with the intervention of the court where a suit is pending. [Sec.21 to 25]

Power of Judicial Authority to Refer Parties to Arbitration: A judicial authority before which
an action is brought in a matter which is the subject of an arbitration agreement shall refer the
parties to arbitration if a party so applies. The party must, however, apply before submitting his
first statement on the substance of the dispute [Sec.8(1)1].

Further, the application shall not be entertained unless it is accompanied by the original
arbitration agreement or a duly certified copy there of. [Sec. 8(2)]

Notwithstanding that an application has been made and that the issue is pending before the
judicial authority, an arbitration may be commenced or continued and in arbitral award made,

In order that the judicial authority may refer the parties to arbitration under section 8(1), the
following conditions must be satisfied.

1. There must be a valid and subsisting agreement between the parties.

2. The matter about which a suit has been filed should be within the scope of the arbitration
3. The party asking for the stay must have applied at the earliest opportunity, i.e., before
submitting his first statement on the substance of the dispute.
4. The application must be made to the judicial authority before which the proceedings are
5. The application must be accompanied by the original arbitration agreement or by a duly
certified copy thereof.
6. The judicial authority must be satisfied that there is no sufficient reason why the matter
should not be referred.

This is a very important provision inasmuch as if any party to the Arbitration Agreement brings
an action before the Court ignoring the Arbitration Agreement, the other party can move an
application before the court along with original arbitration Agreement or a duly certified copy of
agreement but before submitting his first statement on the substance of the dispute otherwise the
party will lost its right of objecting the matter to be tried before the Court. Above all, the most
important provision is that the arbitration proceedings can continue or proceed further despite the
fact that one of the parties has moved a petition before the court.

Under the previous old Act, there was no such specific provision and consequently, in the past,
the arbitration proceedings remained in abeyance.


Question 5: How is a consumer defined in the Consumer Protection Act? Discuss.

Answer: ‘Consumer’ means any person who: (i) “Buys any goods for a consideration which
has been paid or promised, or partly paid and partly promised, or under a system of deferred
payment,” or (ii) Hires any services for a consideration which has been paid or promised, or
partly paid and partly promised, or under a system of deferred payment i.e., in respect of hire-
purchase, transactions, [Sec. 2(d)].

Thus, consumer is a person who (i) buys any goods for a consideration, or (ii) hires or avails any
services for a consideration. In addition to buyer(s) of goods or hirer(s) or user(s) of services, any
beneficiary of such services, using the goods/services with the approval of purchaser or hirer or
user would also be a deemed a ‘Consumer’ under the Act. The widow of the deceased Policy
holder was held as consumer under the Act by the State Commission of A.P. in the case of A vs.
LIC of India. The consideration may be either paid or promised, or partly paid and partly
promised or under any system of deferred payment. The Act thus covers transactions for the
supply of goods and rendering of services.

Buyer of goods for consideration: The Act, unlike the Sale of Goods Act, does not insist on
money consideration only. Transactions of transfer of services, or barter, or exchange will come
within the purview of the Act. The user of such goods, with the approval of the buyer of goods, is
also a consumer as per the Act. But according to Section 2(d) of the Act, the term consumer does
not include a person who obtains such goods for resale or for any commercial purpose. Thus a
purchaser of goods for reselling them or a purchaser of a taxi for plying the same on hire, a
purchaser of a V.C.R. for running a video library, or purchaser of machinery for his commercial
establishment is not a consumer. However, according to Consumer Protection (Amended) Act
1993, a person who purchases tools or machinery under self-employment scheme is also a

Hirer of services for consideration: Any person who hires services for a consideration is a
consumer. Consumer, not only means merely one who hires services for consideration, but also
includes a person who is a beneficiary of such services. For example, the user of a telephone,
even though he is not himself the subscriber is a consumer under the Act. Services include all
kinds of professional services, be it the routine services of a barber or the technical services of a
highly qualified person. For example, supply of electricity has been held to be a service and not
sale of goods. The services must be of commercial nature in the sense that they must be on
payment. The payments may be in cash or kind. It may be made either at once, or partly at once,
or partly on credit. The services may be rendered wholly or partly on credit. However, free
services or personal service under a contract have been excluded from the protective spell of the
Consumer Protection Act.

Union of India Vs. Mrs. S. Prakash: It was held that the subscriber of telephone is a consumer as
the rental charges paid to the Central Government is the consideration for the services rendered
by the Tele-Communication Department, District Manager, Telephones, Patna Vs. Lalith Kumar
Bajla (1989).

Mumbai Grahak Panchayat, Vs. Andhra Pradesh Scooters Ltd. The complainant made an advance
deposit of Rs.500 with the A.P. Scooters Ltd., booking a scooter. The complaint was not given
the refund of the deposit when he demanded the same as per his contract with the opposite party.
It was held that the complainant was a consumer, and was entitled to relief asked by him.

Ganapathi Vs. Postmaster, Karnataka State: In this case, the remitter of T.M.O., was held to be a
consumer and was awarded a compensation.

Cosmopolitan Hospitals Vs. Smt. V.P. Nair’s: The National Commission held, that a patient is a
consumer and the medical assistance was a service. The Medical Officer’s service was not a
personal service so as to constitute an exception to the application of the Consumer Protection

Who are not Consumers?

The following persons are not consumers as per the Consumer Protect Act.

(a) A person who purchased goods for resale.

(b) A person who purchased goods for commercial purpose
(c) A person who obtains services without consideration
(d) A person who obtains services under a contract of personal service

The National Commission, in various cases, had decided that the following are not consumers:

• Tax-payers to municipality
• Contractors
• Applicants for jobs
• Persons who filed suits in courts, etc.


Question 6: Undertake a survey of 20 shops and write a report on the provisions maintained
in these shops as per the Shops and Establishments Act.

Answer: On making a survey on 20 different shops coming under shops and

establishments acts, the important findings are summarized:
-To provide statutory obligation and rights to employees and employers in
the un organised sector of employment, i.e., shops and establishments.
Scope And Coverage
- A state legislation; each state has framed its own rules for the Act.
- Applicable to all persons employed in an establishments with or without
wages, except the members of the employer's family.
- State government can exempt, either permanently or for a specified period,
any establishments from all or any provisions of this Act.
Main Provisions
- Compulsory registration of shop/establishment within thirty days of
commencement of work.
- Communications of closure of the establishment within 15 days from the
closing of the establishment.
- Lays down the hours of work per day and week.
- Lays down guidelines for spread-over, rest interval, opening and closing
hours, closed days, national and religious holidays, overtime work.
- Rules for employment of children, young persons and women
- Rules for annual leave, maternity leave, sickness and casual leave, etc.
- Rules for employment and termination of service.
- Maintenance of registers and records and display of notices.
- Obligations of employers.
- Obligations of employees.
When To Consult And Refer
- At the time of start of an enterprise.
- When framing personnel policies and rules
(2 credits)
Set 1
Marks 30

Question 1: Write a brief note on building consumer driven supply chain networks.

Answer: Building Consumer driven Supply Chain Networks: Consumer-driven supply is

an innovative approach to design supply chain network and operations. It means designing single
supply chain network into a more commercially competitive tool to deliver offering in order to
win over consumer’s preferences or choice. It acts as a substitute for the traditional supply chain
network designed to deliver goods and services to the customers which was regarded as a cost
centre, where savings were driven by simplification and automation.

Today’s Consumers and customers are more demanding, there’s more complexity in their
decision making process due to wide range of products, increased brand awareness and fuelling
consumers knowledge through mass advertising, high level of inventory and shrinking of the
world into one single market.

In building consumer oriented supply chain networks, companies must adopt a CRM Tool known
as Efficient Customer Response (ECR). ECR is an initiative which is a blueprint for building
an industry wide solution to counteract competitive deterioration.

Consumer-driven supply is a strategic business tool which demands that profits and supply
functions work in a preserved environment to create value for customers. This requires
partnership, aligned measures and a much more multi level functional aspects to redesign the
organization structure.
Overall, the focus is on improving fast and accurate information flow up the network and fast and
efficient product flow down it. Specifically, this means reducing end-to-end supply network
time, driving out non-value-added complexity and inventory, and providing differentiated service
and product solutions.

The term “supply chain” evokes the image of a predefined and fixed series of linkages, which are
serially connected and unidirectional – currently an accurate description in most cases. The
traditional supply chain exists within the “four walls” of an enterprise, where material and
information flow linearly along fixed routes starting with the receipt of raw material through to
shipment of the customer order. Some supply chains have been extended to share information
with trading partners, though these relationships are generally limited to long-established, trusted
customers and suppliers. To address the looming competitive, consumer and regulatory pressures,
consumer products companies must transform their linear, internally-focused supply chains into
consumer-driven supply chain networks.

The consumer-driven supply chain network is best thought of as a dynamic construct of

organizations and supply chains that come together, at a given point in time, to provide a
seamless pipeline for products and information from source suppliers through to end consumers.
This union may be temporary – perhaps a single transaction – or an enduring alliance. It will
consist of multiple partners, each with a role to play: from brand owners, product designers and
contract manufacturers, through to co-packers and other service providers which, when
combined, act as a single entity to deliver the overall business value sought by retail customers
and consumers.

The advent of customer centric era took place in the early 1960s, arguably during the heyday of
the producer centric era. During the past decade the business landscape has changed dramatically.
Following points explain the changes.

1. Consumers, not producers, have become the dominant component. Today the production
capacity is greater than product demand for the majority of industries. Prices are determined by
competitive market forces and not set by the producer. The purely internal focus of the standard
cost system is no longer valid.

2. The local optimisation view encouraged by the competitive strategies did not often result in
global improvement. Quite to the contrary, actions take n to improve the cost performance at one
stage actually created more costs elsewhere, creating higher inventories and other inefficiencies.

3. Factors such s reliability of deliveries, quality of products, speed with which orders can be
filled and variety of products offered are the dominant factors determining a company’s
competitive position.

4. Direct labour cost on which most allocation decisions were made, was no longer the major cost

Question 2: Write a short note on CPFR. Give a real time example of a business setup which
practices the CPFR strategies.

Answer: Collaborative Planning, Forecasting and Replenishment (CPFR)

The Voluntary Interindustry Commerce Standards Association (VICS) has defined CPFR as "a
business practice that combines the intelligence of multiple partners in the planning and
fulfillment of customer demand." According to VICS, since 1998, "’over 300 companies have
implemented the process." In this section we describe CPFR and some successful
implementations. It is important to understand that successful CPFR can only be built on a
foundation in which the two parties have synchronized their data and established standards for
exchanging information.

Sellers and buyers in a supply chain may collaborate along any or all of the following four supply
chain activities.

1. Strategy and planning: The partners determine the scope of the collaboration and assign
roles, responsibilities, and clear checkpoints. In a joint business plan they then identify significant
events such as promotions, new product introductions, store openings/closings, and changes in
inventory policy that affect demand and supply.

2. Demand and supply management: A collaborative sales forecast projects the partners’ best
estimate of consumer demand at the point of sale. This is then converted to a collaborative order
plan that determines future orders and delivery requirements based on sales forecasts, inventory
positions, and replenishment lead times.

3. Execution: As forecasts become firm, they are converted to actual orders The fulfillment of
these orders then involves production, shipping, receiving, and stocking of products.

4. Analysis: The key analysis tasks focus on identifying exceptions and evaluating metrics that
are used to assess performance or identify trends.

A fundamental aspect of successful collaboration is the identification and resolution of

exceptions. Exceptions refer to a gap between forecasts made by the two sides or some other
performance metric that is falling or is likely to fall outside acceptable bounds. These metrics
may include inventories that exceed targets or product availability that falls below targets. For
successful CPFR, it is very important to have a process in place that allows the two parties to
resolve exceptions. Detailed processes for identifying and resolving exceptions are discussed in
the VICS CPFR Voluntary Guidelines V 2.0 (2002).

One successful CPFR implementation has involved Henkel, a German detergent manufacturer,
and Eroski, a Spanish food retailer. Prior to CPFR Eroski saw frequent stock outs of Henkel
products, especially during promotions. At the inception of CPFR in December 1999, 70 percent
of the sales forecasts had an average error of over 50 percent and only 5 percent of the forecasts
had errors under 20 percent. Within four months of the CPFR implementation however, 70
percent of the sales forecasts had errors under 20 percent and only 5 percent had errors over 50
percent. CPFR resulted in a customer service level of 98 percent and an average inventory of only
five days. This was accomplished despite 15 to 20 products being promoted every month.
Another successful implementation involved Johnson & Johnson and Superdrug. a chain in the
United Kingdom.

It enables companies to have the product in the right place at a right time. Yet still achieve a
major reduction in inventory, lower total value of inventory, increase inventory turns, improve
service and ultimately gain a competitive advantage. The question is, has supply chain
collaboration really been adopted? In some industries, yes for example, collaboration throughout
the supply chain is gaining strong support in the retail industry where companies, such as Wal-
Mart, share specific real time information with their vendors on a continual basis. The data Wal-
mart collects contains a wealth of significant sales and customer-demand information.

Wal-mart knows how to use such information to keep its stores, merchandisers, distribution
centers and suppliers in synchronization. Modern retailers and manufacturers are becoming more
and more market driven. The Internet revolutionized the value chain by hype around online
retailing and the introduction of Business-to-Business (B2B), e-commerce. One can visualize that
a number of e-marketplaces are becoming mature by introducing new communication standards
and collaborative planning, forecasting and Replenishment (CPFR) initiatives.

For years, companies have engaged in the traditional behavior of pushing the supply chain slack
downstream. But now the time has come for organizations to work together to take time and cost
out of the entire length of the value chain. The evidence certainly exist that cost savings and time-
to-market gains are there. This really is a win-win situation for everyone involved. Companies
can realize time and cost gains, and reduce obsolescence risk, by setting up collaborative Supply
Chain Management- typically Internet portals that can run on electronic exchanges and provide
shared access to relevant data to all collaborators.

There are secured and collaborative environments that allow all authorized parties to use common
standards and data formats for product identification and work flow. By sharing and
synchronizing supply and demand plans, for example, companies can lower cost through reduced
inventory holdings, maximize profits through enterprise price optimization, and increase sales
through better forecasting, grater customer satisfaction and the ability to respond both more
quickly and more proactively to changes in demand.


Question 3: Write short notes on:

(A) Bullwhip Effect

(B) Advantage of CPG System
(C) Evolution of Precision Retailing

Answer: (A) Bullwhip Effect: Supply chain coordination improves if all stages of the chain
take actions that together increase total supply chain profits. Lack of coordination in supply chain
leads to degradation of responsiveness and increases cost. There are various obstacles that lead to
this lack of coordination and exacerbate variability through the supply chain. Supply chain
coordination requires each stage of the supply chain to take into account the impact its actions
have on other stages.
Lack of coordination occurs either because different stages of the supply chain have objectives
that conflict or because information moving between stages is delayed and distorted. Different
stages of a supply chain may have conflicting objectives if each stage has a different owner. As a
result, each stage tries to maximize its won profits, resulting in actions that often diminish total
supply chain profits.

Today, supply chains consist of stages with many different owners. For example, Ford Motors
has thousands of suppliers from Goodyear to Motorola, and each of these suppliers has many
suppliers in turn. Information is distorted as it moves across the supply chain because complete
information is not shared between stages. This distortion is exaggerated by the fact that supply
chains today produce a large amount of product variety. Ford produces many different models
with several options for each model. The increased variety makes it difficult for Ford to
coordinate information exchange with thousands of suppliers and dealers. The fundamental
challenge today is for supply chains to achieve coordination in spite of multiple ownership and
increased product variety.

Many firms have observed the Bullwhip effect in which information in orders increase as they
move up the supply chain from retailers to wholesalers to manufacturers to suppliers. Bullwhip
effect distorts demand information within the supply chain, with each stage having a different
estimate of what demand looks like. The result is a loss of supply chain coordination.

Minor changes in demand at the end user or the retail level results in huge variations in the
demand at upstream enterprises in te supply chain. This phenomenon, termed the Bullwhip effect,
owes its origin to the fact that a slight motion of the handle of a bullwhip can make the tip of the
whip thrash widely.

In this context of supply chain, the bullwhip effect manifests itself through increasing demand
variability as you move upstream in the supply chain. That is, small shifts in the level of customer
demand experienced by the retailer are magnified as the demand information is passed up the
supply chain creating increasingly higher variation in the orders received by upstream suppliers.

The Bullwhip Effect or Whiplash Effect is an observed phenomenon in forecast-driven

distribution channels. The concept has its roots in J Forrester’s Industrial Dynamics (1961) and
thus it is also known as the Forrester Effect. Since the oscillating demand magnification upstream
a supply chain reminds someone of a cracking whip it became famous as the Bullwhip Effect.

Unexpected changes in demand patterns will continue to escalate further up the supply chain.
Problems tend to escalate in supply chains where communication is minimal between supply
nodes. In virtually all cases, the inventory levels of the retailer decline, followed in sequence by a
decline in the inventory of the wholesaler, distributor, and factory. As inventory falls, players
tend to increase their orders. Players soon stock out. Backlogs of unfilled orders grow. Faced with
rising orders and large backlogs, players dramatically boost the orders they place with their
supplier. Eventually, the manufactures ships this huge quantity of beer, and inventory levels
surge. In many cases one can observe a second cycle.

The bullwhip effect results in tremendous inefficiencies in supply chain. It results in excessive
inventory investment, poor customer service, lost revenues, misguided capacity plans and
ineffective transportation and production schedules. Many enterprises have gained significant
competitive advantages by understanding the underlying causes of the bullwhip effect and
working with their supply chain partners to reduce it. This, in turn, enables them to reduce
inventories and become more responsive to customer demand.

It is an exercise that showcases the problems that arise in a company with minimal
communication in the supply chain. It is important for management to understand the causal
factors that create supply chain oscillations.

(B)Advantages of CPG system:

* Provide a Return on Investment (ROI) for the enterprise’s investment based upon improved
sales, lower production costs and fewer returns.

* Develop an integrated to improve supply chain efficiency and reduce associated costs.

* Base manufacturing and production planning upon market and customer demand, not human

* Make information accessible to participants in the manufacturing and distribution supply chain
to facilitate planning and distribution.

* Leverage historical sales information contained within the enterprises distributed operational

* Maintain the operational efficiency of the existing legacy applications.

* Implement and maintain an infrastructure that optimises the business processes and supporting
software applications, as well as minimizes Total Cost.

* Annual reduction in network costs.

* Optimising connectivity with distributors, yields greater revenue.

* Reduction in inventory costs, including warehousing and logistics.

* Production planning lead-time reduction.

* Inventory carrying cost reduction.

* Reduction in transportation and human resource costs as a result of greater efficiency in the
supply chain.

(C)Evolution of precision retailing: In order to meet the ever changing market demand, retailers
must discover new tools and techniques to analyze their business trends. Retailers use this tool of
precision retailing to meet the ever chaining and dynamic market trends. Following figure shows
that how retailers have updated themselves with adequate tools to meet the demand.
Shoppers today expects more than the required level of satisfaction for the value they pay in
buying a product or service. Their expectations today are something different that of yesterday. In
this ever changing need, retailers have to know the expectations of his shoppers and formulate
strategies accordingly. A shopper expects rock-bottom prices for all the products that he buys
from a retailer. In achieving this, he would visit all the shops at his disposal, enquiry whole range
of products and the prices and they evaluate the alternatives to arrive at the decision. Nowhere in
the prices, would a shopper compromise on the quality of the products in specialty items. This
behavior of the shopper puts an obligation to the retailer to think again to connect him to

In achieving this, a retailer may have to take many decisions related to assortment and variety for
their products. There are number of factors which influence a retailer’s decision.

They are:

· Greater variety
· Point of purchase
· Identification of fast moving products in the shelf
· Inventory control
· Assortment across channels
· Assortment across stores
· Customized assortments for end users

The above factors help retailer in providing category wise insights about their inventory levels in
terms of which products are selling well in which store with how much of quantity. This
information helps a retailer in correlating the effectiveness of sales with pricing, sales with
promotion etc., with the help of precision retailing, retailer will be moving from general strategy
of what customers want to specific strategies like which items would be a good fit for each store
and each customer.

Through precision retailing, a retailer can achieve number of objectives related to various aspects
of retailing including customer level as well as organizational level. Customer level objectives are
highly influenced by consumer behavior factors which are highly uncontrollable by retailers.
Organizational level objectives are set by retailers which are influenced by customer level
objectives. These organizational level objectives can be termed as controllable variables which
can be easily managed and altered by the retailers.

Precision assortment decisions are based on several criteria. Retailers before planning their
strategies should be able to answer some of the basic issues which are:
· Target customers
· Market trends
· Promotional tools
· Competitors assortment strategies
· Product line strategies
· Shelf capacity in attracting the customers etc.


(2 credits)
Set 2
Marks 30

Question 1: Radio Frequency Identification (RFID) technology has been in use from
decades, initially in military applications, such as tracking material in rugged and fast
moving situations where barcodes could not be used. Only over the last few years has this
technology been considered as a complement to barcode technology in the retail industry.
What does its evolution mean for Indian retail industry? Discuss the importance,
applications, limitations and advancements of usage of RIFD in the retail industry.

Answer: An RFID tag consists of a small silicon microchip attached to an antenna. The chip
itself can be as small as half a millimeter square – roughly the size of a tiny seed. Some RFID
tags are thin enough to be embedded in paper. An RFID tag is capable of transmitting a unique
serial number a distance of up several meters in response to a query from a reading device. RFID
tags can be either passive meaning they lack batteries and obtain power from the antenna or it can
be active meaning they have batteries and can energize on their own.

RFID tags are already quite common in everyday life. Examples include proximity cards used as
replacements for metal door keys, Speed pass™, E-Z Pass™ and Fastback™ automated toll
payment devices. Tens of millions of pets around the world have surgically embedded RFID tags
that make it easy to identify them should they lose their collars. Electronic Article Surveillance
(EAS) – a tiny tag is used to prevent shoplifting books and articles. Airlines industry can tag
baggage to track when they get lost.

RFID is one of the key technologies transforming the industry, enabling products to be easily
tracked electronically at every step in the supply chain.

Radio Frequency Identification (RFID): Unlocking the Wireless Opportunity: As the cost of
RFID tags comes down, the rate of adoption is forecast to expand exponentially. Several major
retailers are already asking their suppliers to support RFID initiatives. However, RFID has
significant value creation potential for consumer products companies as well, including improved
labor efficiency, fewer supply chain errors, better visibility of inventory and its location, reduced
theft, lower levels of safety stocks and an ability to serve the retail customer more effectively.

RFID can enable businesses to react much faster to changing market and operating conditions.
Consumer products companies need to carefully plan a strategy to optimize the value to their own
businesses from implementing RFID capabilities. At the same time, they need to avoid simply
reacting to multiple retailers’ mandates with potential duplication and inefficiency. Embracing
industry standards and roadmaps will be critical.

Role of RFID in retail industry: Radio Frequency Identification (RFID) technology is being
introduced for use in the retail industry. RFID promises to speed supply chain operations by
automating the tracking of goods. RFID uses electronic tags for storing data and identifying
items. Since RFID is used to capture information the issue becomes what data is being captured
and hence the privacy issue becomes a concern.

Many large retailers have instructed their suppliers to tag pallets and cases with RFID tags
carrying Electronic Product Code (EPC), a “license plate” with a hierarchical structure that can be
used to express a wide variety of different, existing numbering systems. EPC Global has
approved a new communications protocol for UHF tags that will standardize tags and readers for
retail supply chain throughout the world. Eventually many billions of tags will be needed for
pallets and cases alone. If tagging at case and pallet level proves to be successful, then the next
step in the process may be to tag individual items and thus affecting consumers.

Shaping of public opinion has been started by consumer advocacy groups, for example, by
“Consumers against Supermarket Privacy Invasion and Numbering” – CASPIAN, followed by
numerous articles and journals and newspapers and not only in those specialized in technology
and business but also in the popular press. According to CASPIAN consumers have no way of
knowing which packages contain RFID chips. While some chips are visible inside a package,
RFID chips can be well hidden. For example, they can be sewn into the seams of clothes,
sandwiched between layers of cardboard, molded into plastic or rubber, and integrated into
consumer package design.


Question 2: Can the retail boom take logistics to new heights? Support your answer with
real examples.

Answer: As India’s retail sector opens up on a huge scale, domestic logistics companies are
planning significant investments to expand their portfolio of services. It is expected that in the
next two years, the logistics sector will have undergone major changes, offering a wide spectrum
of services. Consider this: Global retail giant Wal-Mart announces its entry into India through a
joint venture with Bharti. Reliance puts on its drawing board a mega plan of Rs 25,000-crore to
create 100 million sq ft of retail space. The Aditya Birla group makes a retail foray with plans to
invest Rs 15,000 crore. The Tata’s plan to participate in the retail race with renewed vigor.
Pantaloon plans to create a retail space of 30 million sq ft by 2009-10. Shoppers Stop may have 6
million sq ft of retail space by the same time. Global retailers from the US, European Union and
Australia are all eyeing the retail revolution in India.
On the growth path: Indian players in the logistics space are keenly tracking these
developments, as they suddenly find their services in big demand. Although some retailers, like
Reliance, may have their own logistics subsidiaries, most of the others are working with third-
party providers. "The Indian logistics sector is at the beginning of a strong growth path. Not only
retail, there are other growth drivers like the manufacturing, FMCG and auto components
sectors," says an Edelweiss research.

Players in the segment are, indeed, ramping up their capital expenditure programme. Edelweiss
estimates that the six major players in this sector – Concor, Gateway Distriparks Ltd (GDL),
Allcargo, SICAL, Transport Corporation of India and Gati – will spend Rs 3,400 crore over the
next three years to cash in on the growth opportunities. These companies together invested about
Rs 500 crore in the last fiscal.

The companies plan to expand their service portfolios. For example, Concor and SICAL’s future
growth area is cold chain logistics, GDL and SICAL’s is container train operations, while TCI
and Gati’s is warehousing. Other trucking and courier companies are leveraging on their networks
to offer express and supply chain distribution solutions, apart from developing expertise in 3PL
(third-party logistics) services.

Absorbing investments: The different sectors within the logistics segment are also poised to
absorb significant investments. Edelweiss estimates that the container train sector (thrown open to
private sector recently) will see a capex of Rs 1,600 crore in the next three years, while
warehousing will get Rs 200 crore, trucking/XPS Rs 380 crore and offshore logistics Rs 250
crore. Worldwide, the logistics industry is on a growth path, with the global logistics industry
estimated to be of the size of $3.5 trillion in 2005 – the US market alone was estimated at $900
billion, almost 25 per cent of the global industry.

In fact, about 60 per cent of the Fortune 500 companies report having at least one contract with a
3PL company. "India at present spends 13 per cent of its GDP on logistics, which is much higher
than the global average. We believe that this is due to inadequate infrastructure leading to
periodic bottlenecks along the routes. Another major reason is the regulatory loopholes, which
raise the cost of service and cause delays," the Edelweiss research points out.

However, the infrastructure will certainly see brisk development in the coming years, with the
Government attaching high priority to this sector. The road sector alone will see investments of
about Rs 1, 52,000 crore between 2006 and 2012. Airports, which together handled a cargo of 1.4
million tonnes last fiscal, as against 0.65 million in 1995-96, will also see significant expansion
and development.

The biggest challenge: The logistics companies at present provide services from transportation
to warehousing and inventory management. But, in the near future, they will have to expand their
products basket to include new value-added services, such as packaging, labeling and reverse
logistics. The biggest challenge that faces these companies is that they should quickly imbibe
latest technologies, such as GPC/GIS tracking of consignments, and uncork new services to cater
to corporate seeking to outsource their logistics needs. Also, the Government should come out
with a sound policy that facilitates the operations of the logistics companies.

Question 3: Discuss the trends and challenges in new technologies in supply chain

Answer: Future trends in supply-chain management: Today, it would be difficult to find an

organization, large or small, that doesn’t understand the importance of supply chain management
and how successfully implementation of supply chain management principles can have a positive
impact on its overall success. It is one of the major functions common to many types of
organizations: The overall goal of supply chain management is to impact the organization’s
bottom line in a positive way.

While it involves a number of actions, present supply chain management is trying to achieve the
following goals:

· Provide an uninterrupted flow of materials, supplies and service required to operate the

· Keeps inventory investment at a minimum.

· Maintain and improve quality.
· Find or develop competent suppliers.
· Purchase required items and services at lowest total cost.
· Improve the organization’s competitive position.
· Achieve harmonious, productive working relationships with other functional areas within the
· Accomplish the purchasing and marketing objectives at the lower possible level of
administrative costs.

Traditionally, marketing, distribution, planning, manufacturing and the purchasing organizations

along the supply chain operated independently. These organizations have their own objectives
and these are often conflicting. For example, high customer service and maximum sales
objectives of marketing may conflict with manufacturing and distribution goals.

Many manufacturing operations are designed to maximize output volumes and lower costs with
little or no considerations for the impact on inventory levels and distribution capabilities.
Purchasing contracts are often negotiated with very little information beyond historical buying
patterns. The result of these conflicting objectives is that there is not a single integrated picture
for the organization as a whole. Hence, there is a need for an integrated picture through which
these different functions can be integrated together.

Supply chain management is a strategy through which such integration can be achieved. Today, it
is indeed possible through IT (Information Technology) to achieve this type of integration.
Supply chain management is the combination of art and science that goes into improving the way
your company finds the raw components it needs to make a product or service, manufactures that
product or service and delivers it to customers.
Supply chain operations today is posing lot of challenges of the organizations in order to keep up
the expectations of the customers. In achieving so, supply chain operations act as a major area
that every company should examine. In order to boost up the profitability and make the
organization more successful, supply chain has a key role to play in it.

Information is crucial to the performance of a supply chain because it provides the basis on which
supply chain managers make decisions. Information technology consists of the tools used to gain
awareness of information, analyze this information and execute on it to increase the performance
of the supply chain. Without information, a manager cannot know what customers want, how
much inventory is in stock and when more products should be produced or shipped.

This is going to be biggest areas of improvement for manufacturer in the near future to face the
challenges of supply chain. The role of IT becomes very important to achieve the above said
goals in an effective manner. It is the future which is going to make radical changes to the supply
chain to deliver step changes in performance.

Today’s “one approach suits all” supply chains cannot provide an adequate solution to the
challenges now faced by companies. Yet, overnight transformation is an impossible issue,
significant changes in supply chain has to be brought in organizations to equip themselves to face
the future challenges.

Companies are increasingly being watchful in learning the changes in consumer buying
behaviors, increased retailer demands, growth objectives and changing regulatory norms. The
supply chain plays an essential role in addressing these demands on the business.

Trends in supply chain management: The combined effects of the above trends will be
profound, and will surely accelerate the growth of logistics/supply chain management as the
organizational hub of the global extended enterprise. Based on these trends, we believe that
managing the extended enterprise will increasingly focus on these three domains of best practice:

· Physical network management: which seeks to exert strategic control over the physical
distribution chain to the customer? It allows new efficiencies in the movement of goods and
services both inside the enterprise and between the enterprise and its distribution and supply

· Information and knowledge network management, which seeks to exert strategic control over
business-to business and business-to-consumer transactions conducted via private value-added
networks or the Internet. This domain aggressively uses dynamic knowledge management
systems to better visualize supply chain flows, capture organization wide learning about
operations, and improve performance.

· Computer-based infrastructure management, which seeks to acquire and capitalize on a more

efficient and responsive regional, national, and international supply chain support infrastructure
to raise corporate total factor productivity. This domain includes highly automated government
customs/cargo clearance systems and national EDI systems; hub/spoke intermodal transportation
systems with more seamless handoffs between air, sea, and overland shipping modes;
dispatch/routing/vehicle and traffic management systems; and shared assets such as public
bonded warehouses or telecommunications/ online network resources.

(2 credits)
Set 1
Marks 30

Question 1: a.Discuss the objectives and the different types of merchandising.

b. Mention the factors that influence retail buying.

Answer: a. Merchandising are the activities involved in acquiring particular goods and/or
services and making them available at the places, times and prices in the quantity that enable
retailers to reach its goals.

Objectives of Merchandising: Retail organization’s survival depends on the merchandising. The

merchandise department of a retail store should achieve following four objectives to meet
organization goals. They area. To provide the required product to the customer according to his
/her affordability.

b. To make a product available to the consumer as and where required.

c. To provide products at a right time to a consumer.
d. To meet the quantity requirement of the consumer.
Types of Merchandise

1. Staple merchandise: Types of merchandise carried out by a retailer permanently and have
relatively stable sales over the period. Goods like shampoos, soaps and detergents are seen
throughout the year. These products have almost stable demand for all the twelve months whether
January or December.

2. Seasonal merchandise: Products sold for a definite period of the year only. Ice creams, winter
clothes, umbrellas, fans etc… are sold during the particular period of the year. Winter clothes are
sold in November to January period

3. Fad merchandise: This Merchandise is having high sales for a particular period. Movie
merchandising is classic examples for this type. Bond movies usually carry out such type of
merchandise. Recent movie Quantum of solace is also using such technique. People who are fond
of bond movies buy this merchandise. Therefore retailer experiences the high sale for this
merchandise before and after the release of the movie.

4. Fashion Merchandise: Products that have cyclical sales due to changing tastes and lifestyles
Design, colors and cloth composition varies in the fashion merchandise quite often. The fashion
merchandise good for a particular year will become outdated for the next year. Retailer should
emphasis on current trends in this merchandise. Hence a separate merchandise plan is prepared
for such type of goods.

b. Factors that influence retail buying

1. Economic developments: Purchasing of materials depend upon the country’s economic

conditions. If the economy is growing rapidly, usually consumption also grows proportionately
and retail organization should source materials accordingly. The economic health of the nation
provides the image for the organization too.

2. Supply conditions: Materials required for a retail store should be matched with the demand
condition of the retail organization. If an irregular or seasonal demand exists, then the retail
organization should adjust its supplies. Any shortage of the materials will force the retail
organization to go out of the competition.

3. Political and Legal environment: An unstable government will have unpredictable policies.
Any change in the government policy will have direct or indirect impact on the company. For
example: Indian government is not allowing direct foreign investment in the retail sector. If the
government takes decision to free entry to multinational retailers, small retailers will face the

4. Competitive environment: Retail buying is a very complex process. The numbers of buyers
are very few. Any technology change adopted by the competitor should be carefully and quickly
adopted by the suppliers.

5. Culture and customs: Every country has its own culture and customs. A retail store in the
Gandhi bazaar area of Bangalore, mostly serving vegetarian customers, is not able to sell non
vegetarian items, while the same retail store sells more non vegetarian items in Frazer town
consisting of more non vegetarian customers. The classic example of retail adjustment is from Mc
Donald. It sells beef worldwide, but its major sales come from the chicken burger in India.
Therefore McDonald should procure more vegetarian items than live stock in India.

6. Organizational objectives: Purchasing objectives are derived from the organization

objectives. For example, an organization objective is to reduce the overall cost of it by 20%. Its
purchasing objectives also take this as benchmark and try to reduce it by 20%. Some times they
will be forced to cancel the negotiation with a major supplier who may provide value to the
organization in the future to meet the current cost projections.

7. Retail organizational policies and procedures: Retail organization policies like

centralization versus decentralization of buying and selling will have direct impact on the retail

8. Organization structure and systems: Lesser the hierarchy, more the flexibility in a retail
organization. Companies with lot of hierarchies will have plenty of problems to be addressed.

9. Interpersonal factors: Business buying will have different outcomes on the basis of authority,
status, empathy and persuasiveness that customers and retail organizations posses.

10. Individual factors: Age, education, job position, personality, risk attitudes of individual will
determine the buying behavior of each role and in turn these changes will have direct impact on
the organization buying.

Question 2: (a) What are benefits and limitations of the category management?
(b) Write a short note on the consumer’s perspective on merchandising.

Answer: (a) The objective of category management is to provide better value to the customer.
To achieve the objective, business entity should provide better product assortment to the
consumer. The assortment depth or breadth alone will not ensure successes to the organization.
Therefore retail stores need to understand their consumers and environment that affect selection
of right categories of products. These categories need to be tested against set business models to
assess their viability and contribution to the retail store. In short, categories functions as strategic
business units.

Category Management Advantages and Limitations

Advantages of category management:

· Category management is more closely aliened with how consumers define their needs and make
their purchases.
· Retailers’ issues can be addressed at the category level.
· Category management helps in developing tie- in programs.
· It helps in providing a more effective framework for utilizing technology and information in the
retail store.
· It provides the means for better use of suppliers’ knowledge and experience.

Limitations of category management:

· Retailers often have difficulty accepting suppliers as partners

· ‘Efficient’ ranges have danger of becoming boring and looking like those of competition
· Smaller suppliers can be squeezed out
· Smaller retailers may not have resources to adopt Category management

(b) Merchandise manager should know the consumer behavior to understand

· Consumer’s need for particular product.

· Information sought and shared by the consumer
· Consumer decision process

Factors that influence the retail consumer: A retail consumer’s buying decision process in
influenced by many factors. Few of them are discussed below

· Affordability: Income of the consumer will determine what type of merchandise he or she
would like to purchase. People who earn more than Rs 30,000 per month generally buy branded
shirts and trousers. People who earn less than Rs 30,000 generally look for private labels or stitch
and wear segment. Merchandise manager should keep this affordability factors while developing
the assortment plan.

· Proximity: Staple merchandise should be available near to the consumer place. Consumer will
not travel 2 Km to buy one kilo gram of rice. Time is also another factor. In the busy cities like
Bangalore and Mumbai travelling itself takes lot of time. Therefore merchandisers should see all
the products or service required by the target market need to be stored.

· Range of products and services: Retail merchandisers should store different category with
deep assortments. Customer now days would like to shop in one store rather than multiple store.
If the retail store is not providing that facility then consumer will switch over to competitors’

· Personal factors: The culture, subculture, stage of the family life cycle and occupation of a
consumer determines what type of merchandise he or she will look in the retail store.

Retail consumer decision making process:

1. Need recognition: Customer posses two type of stimuli at this juncture. One is driven by the
internal stimuli and another is external stimuli. The internal stimuli are customer’s desire, attitude
or perception and external stimuli are advertising etc… From both stimuli customer understand
the need for the product. Here merchandiser should understand what customer’s needs that
attracted customers towards the product and should highlight those in the merchandising plan.

2. Information search: In this stage customer wants to find out the information about the
product, place, price and point of purchase. Customer collects the information from different
sources like

a. Personal sources: Family, friends and neighbors

b. Commercial sources: Advertising, sales people, dealers, packaging and displays.

c. Public sources: mass media and consumer rating agencies.

d. Experiential sources: Demonstration, examining the product.

3. Evaluation of alternatives: After collection of information, consumers arrive at some

conclusion about the product. In this stage he will compare different brands on set parameters
which he or she thinks required in the product. The evaluation process varies from person to
person. In general Indian consumer evaluate on the following parameters

a. Price

b. Features

c. Availability

d. Quality

e. Durability

At this stage merchandiser should store different categories with large SKU’s to evaluate the
different brands. The Merchandise itself should communicate the brand image of the store.

4. Purchase decision: In this stage consumer buy the most preferred brand. In India affordability
plays an important role at this stage. Organizations’ bring many varieties of the products to cater
to the needs of customers.

5. Post purchase behavior: After purchasing the product the consumer will experience some
level of satisfaction and dissatisfaction. The consumer will also engage in post purchase actions
and product uses of interest to the merchandiser. The merchandiser’s job does not end when the
product is bought but continues into the post purchase period. Customer would like to see the
performance of the product as he perceived before purchase. If the performance of the product is
not as he or she expected before then he develops dissatisfactions. Merchandiser should keep an
eye on how consumer uses and disposes the product.


Question 3: Mr. P and Mr. Q are retailers dealing in a variety of fast moving consumer
products. Although Mr. P has his outlet in the centre of the city, due to competition he has
just enough sales throughout the year. Mr. Q’s outlet is located on the newly developed
highway, but still he manages to earn a fair amount of annual profits. Mr. P and Mr. Q
have both decided to adopt an assortment planning strategy, in order to improve their
position as well as sales. Is it a good decision for both of them? Why?


Assortment Planning: The assortment plan gives an indication of the width and depth within
each category and sub category of product range that should be available within retailer’s outlet.
Assortment planning is a list of product need to be stored by the retailer in a particular period.
Therefore this plan is also called as model stock list. Assortment planning varies with type of
merchandise stored in the retail outlet. If the retailer carries only staple merchandise then
retailer’s assortment plan hardly varies in the year but if the retailer carries fashion merchandise
then he should vary his assortment plan. A retail store may be having large merchandise and may
require change in the assortment plan too.
There is a general conception that assortment planning is carried out at the SKU level but in
practicality it’s not true. Assortment planning is usually carried out at sub category level. The
plan may be taken to the SKU level if the merchandise needs special attention.

Mr. P and Mr. Q are retailers dealing in a variety of fast moving consumer products. Although
Mr. P has his outlet in the centre of the city, due to competition he has just enough sales
throughout the year. Mr. Q’s outlet is located on the newly developed highway, but still he
manages to earn a fair amount of annual profits. Mr. P and Mr. Q have both decided to adopt an
assortment planning strategy, in order to improve their position as well as sales.

Its is a good decision for both because both are take handle properly

1. Need recognition: Customer posses two type of stimuli’ at this juncture. One is driven by the
internal stimuli and another is external stimuli. The internal stimuli are customer’s desire, attitude
or perception and external stimuli are advertising etc… From both stimuli customer understand
the need for the product. Here merchandiser should understand what customer’s needs that
attracted customers towards the product and should highlight those in the merchandising plan.

2. Information search: In this stage customer wants to find out the information about the
product, place, price and point of purchase. Customer collects the information from different
sources like

a. Personal sources: Family, friends and neighbors

b. Commercial sources: Advertising, sales people, dealers, packaging and displays.

c. Public sources: mass media and consumer rating agencies.

d. Experiential sources: Demonstration, examining the product.

3. Evaluation of alternatives: After collection of information, consumers arrive at some

conclusion about the product. In this stage he will compare different brands on set parameters
which he or she thinks required in the product. The evaluation process varies from person to
person. In general Indian consumer evaluate on the following parameters

a. Price

b. Features

c. Availability

d. Quality

e. Durability

At this stage merchandiser should store different categories with large SKU’s to evaluate the
different brands. The Merchandise itself should communicate the brand image of the store.
4. Purchase decision: In this stage consumer buy the most preferred brand. In India affordability
plays an important role at this stage. Organizations’ bring many varieties of the products to cater
to the needs of customers.

5. Post purchase behavior: After purchasing the product the consumer will experience some
level of satisfaction and dissatisfaction. The consumer will also engage in post purchase actions
and product uses of interest to the merchandiser. The merchandiser’s job does not end when the
product is bought but continues into the post purchase

period. Customer would like to see the performance of the product as he perceived before
purchase. If the performance of the product is not as he or she expected before then he develops
dissatisfactions. Merchandiser should keep an eye on how consumer uses and disposes the

(2 credits)
Set 2
Marks 30

Question 1 :(a) Describe the process of customer relationship management.

(b) Explain the differences between manufacturer brand and private label.

Answer: Customer Relationship Process: Customer relationship management process begins

with retailer identifying the customer related data. He will create a customer database which shall
be used for decision making purpose. Customer data is analyzed and mapped. Thus the retailer
can identify his or her target customers. Retailer develops the CRM programs and implements it
in the retail store. The process is given in detail in the below mentioned diagram. The stages are
explained in detail thereafter.

Collecting customer data: Retailer’s customer relationship process starts with collecting the data
regarding the customers. He or she will collect the data to create the database which shall be used
in the future. The customer data base usually contains the following data:

· Date of purchase
· The total amount of merchandise purchased
· The SKUs purchased.
· Customer details about information collection (website, kiosk or call center)
· Customer preferences (colors, brands, fabrics and flavors)
· The demographic data of the customer
· Customer lifestyle related data.
· Customer response to the promotion programs

The retailer will not get right picture of the customer after collecting the above data. In a
particular house only different customers purchase the SKUs for the house. Therefore it will
become complex for the retailer to map the customer details. Thus the retailer also collects the
information about the households. The customer database management provides meaningful
insight to the retailer. For example, Fabmall, categories used to have Mothers’ recipe brands but
when it carefully observed the data in a few stores and found that Priya pickles are moving faster
they changed their merchandise allocation.

Collecting customer data is a very difficult task. Some customers are unwilling to provide any
data. This is very much true in the store retailing. Retailers follow various strategies to collect the
information from the customers. They are:

· Retailers requesting customer to provide information: Assume you are purchasing beauty
products from Health and Glow or Megamart. Once the transactions are completed, sales
representatives will ask the customer to fill in the details. in a particular format. These data will
be used to create the database. There are some practical difficulties in getting the customer related
data. One, customer is not at all ready to share any information and secondly, sales representative
who should collect the data might forget to get the information.

· Retailers come out with frequent shoppers programs or loyalty programs.

Loyalty programs are programs that identify and provide rewards for customers who patronize a

The retailer offers some discounts, gifts and incentives to customers who purchase regularly.
They ask the customers to purchase their shopping cards or gift vouchers. To get these cards or
vouchers, customer will be giving his or her details. These details can be used to collect the
information. For example, Shoppers’ Stop’s customer loyalty program is called The First Citizen.
The program offers its members an opportunity to collect points and avail of innumerable special
benefits. Currently, Shoppers’ Stop has a database of over 2.5 lakh members who contribute to
nearly 50% of the total sales of Shoppers’ Stop.

· Some retailers collect the information regarding the consumer through third party credit cards.
Assume you are shopping in a retail store and made payment through Visa or Master card. The
retailer will collect the information from these payment service companies rather than from

Customer profile of Shoppers Stop: Shoppers’ Stop’s core customers represent a strong SEC A
skew. They fall between the age group of 16 years to 35 years, the majority of them being
families and young couples with a monthly household income of above Rs. 20000 and an annual
spend of Rs.15000. A large number of Non Resident Indians visit the shop for ethnic clothes in
the international environment they are accustomed to.

Analyzing the customer data and identifying target customers: As we discussed in the
previous section, the customer database is used to take appropriate decisions. The retailer uses the
technique called data mining to analyze the customer data.Data mining is a technique used to
identify patterns in data, typical patterns that the analyst is unaware of prior to searching through

For example, Shoppers Stop collects the data regarding its customers. From the customer profile
of Shoppers Stop, it is very much clear that customers group involves NRI’s. It also reveals that
NRIs purchase from ethnic shops. From this information we can conclude that Shopper’s Stop
mined their information from their database in two aspects. They are type of customer and
merchandise shopped.
The detailed information on the customer helps the retailer to identify the market segments.
Home Town, a furniture and interior design format from Future group analyzed the data of
customers in Bangalore and got some strange facts. Basically, Future group thought that most of
its customers would be from the information technology area. The analyzed information showed
that 6 out of 10 customers are non resident Indians and next 2 parts are from real estate business
and rest from IT and others. This has helped Home Town rearrange their merchandise and
promote it. Shoppers Stop has two major segmentation variables i.e. apparel and lifestyle.

Life time value of customers:

The total purchases a customer can make with an organization as long as his or her relationship

Life time value of customer estimation requires following information:

a. Past behavior of customers

b. Gross margin from those purchases and

c. Service costs.

Life time value of the customer provides information regarding the customer purchases over the
period. The table below provides you the information regarding the lifetime value of the customer
over three years

Though number of customers decrease year after year, their purchase has increased and cost by
retailer over them has reduced. This shows the importance of retaining the customer

Customer pyramid: The life time value of the customer provides the details about the customer
profitability in general. All customers who come to the retail store will not purchase equally. In
that case, retailer wants to know the classification of customers on account of their importance to
the retail store. In the retail world, this type of classification is called 80-20 rule

“80% of the sales of the retail store come from the 20 % of customers”

Thus retailer should identify who these entire customers are

The top 20 % account for 80% of the sales of the retail shop. They are the most profitable
customers of the retail organization.

RFM analysis (Recency, Frequency and Monetary analysis): The RFM analysis of customer
data helps the retailers to identify their target customers. The data helps to identify how recently
customers came to the store, how many times they come to the store and what is the monetary
value to the retailer. The following table shows a model RFM analysis:

According to the table, recency of the customer varies between four components: 0-2 months, 3-
4 months, 5-6 months and over 6 months, frequency varies between 1 to 6 times and monetary
benefits are categorized into below Rs 500 and Rs 500 and above. If the retailer would like to
know how many customers who visited a retail store 5 to 6 times in the last four months
purchased more than Rs 500, then it is 6%. This means only 8% of the total customer database
visited the retail store 5 to 6 times in last four months and purchased more than Rs 500. On the
basis of this information, retailers can develop the communication programs.

(b) . Manufacturer brand: These brands are also called national brands. These products are
designed, produced and marketed by the manufacturer. Retailers organize their categories around
these brands. For example, the majority of Big Bazaar and Bangalore Central comes from
Madhura Garments brands Peter England, Van Heusen, and Louis Philippe and Aravind Mills
brands. These brands provide an image to the store. For example, customers walk into the
Shoppers Stop thinking that they store luxury brands. Though manufacturer’s brand offers the
quick sales to the retail store, their margin is very less compared to private labels. Manufacturer
brand also helps in building customer loyalty.

. Private labels: These are also called store brands. These products are developed and marketed
by the retailers. Retailers assess the customer needs and list out the products required. They
request a vendor to produce the merchandise. Retailer will take the title of the product and take
the responsibility of promoting it. Private labels offer better margins to a retailer. Therefore more
number of retailers are selling the private labels
Basic ingredients of private labels are

1. It must be a unit package: It is difficult to assign a private label character to say, rice sold loose
from a 100 kg bag. Even though it may enhance consumer loyalty for whatever

reason, it does not qualify as a private label product.

2. Relabeling: The unit pack must bear only the brand name of the particular store or any other
party the store may choose for its private label programme.

Private labels will enhance the category profitability; increase the negotiation power of the
retailer and better value creates better consumer loyalty. All retailers cannot go for the private
labeling. Private labels can be introduced if and only if

a. The consumer is not getting the tangible value.

b. The retailer is not making enough returns from the sale of the branded goods.
Emerging issues in private labeling:
1. The private label strategy is effective and profitable.
2. The retailer must understand the price, quality and willingness to pay.
3. The retailer must have a sufficiently large base of loyal customers in the store before
introducing the private label.
4. The focus must be on consumer need and not any private agenda of the retailers
5. There must be stringent system for the private label production. Quality control is a must since
there is no else to blame.
6. Private label must work to fill- in gaps in the category and not target the brand leader
7. Smart manufacturers may take a private label initiative of the retailer seriously and avoid value
gaps in the categories as an impediment to growing private labels.


Question 2:(a) Write a short note on margin and credit offered to retailers.
(b) Discuss the significance on vendor rating, selection and evaluation.

Answer: (a) Margin and Credit

Credit to retailer: Competition in the retail world made channel members come out with value
added services. Channel members started offering credit to retailers. The credit offered varies in
a. Type of products offered: Credit period varies from product to product. A fast moving
consumer goods company provides 15 to 21 days credit and other product suppliers offer up to 45

b. Nature of suppliers’ industry: Credit period in high value merchandise category is almost stable
while in the fast moving consumer goods industry it is subject to competition

c. Amount of business: Retailer credit either increases or decreases on the basis of volume he or
she purchases. If retailer purchases high volume merchandise without demanding for direct
supply he or she will enjoy higher credit period.

d. Type of channel used: As we discussed in the above models, types of channel vary with the
amount of business done by a retailer. Retailers’ credit period will be less if there is direct supply
from manufacturer or vendor to him. The credit period is more if retailer gets it from distributors.
For example, a distributor gives 45 days of credit while in direct supply manufacturer/vendor
gives only 15 days credit. The decrease in the credit period is due to increase in the replenishment
cycle and inventory turnover rate.

Margin: Trade margin is defined as the difference between actual price realized on goods
purchased for resale and the price that would have to be paid by the distributor to replace the
good at the time it was sold. Margin will be higher for volume buyers and direct buyers whereas
it is low for small buyers. Add to the margin supplier offers trade discounts to retailer.

(b) Vendor rating and selection

Vendor selection will be based on the set standards by the retail buyer. Some of the standards are:

These are a few criteria. The buyer may put some more criteria on the nature of buying. The
supplier score against the weightages will be considered and whoever gets the best score will be
Vendor relationship

Retailer – supplier development stages

(Source: Rosemary, Retail product management.)

Retail buyers and vendors in modern retail trade are concentrating on having a long term
relationship with each other. The retail buyer selects the vendor thinking for only one transaction.
The better service by the vendor makes the retailer to ask him for repeated transactions.
Continuous efficient and effective supply ensures a long term relationship and transactions will
become routine. The confidence of vendor and retailer will be high at this stage. They carry this
confidence to collaborate their systems and knowhow. Further transactions ensure buyers provide
the franchising to retailers. If the performance at the franchising stage is encouraging, retail
buyers integrate the vendor business and control the ownership.

Maintaining the strategic partnership: Vendor and retail buyer strategic partnership is based
on the following criteria:

a. Trust: It is a belief of vendor or retailer that he or she will fulfill the pre agreed conditions.
b. Open communication: There should be honest and open communication between vendor and
buyer. This will be a win- win situation for both buyers and suppliers.
c. Common goals: Vendors and retail buyers should have common goals. This will help them to
deliver the things according to a plan.

Factors affecting the relationship between retailers and their suppliers

1. Sharing the target customer and brand information: Both retail buyers and vendors should
share the information regarding target customers and brand. Refusal of any one of it will strain
the relationship.

2. Market information: No sharing of market related information collected by either party will
affect the relationship

3. Cooperation and coordination in marketing activities: Retail buyer accepts suppliers

involved in marketing activities. Retail buyers expect their suppliers to perform the role just like
Intel does for computer manufacturers.

4. Business commitment

a. Forward planning: Retailer and buyer should agree for forecast data collected by both parties.
On consensus they should develop their future planning

b. Store space: Retailer and vendor both agree in the negotiation stage about the placing of a
product in a retail store. If either party does not adhere to it, it will result in souring of the

c. Product development: Non cooperation of retailer or vendor for their new product will
terminate the relationship.

5. Quality management: Retail buyers and vendors not adhering to quality requirements in the
negotiation process will reduce the trust among them

6. Functional and retailer integration: Increasing buying power of retailer is also enhancing his
forward and backward integration. This is a contentious issue between buyer and seller.

Vendor evaluation: Retail buyer would like to know how his or her vendors are performing.
The evaluation process helps in developing vendor strategy and sourcing decisions. If the
performance of the vendor is not satisfactory he will be dropped from the vendor list. There are
several techniques to discuss the vendor analysis. We will study one of them here.

Multiple attribute method:

A method for evaluating vendors using a weighted average score for each vendor

Criteria Weightages Supplier Supplier Supplier Supplier

1. Ability to refill the0.2
2. Mark up is adequate 0.1
3. Customers ask for0.1
the line
4. change in supplier0.2
5. supplier0.2
6. vendor brand0.2
7. Supplier’s total score 1.0

In case of multiple attribute method, retail buyer lists different attributes on which merchandise
performance of vendors are analyzed. These attributes are weighted on the basis of industry data
or pre agreed standards between retail buyer and vendor. Vendors are rated against each
weightage. The total scores of the vendor are calculated. A vendor who has higher weightages is


Question 3: Identify five retail units near your place or in the surrounding areas. Highlight
their strengths and weaknesses in terms of merchandise availability and number of support
staff or assistants.

Answer: After having a careful observation of the below mentioned retail stores, strengths and
weaknesses of these stores can be stated as follows:

Name Of The Strengths and weaknesses

Retail Unit
BIG APPLE 1. Big apple has a good collection of grocery and food items.
2. It has stationery items and clothing also but very few and selected pieces.
3. There is a permanent problem of merchandise stock out in the store.
4. Goods are properly displayed in racks but a lot of dust is there on the
products and on most of the racks there are no price/offer stickers placed.
5. No sufficient customer helping staff is present
6. F&V section is much cluttered in the evening.

RELIGARE 1. A good health care store with ample collection of Prescription drugs, OTC
WELLNESS drugs, Diagnostic Kits, Fast Moving Health and Consumer Goods and
Pathology Collection Centre as well.
2. Sufficient and well trained staff to help customers.
3. Good coordination with their supply chain/warehouse to replenish the
finished stock.
4. Medicines of some specific brands are permanently not available.

VISHAL 1.A large store having almost every thing of daily need, i. e. food, grocery,
MEGA apparel, stationery, toys, household goods, home furnishing, electronics, mobile
MART & accessories etc.
2. Large number of items but 10-25% items will always be out of stock.
3. Proper, neat and clean display of goods.
4. Customer supporting staff present but not having in depth knowledge of the
product and store as well.
5. Some items like in stationery, toys, electronics and household, except
branded products, are not matching quality standards.
6. Billing process is very troublesome, offers and discounts are not calculated in
bill properly.
7. Exchange process is also not customer friendly.

BIG 1. Better understanding of customer, helping the company to serve them better.
BAZAAR 2. Vast range of products under one roof helping in attracting customer and
their family to shop together.
3. Sufficient staff for customer support while purchasing, but sometimes not
having clear knowledge about product and location.
4. Billing process is irritating especially in weekends; we will have to wait for a
long time in queue.
5. Well placed and categorized merchandise, helping customer to pick the
required items with ease.
SPENCER’S 1. A large format store, having vast range of products.
2. Sufficient stock of the products.
3. Good customer service but a bit shortage of customer supporting staff, lack of
product knowledge, doesn’t seem to be energetic.
4. Nice placement of goods, visible and easy to search.
5. F & V section needs more and attention of the management.

(2 credits)
Set 1
Marks 30

Question 1: Discuss the importance of “Store Design” in a retail scenario. List out the
objectives that are to be taken into consideration by retailers in designing a store.

Answer: Store Design: As the store space is fixed, the optimum use of available store space is
critical factor in successful retailing. To achieve this it requires balancing the effects of the
overall store design and atmosphere with the more direct impact of product layout and
merchandising offered within the store.

Store layout and design must reflect local requirements, designed to emphasize the impact of an
open, bright store. However, optimizing the available space and different fixtures would be
necessary in a store for retailer to maximize the product range and to offer additional services.

Major store design objectives: Every retail store has to be designed in such a way that it reflects
the store image with a good and appealing store atmosphere. Proper planning should be taken in
designing store design so that it promotes the store objectives. External store design attracts the
customer to drive into the store and a good internal store design converts the footfalls into actual
purchases. Now let us now consider the Store design objectives.

The following are some of the major store design objectives.

1. Consistent with retailer’s image, positioning and strategy: Every retailer has his own
objective/ strategy based on the product line he deals with, targeted customer base or
specialization of the services offered. A retail store design should be in such a way it promotes
the store objective by creating a positive image of the retail store in customers mind.

2. Positive influence on Customers purchasing behavior: The design of a retail store should be
designed in such a way that it facilitates the customer for easy accessibility within the store. The
store design should be customer friendly so that he spends much time in navigating through the
store with ease and comfort ability in exploring the different merchandise/sections with out
feeling bored or confused. Proper care should be taken in designing the interiors so that the
ambience, store atmospherics, the aroma, music etc within the store has a positive psychological
impact on customers.

3. Safety & security: The store design should take care of all the safety and security measures
within and outside the store. (Detailed description of safety and security measures is given in
further units)

4. Cost effective – space productivity: Since the store space is limited and expensive, it has to
be so designed that maximum utilization of store space takes place. Optimization of the store
space by creatively using the selling space to create an appealing store image in customers mind
is more important. A good store design should facilitate the traffic of the customers within and
out side the store, good parking facilities, proper basic amenities for staff and customer such as
rest rooms, trail rooms etc. are to be taken care while designing the store.

5. Flexible and easily accessible to customers: A good retail store design should be supported
by the store positioning. There is no matter in having a mall or a multiplex in a remote area which
is not easily reachable. So It should be easily accessible with good connection to prime areas of
the city/town and it should have lengthy working hours
(i.e. 8 am to 8 pm). As most of the customers shop in week ends it should be opened all the 7
days a week with extended working hours to facilitate customer shopping.


Question 2: Briefly discuss the classification of retail stores that are operational in India, giving one
example of each.

Answer: Classification of stores: The retail models can primarily be classified into store based
and non-store based retailer. The normal brick and motor stores, is the traditional store based set
up. Where as the non store based retailers contain the direct selling, telemarketing, automatic
vending, mail order retailing and internet retailing. The store based retailer can further be
classified on the basis of the merchandise they offer and manner of their ownership.

The following diagram illustrates the basic classification of retail formats.

Classification of retail stores based on owner ship:

· Independent retailer: He is one who owes and operates only one retail out let. It is generally
owed by a single person using the help of family members and tends to pass from generations to
generations. In India most of the retail set up is of this type. Ex: local baniya / kirana shop.

· A chain retailer: It is a corporate retail chain where two or more outlets come under common
owner ship. Theses retail stores operated under single ownership and have similarities in the
merchandise offered, the ambience, advertising and promotions etc. Ex: Food world, Globus,
West side etc

· Franchising: A franchise is a contractual agreement between the franchiser and the franchisee,
which allows the franchisee to carry on the trade under an established name/ franchiser name in
return for a fee or compensation. This type can be further classified as under-

(a) A product or a trade mark franchise: Where a franchisee sells the products/ services under
franchiser name. Ex: Archie’s

(b) A business format franchise: In this the business is carried under the name of the franchisee
name by the individual.

In both the cases retail business is carried on with franchise of a single or multiple out lets within
a region or country. Franchising gives a chance of expanding the operations of a retail business.

· Leased departments: This is also known as shop-in-shop , where a section of a department

store in a retail store is leased/rented to an outside party .In this case the stores display a limited
number of products in the anchor stores to catch the potential customer base. Their main aim is to
be available to the consumers near to his work place or home.

· Consumer co-operatives: A consumer co-operative is a retail institution owned by its member

customers forming a group. Ex: Apna bazaar, Sahakari bhandars etc

The organized retail stores can be classified in to the following categories based on the
product/services (merchandise) they offer:

· Convenient stores: These are relatively small stores located near to residential areas which
operate for long hours, all the 7 days a week.
Ex: petrol bunks like HP speed mart, local groceries stores etc.

· Supermarkets: These retail establishments, which are primarily involved in providing food to
consumers but have increasingly ventured into other product areas in recent years. Ex. Nillgiris,
more etc

· Hypermarkets: These are huge retail stores occupying an area ranging from 80,000 to 2,
20,000 sq feet. It often has both food and non food items available within the stores. This concept
is pioneered by Carrefour in France.

· Specialty stores: This type of retail stores typically concentrates their efforts on selling a single
type or very limited range of merchandise. Examples: Clothing stores, musical instrument stores,
party supply stores.

· Department stores: These establishments are comprised of a series of departments, each of

which specializes in selling a particular grouping of products. Example: A retail store having
different departments selling food item, groceries, soaps and detergents, house hold utensil etc.
· Discount stores: This type of retail outlets offer consumers a trade-off: ie .lower prices
(typically on a broad range of products) but for lower levels of service. Indeed, many discount
stores operate under a basic "self-service" philosophy.

· Category killer: A large retail chain store that is dominant in its product category. This type of
store generally offers an extensive selection of merchandise at prices so low that smaller stores
cannot compete. It is Also Known As: Big Box Store. Examples: Best Buy is an example of an
electronics category killer.

· Catalogue showrooms: Catalogue retailers usually specialized in hard goods, such as house
ware, jewelry, and consumer electronics. A consumer will walk in to the stores and the sales man
shows the catalogue and explains the features of the product and takes the order by noting its
code mentioned in the catalogue and delivers the product at a later time. Ex: Argos, tanishq

Mail-order businesses and other non store retailing establishments: Some retail
establishments subsist entirely on mail order, forsaking traditional stores, while other companies
maintain operations on both levels. In addition, this category includes sales made to end
consumers through telemarketing, vending machines, the World Wide Web, and other non store

· Direct selling: In this type of retailing there is a personal contact between a sales person and a
consumer away from a retail store. This channel of retailing particularly suits the products which
need demonstration.
Ex. Amway.

· Tele marketing: Selling the products/services through marketing them by tele phone is known
as telemarketing. Products which can be brought with out seeing can be purchased in this manner.
Ex: credit cards, club membership cards etc.

· Television shopping: The products/ services are advertised on the television with all details like
features of the product, price, guarantee etc. Products or services of customer’s choice can be
booked using the telephone numbers provided with the advertisement shown and purchases can
be made. The products/services of customer choice are home delivered. Ex: Asian sky shop.

· Online retailing or e-tailing: Online retailing is one which consists of electronic transactions in
which goods or services are purchased by ordering on internet. Ex. E-bay

· Automatic vending: The sale of products through a machine with no personal contact between
the buyer and seller is called automatic vending. Ex.ATM Machine.

· Airport retailing: It is an emerging sector. Retail is becoming increasingly important, focusing

on retail and food and beverage strategies up fort, so as to reshape airports into exciting, energize
business and retail/entertainment centers – as well as transportation hubs.

· Cash and carry: It means customers order picking, pay in cash and carry the merchandise
away. It is a wholesale format aiming at small business man and retailers. Ex: Metro.

Different types of Retail verticals operating in INDIA.

Different verticals of retail

Food retailers: There are a large variety of retailers operating in the food retailing sector.
Traditional types of retailers, who operate small single outlet businesses mainly using family
labor, dominate this sector. Modern food retailers now consist of supermarkets, food chains etc.
The strong competitive strengths that traditional retailers possess include low operating costs and
overheads, low margins, proximity to customers, long opening hours, and additional services to
customers (such as home delivery).

Ex: Haldiram eating joints, KFC, café coffee day etc.

Health and beauty products retailers: With growth in incomes, Indians have been spending
more on health and beauty products. As in the case of other retailing sectors, small single-outlet
retailers also dominate sales of health and beauty products. However, in recent years, a couple of
retail chains specializing in health & beauty products have sprung up. At present, they account for
only a tiny share of sales of these products. However, as Indians spend more on such products in
future; their business will undoubtedly expand substantially. There is also scope for entry of more
such chains.

Ex: Health and glow, VLCC, Manipal Care & Cure etc

Clothing and footwear retailers: Numerous clothing and footwear shops are to be found in
Indian cities and towns, especially in shopping centers and markets. These are a mix of traditional
and modern stores. Traditional outlets are small and cramped with little emphasis on alluring
displays. They basically stock a limited range of cheap and popular items. In contrast, modern
clothing and footwear stores are spacious with sample products attractively displayed in
windows, sometimes with mannequins.

Ex: Cluster of shops in Chandini chowk, Dharmathala (new market) in Kolkata, west side outlets

Home furniture and household goods retailers: The home furniture and household goods
retailing sector in India is dominated by small retailers. Despite the large size of this market, very
few modern and large retailers have established specialized stores for these products. However,
there is considerable potential for the entry or expansion of specialized retail chains and it is
likely that this will happen during the next few years. Ex: Durian furniture, furniture bazaar etc.

Durable goods retailers: The entry of a large number of foreign consumer durable companies
into the Indian market during the 1990s after the government liberalized its foreign investment
and import policies transformed this sector dramatically. A much larger variety of consumer
electronic items and household appliances became available to the Indian customer. Competition
among companies to sell their brands provided a strong impetus to the growth for retailers
operating in this sector. Ex: e-Zone, Girijas, Pai showrooms etc

Leisure and personal goods retailers: Rising household incomes due to economic growth
spurred consumer expenditure on leisure and personal goods in India. There are specialized
retailers for each category of products in this sector. A few retail chains also emerged particularly
in the retailing of books and music products. Another key feature of this sector is the popularity
of franchising arrangements between established manufacturers and retailers. Ex: planet M,
Higgis bottams etc
Question 3: Suppose you are appointed as an assistant manager for a branch of Big Bazaar,
whose target customer segment is the high middle income group. Delay of billing, poor
parking space, and no children’s play area are some of the problems faced by the retail
branch. How will you overcome these issues? List out at least five strategies you will adopt
to increase your customer service.

Answer: Delay In Billing is most prominent problem in these types of large format retail stores.
Customers have to wait for a long time for the billing procedure. After all billing is not free from
errors, many times schemes/discounts are not given, and promotions are not applied in the bill.
These things make the customer irritated and angry.
Unavailability of proper parking space and play ground are also causing problems for the
customer. These problems are continuously being faced by customers, resulting in more number
of unsatisfied customers. To retain these customers and to increase in our customer data base I
have planned to implement these strategies in the store.

1. Billing problem is the most common and prominent problem to be resolved. Normally in week
days there are limited customers, but on weekends there is a lot of rush in the store. To manage
this rush, especially on weekends, some extra cash-tills will be started, other staff such as CSA’s,
or back office personnel will be trained for billing purpose for weekends only. In back office
there is less work on weekends; therefore back office work will not be affected.

2. Many people have to wait for billing for a long time, whether they have selected a few items.
For these customers one or two express billing counters will be installed. This will reduce the
rush in a very short time.

3. Billing takes a long time because many times barcodes/price tags are missing and cashier do
not know about the items, in this case either customer have to leave that article or wait for the
barcode/price tag to come. It will be made sure that price tag is attached with each and every
article and not even a single item is displayed without barcode or price tags. It is necessary to
feed the schemes and promotions in the system because many times billing personnel is not aware
of the billing procedure/discount promotion and this results in wrong billing causing customer to
wait and run here and there get the billing done correctly.

4. Parking has always been a problem for the customers, problem is not of space, the basic
problem is wrong way of parking, a trained staff will be kept there to park the vehicle in proper
manner to fully utilize the available space. If this space is not sufficient there will be some
arrangement done for multilevel parking.

5. Children’s play area is not available in the store premises, lawns outside the store can be used
as play area. Some play instruments could be installed there to attract the children. A small space
in the store can also be used as activity centre to attract the children. Any activity like painting,
singing, sketching can be preformed there fro the children. It will lessen the impact of
unavailability of children’s play area.

6. Some special arrangements for the festive session or holiday’s can also be done to satisfy the
kids as well as their parents. *************

(2 credits)
Set 2
Marks 30

Question 1: Explain the importance of promotion mix in a retail store. Which one of the
two - sales promotion or personal selling - has a greater effect in boosting retail
sales and why? Support your answer with some real time examples.

Answer: How ever strong the strategy of a retail store is, promotion mix plays an important role
in the profits of the organization. Promotion is basically a communication process. It is broadly
defined as any communication by a retailer that informs, persuades, and/or reminds the target
market about any aspect of that firm.

Promotion is an “exercise in information, persuasion and influence” Accordingly; promotion has

come to mean the overall co ordination of advertising, selling, publicity and public relations.

Promotion Mix: A promotion mix involves three main activities: personnel selling, advertising
and sales promotion.

Approaches to promotion: The objective of promotions is to catch the potential customer and
pass through a series of stages that lead to purchase the product/services. One concept in this
perspective is AIDA concept:

i.e.; A – to create Attention

I – is Interest and

D – Is desire to make a purchase and finally leading to

A – Action (make the purchase). These are the logical stages through which promotional
methods act.

Different retailers use different promotional strategies to maximize their business. The
promotional strategy of different stores may be different. The following are the steps involved in
planning a promotion strategy:

1) Goals should be specific and measurable terms. Positive Word Of mouth (WOM) should be
recognized as an important long-term goal.

2) An overall promotion budget is set based on how much a retailer can afford for incremental,
competitive parity, etc.

3) The promotional mix is outlined, based on the firm’s budget, the type of retailing involved, the
coverage of the media, and the hierarchy of effects.
4) The promotional mix is enacted. Included are decisions involving specific media, promotional
timing, message content, sales force composition, particular sales-promotion tools, and the
responsibility for co-ordination.

5) The retailer systematically reviews and adjusts the promotional plan, consistent with its preset

Sales Promotion and Personal Selling: Personal selling and sales promotions comprises of two
effective tools in integrated marketing communication. Personal selling involves a two-way
communication between a seller and a proposed buyer. Careful cultivation of the sales force is
needed for a result-oriented personal selling program. This includes efficient supervision,
evaluation and compensation of the salespersons.

Personal selling is a promotional method in which one party (e.g., salesperson) uses skills and
techniques for building personal relationships with another party (e.g., those involved in a
purchase decision that results in both parties obtaining value). In most cases the “value” for the
salesperson is realized through the financial rewards of the sale while the customer’s “value” is
realized from the benefits obtained by consuming the product.

Marketing communication activities in which a short-term incentive motivates a purchase.

Advertising, personal selling and public relations are not included in personal selling.

Where as Sales promotion is a mass communication technique that offers short-term incentives to
encourage purchase of a product.

Sales promotion consists of promotional activities other than advertising, personal selling, and
publicity, which stimulate purchases. It normally involves a direct inducement (such as money,
prizes, extra products, gifts, or specialized information) that provides extra incentives to buy now
or buy more.

Sales promotion activities occur simultaneously with and utilize advertising and publicity.

Examples of Sales Promotion

· Displays
· Fashion shows
· Coupons
· Exhibits
· Free samples
· Novelty items
· Trade shows
· Demonstrations


Question 2: Explain the importance of retail pricing and discuss different retail pricing
strategies, giving one example of each.
Answer: Retail pricing is a key determinant factor which determines the business performance.
Though retailers realize this fact, many off them fail in strong pricing strategies due to several
reasons. Pricing decisions are fragmented and they are often determined through an undisciplined
mix of generic margin assumptions, based on customer complaints and suggestions and some
times to compete with competitors. Due to these reasons profits come down. So strong pricing
strategies are required to be adapted by the retailer to promote his business.

Key Retail Price Objectives:

To maximize long-and short-term profit

To increase sales volume (quantity)

To increase sales value

To increase market share and to obtain a target rate of return on investment (ROI)

To maintain a proper image of the store and products

To discourage customers from becoming overly price-conscious

To be consistent with setting prices

To increase customer traffic during dull periods

To clear out seasonal merchandise

To match competitors’ prices without starting a price war

To be regarded as the price leader in the market area by consumers

To provide ample customer service

To minimize the chance of government actions relating to price advertising and anti-trust matters

To discourage potential competitors from entering the marketplace

To create and maintain customer interest

To encourage repeat business

Based on the desire to achieve all or a set of such objectives, the retailer evolves various pricing
policies, strategies, and short-term tactical initiatives


Question 3: Explain the terms category management, supply chain management and
inventory management. Explain the relationship between these three concepts
in a retail scenario with an example.
Answer: Category Management: The assortment of items which fall in the same category (e.g.:
break fast cereals, Health drinks) in a retail store are referred as Category. A Category may be
defined as “A distinct, manageable group of products/services that consumers perceive to be
interrelated and/or substitutable in meeting a consumer need”. The arrangement of merchandise
by category facilitates the customers search for substitutes.

Category Management may be defined as the process of managing a retail business with the
objective to maximize the sales and thus the profits of a category is called as Category

The industry standard model for Category Management is the 8-step process, or 8-step cycle
developed by the Partnering Group.

1. Define Category.

2. Assess Role of Category.

3. Assess Performance.

4. Set Objectives & Targets

5. Devise Strategies

6. Set Category tactics

7. Implementation

8. Review.

The eight steps are:

1) Define the Category: It is the first step in the process. This initial step has a significant impact
on the subsequent steps. .A category definition should be based on what a customer buy instead
of how a retailer buy. (ie what products are included/excluded). Based on the product lines dealt
within the stores .

2) Define the role of the category within the retailer: Each category has specific demand;
based on it the role of that particular category can be determined. The category role determines
the priority and the importance of the various categories in the overall business. Traditionally four
categories have been identified. They are:
a) Destination category: This refers to the main product offering of the retail store. Ex:
Departmental store-apparel, supermarket-Fresh groceries.

b) Routine category: The products that customers buy as a routine or as a habit. Ex. Soaps etc

c) Seasonal category: These include products which are not very often purchased, but purchased
when they are available.
Ex. Mangoes in summer, sweaters in winters, umbrellas in rainy seasons.

d) Convenience category: the products the consumer finds convenient to buy from a
neighborhood retailer. Ex. Milk, eggs etc.

3. Category Assessment: In this step, the current performance of the category is evaluated with
respect to the turn over, profits and return on asses in the category. It involves in the assessment
of the consumers, the market, the retailer and the supplier.

4. Category performance measures: The development of the category performance measures

involves the setting of measurable targets in terms of sales, margins and gross margin returns on
investment (GMROI)

5. Category strategies: Devise an overall Strategy: Once the objectives for different categories
are set, they should fall under the strategy of the store. The purpose of this step is to help the
retailer and supplier to develop strategies that capitalize on category opportunities through
creative and efficient use of the resources that are available to the category.Category strategies
can be aimed at building traffic or transactions, generating profit, enhancing the image of creating

6. Category tactics: Devise specific tactics, and if some promotional activities are to be set up to
push the sales they are to be planned at this stage.

7. Category plan Implementation: objectives set in the previous stages are to be implemented in
this stage. Accurate implementation is a key to the success of the category Management.

8. Category review: This is the final step in the process where the review of the progress and
actual achievement as against the targets set for the category. Review aids at taking of decisions
at the right point of time.The eighth step are one of review which takes us back to step 1.

Supply Chain Management: Supply Chain Management (SCM) includes planning,

implementing and controlling the efficient, cost-effective flow and storage of raw materials, in-
process inventory, finished goods and related purpose of conforming to customer requirements. A
Supply chain is a network of facilities that perform the functions of procurement of materials,
transformation of materials to intermediate and finished products, and distribution of finished
products to customers.

The Supply Chain council defined Supply Chain as “The Supply Chain- a term increasingly used
by logistic professionals- en composes every effort in producing and delivering a final product,
from the supplier’s to the consumer’s consumer. Four basic processes- plan, source, make,
deliver- broadly defined these efforts which include managing supply and demand , sourcing of
raw materials and parts, manufacturing and assembly, warehousing and inventory tracking , order
management, distribution across the channels and delivery to the customers.” To conclude Supply
Chain Management is an integrating philosophy to manage the total flow of a distribution channel
from suppliers to the ultimate customers.

The supply chain activity therefore constitutes complex objects, as it involves decision-makers
from many different companies, some times placed in very different geographical locations. Yet
the decisions they make are mutually dependent upon each other. Hence, there is a need for an
information system capable of linking together the different members of the chain so that there is
an open communication between them. In such cases the modern software applications are of
great use.

Green supply chain: Green supply chain involves the management of materials and resources
from Suppliers to manufacturers, service providers to customers and back while protecting and
conserving the natural environment.

A green supply chain involves the implementation of appropriate strategies to reconcile the
supply chain to environmental protection and conservation on a Sustainable basis. Waste
minimization and elimination of inessential non-value added activities is one of the most
important strategies towards a green supply chain.

As supply chain management involves the carrying of raw materials and inventory, now let us
throw light on the impact of excess or fewer inventories carried which is popularly known as Bull
Whip effect.

Inventory Management: Inventory management practices play a crucial role in determining the
operational efficiency of the enterprise.

A key challenge for any retailer is inventory management: too much inventory means
unnecessary cost; too little increases the risk of losing sales. Even with frequent deliveries, daily
information updates may not be in time to optimize inventory management. As with any retail
process, if it is to work well it must be successfully implemented by the people working in the
shops – not by head office.

Retail software with an inventory management system eliminates the guesswork from running
your retail business.

Some inventory management systems can be set up to automatically notify you when it’s time to
order more inventory, such as when stock falls below a pre-determined level Many retail software
packages will even generate purchase orders, further streamlining your inventory management. In
addition to increasing your sales, retail software with an inventory management system can
drastically reduce your operating costs by reducing the time spent manually counting inventory
and creating purchase orders.

An inventory management system tracks which items are selling and which aren’t. This is a great
way to identify your hottest and coldest items so you can make better business decisions. By
identifying your slowest moving items, you can adjust their placement, pricing, or other issues
sooner. You can also see which items are frequently purchased in pairs, so you can group them
accordingly in the store.

Poor inventory management practices can undermine a distributor’s competitiveness and result
· Increased inventory carrying costs and hence a reduction in ROI

· Lost investment buying opportunities

· Stocks outs and lost revenues again leading to a reduction in ROI

Retail Inventory management: RIM aims at valuing the inventory at their costs.

The main objectives are RIM is:

· To maintain a perpetual or book inventory in terms monetary value

· To maintain records that make it possible to determine the cost value of the inventory at any
time without taking a physical inventory

Retailers generally think of their inventory at retail price levels rather than at cost. They take their
initial mark ups, additional markups, markdowns and so forth as percentage of retail.

Steps in RIM:

· Calculate total goods handled at cost and retail:

(a) Record beginning inventory at cost and at retail

(b) Calculate net purchases

(c) Calculate net additional markups

(d) Record transportation expenses

(e) Calculate net transfers

(f) The sum is the goods handled.

(g) Calculate retail reductions


(2 credits)
Set 1
Marks 30

Question 1: a. Analyze the need for IT in the retail sector.

b. Write a note on e-fulfillment.

Answer: The retail sector in India is witnessing a huge revamping exercise as traditional
markets make way for new formats such as departmental stores, hypermarkets, supermarkets and
specialty stores. Western-style malls have begun appearing in metros and second-rung cities alike
introducing the Indian consumer to a shopping experience like never before. India’s vast middle
class and its almost untapped retail industry are key attractions for global retail giants wanting to
enter newer markets.

The organized retail sector is expected to grow stronger than GDP growth in the next five years
driven by changing lifestyles, strong income growth and favorable demographic patterns, a
KPMG report titled ‘Consumer Markets in India: the next big thing?’ said. The structure of
retailing is developing rapidly with shopping malls becoming increasingly common in large
cities, and development plans being projected at 150 new shopping malls by 2008.

The retail industry faces challenges similar to those in other industries. What’s different is that
they combine together to put a great deal of pressure on retailers in today’s modern economy.
With a fast-paced society and faster-paced technological changes, customers want new, different,
and customized goods now, and they’re not willing to wait.

At the same time, pressures on the backend are mounting, too. Larger retailers, with their
efficiencies of scale and international scope, are pushing prices down and slashing margins. To
compete, you have to think like a Wal-Mart, even if you are a medium-sized retailer. Technology
offers your company a way to apply modern IT techniques on a global scale, whether through
bricks-and-mortar stores, or over the Internet.

Decentralized Operations: As a manager, ideally you’d like to be able to walk down the hall
from your office and into any one of your stores or warehouses. In reality, that’s not possible.
You have to hire the right people, staff your other locations, and rely on them to do the job right.
Technology has the advantage of being able to bring you and your employees together whether
they’re located in Minsk or Montana. IT retail solutions provide you with a centralized solution
for your decentralized business. Data flows from your stores and warehouses to your head office
every night, so you have up-to-date sales and inventory information. You can make pricing
changes across the board, or implement a new sales campaign to reflect the success or failure of
one of your major products at one store or all of them.

Staff Turnover: There’s a higher rate of staff turnover in the retail industry, compared to other
industries. This varies by country. European countries, for example, tend to retain store-level
personnel more successfully. North America has a turnover rate of 200-300% of front end
employees in certain segments.

What does this mean for your business? While you can implement and pursue staff retention
programs and it makes good sense to do so you’re going to have new employees coming through
your doors on a regular basis. Getting them trained on your systems rapidly and cost-effectively is
critical so that they can become productive members of your team as soon as possible.

Shrinkage: Consider these sobering statistics on shrinkage (also known as inventory shrink):

For every dollar lost to shrinkage, you can lose $11 to $15 in profits. You’ll only detect 3% of the
shrinkage when it happens, the other 97% you’ll discover later. For every theft you detect, 46
others will go undetected. In 2005, total inventory shrinkage cost U.S. retailers $37.3-billion US.
Administrative error is responsible for 14.6% of shrinkage, and employee theft is responsible for
47.9% of shrinkage (National Retail Security Survey, 2001).

Improve sales and reduce costs within your enterprise and beyond: A retail solution can help
take your business to the Web by providing superior scalability and support for the latest e-
business applications. By sharing the customer insights you gain online throughout your entire
enterprise, you can increase transactional volumes. Many manufacturers and retailers maximize
profits by streamlining their supply chain to deliver the right products at the right time. These
solutions can help can help you and your suppliers predict customer buying patterns and
inventory turns more accurately.

Those integrated lines of communication can realize a higher return on investment through faster
time to market and better customer service. With so many transactions taking place on a daily
basis, it’s critical that your systems are up and running when you need them most.

These Solutions provide the complete e-Business infrastructure your retail company needs for
customer-centric business in the new marketplace

· Enterprise Resource planning (IT)

· Customer Relationship management (CRM)
· Supply chain management (SCM)
· Front-office management
· Order and product configuration
· E-Commerce
· Executive decision Support
· Field service management
· Workflow management
· Business Process management

Proposed e-Business Suite System comprises of IT, CRM, web integration of business and other
e-Business infrastructure tools that helps you manage and automate an entire enterprise and its
business processes both internal and external. It is a set of collaborative tools that integrate the
enterprise with its clients, vendors and employees for smooth and efficient business operations

This System helps you to:

· Compress Time Cycles
· Streamline and Speed-up Customer Order Processing
· Enhance control over business operations
· Access Real time Information
· Maintain up-to-date documentation all times
· Simplify Data Management
· Integrate your Supply chain management
· Cost Tracking
· Improve customer service and on-time delivery
· Compress manufacturing lead times
· Reduce WIP and finished goods inventories
· Increase throughput and profit

(b) E –Fulfilment: Definitions of e-Fulfilment are wide and varied and range from “core
physical delivery to the customer” to “warehouse, pick and pack and call centres”. The term
‘fulfilment’, as such, describes a horizontal tier of services from the beginning of a job through
delivery to distributors or end users. In other words, it refers to the challenges that take place after
the “Buy” button is clicked.

In the framework of e-Thematic, the following definition of e-Fulfilment is used:

“e-Fulfilment defines that part of e-Business which aims at efficiently and effectively integrating
a company’s back-office processes, activities and functions arising from order capture through to
final delivery to the customer.”

The e-Fulfilment process: E-Fulfilment refers to more than setting up an Internet-enabled front-
office. It entails the integration of the website with all the back-office processes, activities and
functions (marketing and sales, finance and logistics) that support the fulfilment of customer
orders.The following figure illustrates the back-office processes that take place after the “Buy”
button has been clicked.

e-Fulfilment process

The sequence of events is: order capture (web order) > stock availability check (e-warehousing)
and interface to finance house (e-billing) > order confirmation > manufacturing or procurement
(not studied by e-Thematic) > order release (picking/packing/shipping) and final delivery to the
customer. Most of these processes can be executed internally or externally.

Scope of e-Fulfilment: · The scope of e-Fulfilment includes companies with an online retailing
presence that are adapting e-Fulfilment applications (whether their business is old economy, new
economy or a mixture of those two), and software vendors providing e-Fulfilment applications.
Both the Business-to-Consumer (B2C) and Business-to-Business (B2B) areas will be addressed.
Regarding the integration of back-office activities, the focus of
e-Thematic will be on the operational level. Manufacturing and procurement are related to the
front-end of the supply chain and will thus not be studied by e-Thematic.


Question 2: Briefly explain the retail planning function.

Answer: The Meaning of Planning System

It deals with the entire supply-demand pattern of an item through all levels of the hierarchy.

2.3 Planning Functionality

The Planning System and Action Messaging

Action Messaging: Order tracking, with its simultaneous creation of action messages (AM), is
not a part of the planning system. This feature interlinks, in real-time, the requirements and the
quantities that could cover them, whenever a new requirement or replenishment order is created
or changed.
· If, for example, the user enters or changes a sales order, order tracking will instantly search for
an appropriate supply to cover the demand. This could be from inventory or an expected
replenishment order (such as a purchase or production order). When a supply source is found, a
link is created between the demand and the supply. If all of the demand cannot be covered, order
tracking will create an action message suggesting what the user could do to address the situation.

· AM are stored in a separate table. The user can retrieve and view them in the planning
worksheet by running the Get Action Messages batch job.

· AM offers a quick response but less comprehensive plan than the planning system.

Differentiating between planning and action messaging: At a quick glance, it may be difficult
to differentiate between planning and action messaging. Both features display their output in the
planning worksheet. The output suggested actions for the user to take is similar but the way this
output is produced differs.

· The planning system deals with the entire supply-demand pattern of an item through all levels of
the hierarchy, whereas order tracking only addresses the situation of the order that activated it.

· When balancing demand and supply, the planning system creates links in a user activated batch
mode, whereas order tracking creates the links automatically and on the fly whenever the user
enters a demand or a supply in the program (for example, a sales or purchase order).

Order tracking establishes links between demand and supply as data is entered, on a first-come
basis. This may lead to some disorder in priorities. For example, a sales order entered first but
with a due date next month may be linked to the supply in inventory, while the next sales order
due tomorrow may cause an action message to create a new purchase order to cover it.
The planning system, on the other hand, deals with all demand and supply orders for a particular
item, in prioritized order according to due date. It deletes all links that were created dynamically
and reestablishes them according to due date priority. When the planning system has run, it has
solved all imbalances between demand and supply. No action messages remain in the Action
Message Entry table, as they have been replaced by the suggestions in the planning worksheet.


Question 3: Mr. Prithvi is a retailer who has a chain of retail shops in and around the city.
His retail chains sell fast moving consumer goods, out of which most are perishable goods
like milk, bread, bakery products etc. He is interested in ERP and related technology, so as
to implement them in the retail chains. Advise him on the steps he needs to follow in this

Answer: Mr. Prithvi has a retail chain of fast moving consumer goods, mainly selling perishable
goods like milk, bread and bakery products. Because these are perishable goods and can’t be
stored for a long time, Inventory management will be the main priority. He should focus on
reducing inventory to the optimum level, to lessen the loss because of the product expiry. ERP
implementation will certainly help him in the business. As ERP is online running software, he
will be able to check the correct available quantity of the merchandise in the outlets as well as
DC/Warehouse. After having clear information about the inventory he will be able to inform
vendor accordingly to supply the product. He will be in a situation to transfer the stock from one
store another if any product is in ample quantity at one store and stock out at another store. He
will be able to track the availability of all the outlets at the same time and taking the action
Implementing ERP will definitely enhance his business but before implementing this technology
in his business he should follow these steps for the smooth change over and future convenience
and business growth.

Assign a project team: It consists of employees from sales, customer service, accounting,
purchasing, operations and senior management, each accountable for specific tasks like
developing a timeline, finalizing objectives, formulating training plans.

Examine current business processes: Have the team perform an analysis on which business
processes should be improved. To start the team discussion, consider questions such as: Are your
procedures up to date? Are there processes that could be automated? Do your sales force and
customer service personnel have real-time access to customer information? The team members
should also conduct interviews with key personnel to uncover additional areas of improvement

Set objectives: The objectives should be clearly defined prior to implementing the ERP solution.
ERP systems are massive and you won’t be able to implement every function. You need to define
the scope of implementation. Examples of objectives would include: Does the solution reduce
backlogs? Can the solution improve on-time deliveries?

Develop a project plan: The team should develop a project plan which includes previously
defined goals and objectives, timelines, training procedures, as well as individual team
responsibilities. The end result of the project plan should be a “to do” list for each project team

Review software capabilities: Intensive review of the software capabilities for the project team.
Train on every aspect of the ERP software to fully educate the team on capabilities and identify
gaps. Determine whether modifications are needed prior to employee training.

Identify manual processes: Evaluate which processes that are manual and should be automated
with the ERP system.

Develop standard operating procedures (SOPs): for every aspect of the business. These
procedures should be documented. The documents are modified as the SOP changes. This is a
huge task, but it is critical to the success of your implementation.
Examples of SOPs:
• How do you handle global price changes?
• What are the processes for inputting new customer records?
• How do you currently handle the paperwork on drop shipments?

Convert data: You can’t assume 100% of the data can be converted as there may be outdated
information in the system. Determine which information should be converted through an analysis
of current data.

Collect new data: Define the new data that needs to be collected. Identify the source documents
of the data. Create spreadsheets to collect and segment the data into logical tables (Most ERP
systems will have a utility to upload data from a spreadsheet to their database).

Pre-test the database: The project team should practice in the test database to confirm that all
information is accurate and working correctly. Use a full week of real transaction data to push
through the system to validate output. Run real life scenarios to test for data accuracy.
Occurring simultaneously with testing, make sure all necessary interfaces are designed and
integration issues are resolved to ensure the software works in concert with other systems.

Verify testing: Make sure the actual test mirrors the Standard Operating Procedures outlined in
step 2, and determine whether modifications need to be made.

Train the Trainer: It is less costly and very effective if one trains the trainer. Assign project
team members to run the in-house training. Set up user workstations for at least 2 days of training
by functional area. Provide additional tools, such as cheat sheets and training documentation.
Refresher training should also be provided as needed on an ongoing basis.

Final Testing: The project team needs to perform a final test on the data and processes once
training is complete and make any needed adjustments.

Go Live and Evaluation: Develop a structured evaluation plan which ties back to the goals and
objectives that were set in the planning stage. In addition, a post-implementation audit should be
performed after the system has been up and running for the first week for reconciliation purposes
and three to six months following to test whether or not the anticipated ROI and business benefits
are being realized. Comparing actual numbers with previously established benchmarks will reveal
if the software tool does what it is intended to do - add value to the business. It is important to
periodically review the system's performance to maximize ROI.


(2 credits)
Set 2
Marks 30

Question 1:(a) Write a short note on RFID.

(b) Write a note on e-fulfillment.

Answer: Radio frequency identification (RFID): RFID is one of the key technologies
transforming the industry, enabling products to be easily tracked electronically at every step in
the supply chain. As the cost of RFID tags comes down, the rate of adoption is forecast to expand
exponentially. Several major retailers are already asking their suppliers to support RFID
initiatives. However, RFID has significant value creation potential for consumer products
companies as well, including improved labor efficiency, fewer supply chain errors, better
visibility of inventory and its location, reduced theft, lower levels of safety stocks and an ability
to serve the retail customer more effectively. RFID can enable businesses to react much faster to
changing market and operating conditions. Consumer products companies need to carefully plan
a strategy to optimize the value to their own businesses from implementing RFID capabilities. At
the same time, they need to avoid simply reacting to multiple retailers’ mandates with potential
duplication and inefficiency. Embracing industry standards and roadmaps will be critical.

The substantial amounts of data that a comprehensive compliance system generates need to be
effectively managed. The success of any compliance program will rest on its ability to deliver the
necessary requirements at the lowest possible costs. Companies will need to standardize business
processes and equipment to reduce deployment time and simplify their rollout. Applying a
common approach across the whole organization, with a preference for low-cost, scalable and
repeatable application integration, will also help reduce the cost of compliance.

Radio frequency identification (RFID) technology is being introduced for use in the retail
industry. RFID promises to speed supply chain operations by automating the tracking of goods.
RFID uses electronic tags for storing data and identifying items. Since RFID is used to capture
information the issue becomes what data is being captured and hence the privacy issue becomes a

Many large retailers have instructed their suppliers to tag pallets and cases with RFID tags
carrying Electronic Product Code (EPC), a “license plate” with a hierarchical structure that can be
used to express a wide variety of different, existing numbering systems. EPC Global has
approved a new communications protocol for UHF tags that will standardize tags and readers for
retail supply chain throughout the world. Eventually many billions of tags will be needed for
pallets and cases alone. If tagging at case and pallet level proves to be successful, then the next
step in the process may be to tag individual items and thus affecting consumers. Shaping of
public opinion has been started by consumer advocacy groups, for example, by “Consumers
against Supermarket Privacy Invasion and Numbering” CASPIAN, followed by numerous
articles and journals and newspapers and not only in those specialized in technology and business
but also in the popular press. According to CASPIAN consumers have no way of knowing which
packages contain RFID chips. While some chips are visible inside a package, RFID chips can be
well hidden. For example they can be sewn into the seams of clothes, sandwiched between layers
of cardboard, molded into plastic or rubber, and integrated into consumer package design.

(b) E –Fulfilment: Definitions of e-Fulfilment are wide and varied and range from “core physical
delivery to the customer” to “warehouse, pick and pack and call centres”. The term ‘fulfilment’,
as such, describes a horizontal tier of services from the beginning of a job through delivery to
distributors or end users. In other words, it refers to the challenges that take place after the “Buy”
button is clicked.

In the framework of e-Thematic, the following definition of e-Fulfilment is used:

“e-Fulfilment defines that part of e-Business which aims at efficiently and effectively integrating
a company’s back-office processes, activities and functions arising from order capture through to
final delivery to the customer.”

The e-Fulfilment process: E-Fulfilment refers to more than setting up an Internet-enabled front-
office. It entails the integration of the website with all the back-office processes, activities and
functions (marketing and sales, finance and logistics) that support the fulfilment of customer
orders.The following figure illustrates the back-office processes that take place after the “Buy”
button has been clicked.

E-Fulfillment process
The sequence of events is: order capture (web order) > stock availability check (e-warehousing)
and interface to finance house (e-billing) > order confirmation > manufacturing or procurement
(not studied by e-Thematic) > order release (picking/packing/shipping) and final delivery to the
customer. Most of these processes can be executed internally or externally.

Scope of e-Fulfilment: · The scope of e-Fulfilment includes companies with an online retailing
presence that are adapting e-Fulfilment applications (whether their business is old economy, new
economy or a mixture of those two), and software vendors providing e-Fulfilment applications.
Both the Business-to-Consumer (B2C) and Business-to-Business (B2B) areas will be addressed.
Regarding the integration of back-office activities, the focus of
e-Thematic will be on the operational level. Manufacturing and procurement are related to the
front-end of the supply chain and will thus not be studied by e-Thematic.


Question 2: Briefly explain the retail planning function.

Answer: The Meaning of Planning System

It deals with the entire supply-demand pattern of an item through all levels of the hierarchy.

2.3 Planning Functionality

The Planning System and Action Messaging

Action messaging: Order tracking, with its simultaneous creation of action messages (AM), is
not a part of the planning system. This feature interlinks, in real-time, the requirements and the
quantities that could cover them, whenever a new requirement or replenishment order is created
or changed.

· If, for example, the user enters or changes a sales order, order tracking will instantly search for
an appropriate supply to cover the demand. This could be from inventory or an expected
replenishment order (such as a purchase or production order). When a supply source is found, a
link is created between the demand and the supply. If all of the demand cannot be covered, order
tracking will create an action message suggesting what the user could do to address the situation.

· AM are stored in a separate table. The user can retrieve and view them in the planning
worksheet by running the Get Action Messages batch job.

· AM offers a quick response but less comprehensive plan than the planning system.

Differentiating between planning and action massaging: At a quick glance, it may be difficult
to differentiate between planning and action messaging. Both features display their output in the
planning worksheet. The output suggested actions for the user to take is similar but the way this
output is produced differs.
· The planning system deals with the entire supply-demand pattern of an item through all levels of
the hierarchy, whereas order tracking only addresses the situation of the order that activated it.

· When balancing demand and supply, the planning system creates links in a user activated batch
mode, whereas order tracking creates the links automatically and on the fly whenever the user
enters a demand or a supply in the program (for example, a sales or purchase order).

Order tracking establishes links between demand and supply as data is entered, on a first-come
basis. This may lead to some disorder in priorities. For example, a sales order entered first but
with a due date next month may be linked to the supply in inventory, while the next sales order
due tomorrow may cause an action message to create a new purchase order to cover it.

The planning system, on the other hand, deals with all demand and supply orders for a particular
item, in prioritized order according to due date. It deletes all links that were created dynamically
and reestablishes them according to due date priority. When the planning system has run, it has
solved all imbalances between demand and supply. No action messages remain in the Action
Message Entry table, as they have been replaced by the suggestions in the planning worksheet.


Question 2: What are the benefits and limitations of grid computing? Also explain its scope
and the various processes involved in grid computing.

Answer: The Meaning of Grid Computing: It is a compact computing Methodology where

programming is condensed to the level of Data Grids.

Grid Computing
Need for Grid Technologies: The original motivation for the Grid was the need for a distributed
computing structure for advanced science and engineering, with considerable importance on
collaborative and multi-disciplinary functions. It is now agreed that similar types of application
are also found in fields such as entertainment, commerce, finance and government. Accordingly,
the Grid has the potential to impact upon many aspects of society.

Business Benefits of Grid Computing: Businesses today are continually faced with the need for
greater computational processing power so that they can run business critical applications. It’s a
fact that the majority of servers only run at between
20-30% of their total capacity and similarly PCs only run at between 5-20% capacity. Grid
Computing will allow business to make us of this unused capacity by centrally managing and
distributing processing power across the organisation.

Grid computing empowers businesses to get more from their existing investments and reduces the
requirement for continuous investment in additional processing power. Furthermore, it also
increases utilisation of existing IT infrastructure and allows processing power to be shared across
the organisation and directed where and when it is needed. For example, a business’s Accounts
Department could be allocated additional processing power towards the end of the month when
it’s required and when it’s not required the processing power could be directed to some other

Based on information gathered from current business users of the Grid and High Performance
Computing, below we list some of the tangible business benefits emerging from the current
market sectors

· Cost savings
· Improved productivity
· Improved design and new products/markets
· Improved management, accountability and financial control
· Flexibility in business processes
· Shorter time to market
· Improved Quality of Service

These business benefits will be enabled by the following Grid computing processes:

Grid computing processes

Power-on-demand: Companies with major scientific processing workloads will be able to save
on their infrastructure costs by sizing their systems to cope with their peak requirements through
hiring additional power-on-demand from supercomputing bureaux only when they need it, with
apparently unlimited extra power being available to them for those processing-intensive tasks.
The security measures available from such power-on-demand bureaux will ensure that their work
is as securely protected as if they had kept it all in house.

Cycle-scavenging: Companies will be able to utilise the computing capacity lying unused in their
networks of PCs. This unused capacity is usually at least 85% during the day and 100% outside it.
Grid Middleware and resource sharing software will enable this dead time to be utilised in the
background, without interfering with the PC user when he/she is using it. This will also enable
companies to take a fresh look at their ICT infrastructure costs, with substantial potential savings
for those that don’t have processing-intensive scientific or engineering workloads.
Information sharing: Companies working collaboratively, either in a consortium or within a
supply chain, will be able to work together on-line, sharing data and information within the
bounds of their joint interests, whilst keeping it secure from companies involved in different
relationships with them, so called Virtual Organisations. Using such technology, they will be able
to transfer such data securely between themselves.

Online monitoring: Companies will be able to monitor large quantities of data acquired during
their products’ operation, allowing them to identify operational problems when they start to
develop, instead of when they become critical. They will be able to identify new potential
problems as they develop, by using pattern-matching techniques. This will be particularly useful
in those in-service situations where down-time is either critical or costly.

Collaborative working: Experts can come together at the same time, without requiring then to
be in one place, and to hold on-line meetings linking each of their work sites, as if they were face-
to-face, with all the relevant data at their fingertips, and to manipulate that data as if they were
alone at their own workstation or workspace. Travel budgets and perhaps more importantly,
wasted time spent travelling will be reduced by these virtual meetings. Face-to-face meetings will
not be a thing of the past entirely though because partners will still need to get to know each other
by meeting and discussing their respective issues, but the proportion of follow-on meetings will
be reduced once mutual confidence has been built. Tools for recording discussion and decisions
will permit to minute the meetings and all decisions to be ratified before the (virtual) meeting is
closed. These tools will also record results of laboratory experiments, acting as an electronic
laboratory notebook.

High Performance: Increased processing power and bandwidth will enable companies to
execute more demanding calculations, simulations and visualisations. For instance, this will allow
the integration of different engineering disciplines and/or the use of finer mesh or Grid sizes in
these calculations to achieve more accurate results in a shorter time with less time-consuming
iterations. This will save time and the costs of testing or exploration, yield more informed
decisions and shorten the time to market. In the long-term it will change the new product
development paradigm from test-then-simulate to one of model-simulate-then-validate-by-test.

Dynamic reconfigurability: The information processing systems used by companies will no

longer be constrained by the architecture and performance limitations in processing power,
bandwidth and data/information storage that suited their historical business requirements. As
these requirements change, users will be able to invoke those facilities they need when and only
when they need them, whether these are short-term peak requirements or longer-term
evolutionary changes.

Portals: Access via portals will be secure but easy to use, with single logon and authentication
and, subject to the relevant criteria, with transferable certificates/permissions between different
security domains.

Data Mining & Decision Support: Organisations’ decision support systems will be able more
easily to access all available databases and information repositories, including private/chargeable
ones by means of secure authentication mechanisms, thus being able to search and locate all
available information meeting particular criteria. They will not necessarily need to define queries
numerically or by simple logical statements but instead use a new breed of intelligent agents. This
is particularly useful in research into new technologies, materials, drugs, scientific phenomena,
Grid Computing: Marketplace: The marketplace for Grid computing is still in its early stages.
At present, its true to say that considerably more effort has been put into “marketing hype” than
real business deployments although this position is slowly but surely changing. This section
reviews some of the obvious markets for Grid computing solutions and indicates which of the
business benefits described above they will be able to take advantage of.

Grid Computing in Retail: The retail sector will be able to demonstrate products to customers in
virtual environments utilising new presentation techniques suited to the customers. Estate agents
will be able to walk purchasers through homes without leaving their premises, allowing them to
short-list those that they need to visit, thus saving time, inconvenience and effort. Kitchen and
bedroom suppliers will be able to walk customers through potential designs, more effectively than
their current approaches. Benefits can be obtained in cost savings, improved productivity, shorter
time to market, improved management, accountability and financial control and flexibility in
business processes through Power-on-Demand, information sharing, collaborative working,
portals, data mining & decision support and dynamic reconfigurability.


Question 3: Mr. X wants to start a retail grocery store. He is interested in SAP applications. How
do you think he should go about undertaking SAP? What benefits will Mr. X have after
implementing SAP?

Answer: SAP Retail Store optimizes local store-specific functions such as adapting promotion
quantities, store-based purchasing, goods movement and sales processes. In addition, the
browser-based interface minimizes training time through intuitive user guidance, ensuring prompt
and effective use by all store staff. As a result, even part-time or temporary employees will find it
easy to use SAP Retail Store. SAP Retail Store combines the intuitive features of a Web browser
with the powerful transactions of the SAP Retail solution. The SAP Retail Store component will
make it easier for users in retail stores to learn and work with the R/3(TM) System and will speed
up implementation time considerably.
The following benefits can be gained after implementation of SAP-

Master Data access, maintenance and analysis: SAP Retail Store gives the local staff access to
all pertinent product and customer information. Store employees can view and analyze product
information for local promotions and advertising. Store staff can also directly enter or change
customer information.

Purchasing: Leveraging the integration between SAP Retail Store and SAP Retail at
headquarters, the local store staff can easily enter orders online with a minimum amount of data
entry. Employees can receive immediate confirmation of stock availability, pricing and expected
goods receipt.

Goods Movement: Close integration of the headquarters and retail store also enables store staff
to quickly and efficiently receive returns, markdowns and mass shipment of goods using
reference documents - reducing the burden of data entry and minimizing the opportunity for
Sales: Retail store staff can support a variety of consumer orders including different methods for
delivery and payment. SAP Retail Store also enables the local sales staff to check the status of
pending orders.

Information Flow: The close integration between SAP Retail and SAP Retail Store ensures a
seamless flow of information from headquarters to the store front including allocations and
change authorizations, promotions and reporting. With the use of electronic mail employees can
send and receive text files, tables or graphics to and from head office, distribution center or other

Facilitates quicker and better decisions: The transparency and open nature of the software has
enabled in processing of information at a faster pace and taking decisions with ease and
maximum accuracy. Since everything is available on demand or after perusal companies can
forecast easily because they know the current strength and to anticipate the future is not a difficult
task. This will also help them in setting standards for items that were formerly complex (to deal

Overall business transformation: ERP is usually associated with change management and
transition process. ERP is supposed to ensure them smoothly in the organization without any
major hiccups. Such a flow can happen only when there is an improvement in results and
productivity. MYSAP ERP system helps the organization by helping them to take the initiatives
to manage and adapt to change besides reflecting better and positive results with the help of its all
round development functions.

Reduction in Costs and Risks: Unlike other ERP applications the implementation of MYSAP
ERP application does not interfere with the routine business. This discards the popular notion of
losing potential customers and the existing loyal ones. The reduction in risks coupled with the
decrease in costs makes this the popular choice of companies choosing ERP applications. If a
company requires SAP they need not necessarily throw away the existing platforms and
applications. On the contrary SAP helps them in integrating their functions with the existing
platforms thereby helping to minimize investments and development costs optimally.

Following Modern Practices: It is well understood from the above steps that MYSAP ERP
system follows the most recent and current trends in the industry. This is beneficial to the
stakeholders at large. For the company it helps to boost business. The shareholders can be assured
of better returns on their equity as the chances for profits are high while for investments they are
low. The employees can contribute in a better manner as MYSAP ERP helps them in discharging
their functions in a better and efficient manner. Such modernizations are helpful to the state in
awarding professional accreditations and licenses.

Specialty: SAP caters to multiple industries. They offer customized solutions designed by
keeping the needs of the particular industry in mind. The diverse service ranges from Aeronautics
to Education to distribution. Whatever be the sector SAP does not compromise on its potential to
capitalize advantages based on the nuances of that particular sector. This always helps them to
retain customers and lead the market.