Spring 2010

Adarsh Avva

Roll No. – 511013900

Center Code – 03120

Program Name - MBA

Semester – Second

Subject – Financial Management

Subject Code – MB 0045

Assignment Set – 1
 Spring 2010

Q 1. Why wealth maximization is superior to profit maximization in

today’s context? Justify your answer

A. Wealth maximization is superior to profit maximization in

justified with the below points:
1. It is based on cash flow, not based on accounting profit.
2. Through the process of discounting it takes care of the quality of
cash flows. Distant cash flows are uncertain. Converting distant
uncertain cash flows into comparable values at base period facilities
better comparison of projects.
3. Shareholders are the owners of the company and the
management of the company is with the directors. Therefore to
keep the investors happy through the performance of the value of
shares in the market, management of the company must meet the
wealth maximization criterion.
4. When a firm follows wealth maximization goal, it achieves
maximization of market value of share. Produces quality goods at
low cost.
5. Maximization of wealth demands on the part of corporate to
develop new products or render new services in the most effective
and efficient manner.
6. Another notable features of the firms committed to the
maximization of wealth is that to achieve this goal they are forced
to render efficient service to their customers with courtesy.
 Spring 2010

Q 2. Your grandfather is 75 years old. He has total savings of

Rs.80,000. He expects that he live for another 10 years and will like
to spend his savings by then. He places his savings into a bank
account earning 10 per cent annually. He will draw equal amount
each year- the first withdrawal occurring one year from now in such
a way that his account balance becomes zero at the end of 10
years. How much will be his annual withdrawal?

A.

Annual Withdrawal = Present value

Annuity factor
= 80,000
6.1446
= 13020

Q 3. What factors affect financial plan?

A. Below are the listed factors that affect financial plan:

1. Nature of the industry

2. Size of the company
3. Status of the company in the industry
4. Sources of finance available
5. The capital structure of a company
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6. Matching the sources with utilization

7. Flexibility
8. Government policy

Q 4. Suppose you buy a one-year government bond that has a

maturity value of Rs.1000. The market interest rate is 8 per cent.
(a) How much will you pay for the bond? (b) If you purchase the
bond for Rs.904.98, what interest rate will you earn from this
investment?

A.
a. Present value of the bond is = 1000 * 0.9259 = 925.90

b. Interest rate = 904.98 / 1000 = .90498 which is 10%

Q 5. 1 Should the company expand its capacity? Show the

computation of NPV

In Milliions
Years Revenue / Co
0
The company should expand its capacity (50
1
Q 5. 2 What is the annual installment of bank loan?
45
2 45
 Spring 2010

A. Annual installment of bank loan of 200 million is

= 200 / 5.216 = 38.34 Million

Q 5. 3 Calculate the quarterly installments of the Financial

Institution loan

A. Quarterly installments of the financial institution loan is

= Effective rate of interest would be = {(1+0.14/4) *4}-1 = 14.75%

= 200 / 5.066 = 39.47

Q 5. 4 Should the company borrow from the bank or from the

financial institution?

A. The company should borrow from bank since it will be paying less
interest when compared to financial institute loan.
 Spring 2010

Adarsh Avva

Roll No. – 511013900

Center Code – 03120

Program Name - MBA

Semester – Second

Subject – Project Management

Subject Code – MB 0049

Assignment Set – 1
 Spring 2010

Q 1. Explain briefly the life cycle of a project

A. The life cycle of a project consist of:

1. Understanding the scope of the project

2. Objectives of the project
3. Formulation and planning various activities
4. project execution
5. project monitoring and control the project resources

The life cycle of Project management consist of:

1. Analyzing and evolution

2. Marketing
3. Design
4. Inspecting; testing and delivery
5. Post completion analysis

Q 2. Examine the Tools used in project planning

A. The tools which are required for coordinating a project are as

follows:

1. Project organization - which consists of activities like,

Initiation, Planning, Execution, control and close.
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2. Project Structure – Which involves development plan, project

tracking and oversight

3. Project key personal – Identify those business areas that are
within the scope or directly interface with the scope boundary
and list them in the business area column of the project
assignment worksheet. Identify the key personal for each are
and list them in the person column of the project assignment
worksheet
4. Project management team – It is a senior management team,
which will be accountable for the project like project
sponsor, client representative, stage manager, project
coordinators
5. Key stakeholders – Management level personal who are critical
to the success to the project
6. Stage teams – Appropriate personal required for the stage
define the tam structure and appoint the team leaders.
7. Key resources – individuals assigned to a key resource role
may work towards gathering business key resources and
technical key resources.
8. Work breakdown structure – the entire process of a project
may be considered to be made up on number of sub process
placed in different stage called the work breakdown
structure.
9. Task duration – Identifying lead and lag times helps in working
out task duration.
 Spring 2010

Q 3. Describe the various steps involved in monitoring and

controlling a project

A. The stages involved in project monitoring and controlling are as

follows:

1. Preliminary work – The team members understand the project

plans, project stage schedule, progress controls, tracking
schedules, summary of the stage cost and related worksheets.
All the members have to understand the tolerances in any
change and maintain a change control log. Also realize the
need and importance of quality agendas.
2. Project progress – The members must keep a track of the
project progress and communicate the same to other related
members of the project. They must monitor and control
progress, through the use of regular check points, quality
charts, statistical tables, control the quality factors which are
likely to deviate from expected values as any deviation may
result in changes to the stage schedule.
3. Stage Control – The manager must establish a project check
point cycle. For this suitable stage version control procedures
may be followed. The details are to be documented stage
wise.
4. Resources – Plan the resources required for various stage of
the project.
 Spring 2010

5. Quality control – Quality control is possible if the project

members follow the quality charts and norms very strictly.
6. Schedule quality review – It is recommended that a quality
review be scheduled at the beginning of the stage and also
ending of every stage.
7. Agenda for quality review
8. Conduct quality review
9. Follow-up – after the quality review is completed. Follow up
the actions planned in strict manner which ensures conformity
to the standards
10. Review quality control procedures.

Q 4. Explain the term ‘knowledge factor’.

A. Knowledge factor or is shortly known as K factor is most

important for the project progress. It is an index of the extent to
which one can manage today with yesterday’s knowledge content
and also the extent to which today’s knowledge will be used
tomorrow. The K-factor will undergo corrections through
obsolescence since changes are now phenomenal. It is important for
the leaders to recognize the knowledge potential of the younger
members. It is equally important for the younger members not to
suppress their knowledge potential from its application. Further as
age and experience advance further wisdom gains but the
knowledge is lost until it is updated and utilized. It is the task of
every team members to maximize the K-factor in all directions.
 Spring 2010

Q 5. What roles do cross functional teams play for project

efficiency? Explain with examples.

A. Productivity can be expected only when the team members are

highly motivated through

1. Sufficient content of development activities

2. Favorable working conditions
3. Planned activities
4. Adequate availability of resources
5. Properly planed system of quality control through process
controls
6. Adequate maintenance support for Hardware and software.

All the above roles will be played by cross functional teams who will
ensure there is increase in the project efficiency.

Q 6. Do core groups enhance the performance of projects?

A. Yes core groups enhance the performance of the projects only if

they show a healthy interpersonal behavior which are explained
below:

1. Projection of a pleasant, but firm personality

2. Clarity of expression and communication
3. Patience in listening and reacting with empathy
 Spring 2010

4. Documentation and correct recording

5. offer to help
6. Call for help whenever necessary
7. Seeking information before attempting decisions
8. Not waiting for things to go wrong
9. Motivation of others through efficiency and meticulousness,
rather urging and exhibiting dependency
10. Putting term goals ahead of individual goals
 Spring 2010

Adarsh Avva

Roll No. – 511013900

Center Code – 03120

Program Name - MBA

Semester – Second

Subject – Management Information System

Subject Code – MB 0047

Assignment Set – 1
 Spring 2010

Q 1. Define MIS? What are the objectives and characteristics of MIS?

A. Management information system is considered as one of the

method of generating information which is used by management of
organization for decision making, control of activities, operations
etc.

The objectives of MIS are:

1. Speedy access to information

2. Interpretation of data
3. Quick decisions
4. Speedy actions
5. Increased productivity and thereby increase in profits
6. reduced transaction cost

The characteristics of MIS are:

1. It is designed to take care of the needs of the managers in the

organization
2. MIS aids in integrating the information generated by various
departments of the organization
3. MIS helps in identifying a proper mechanism of storage of
data.
 Spring 2010

4. MIS also helps in establishing mechanism to eliminate

redundancies in data
5. MIS as a system can be broken down into sub systems, which
can be programmed and results in easy access of data,
accuracy of data and information.

Q 2. Explain strategic MIS categories in detail. Give illustrations for

each category.

A. Information technology has been critical to the implementation

of an organization’s strategy. An organization’s strategy supported
by information system fulfilling its business objectives came to be
known as Strategic Information system. The strategic information
system consists of functions that involved gathering, maintenance
and analysis of data concerning internal resources, and intelligence
about competitors, suppliers, customers, government and other
relevant organizations.

Q 3. Write a detailed note on the planning and development of

Management Information
Systems.

A. Planning of information system

1. Development of long range plans of the MIS – The plan of MIS is
consistent to the business plan of the organization. The information
needs for the implementation of the business plan should find place
 Spring 2010

in the MIS. The plan of development of MIS is linked with the steps
of the implementation in a business development plan. Once the
management needs are translated into information needs, it is left
to the designer to evolve a plan of MIS development and
implementation.
2. Contents of the MIS plan
3. MIS goals and objectives

Strategy for the plan achievement – The designer has to take a

number of strategic decisions for the achievement of the MIS goals
and objectives
1. Development strategy
2. System development strategy
3. Resource for system development
4. Manpower composition

The Architecture of the MIS – The architecture of the MIS plan

provides a system structure and their input, output and linkages. It
also provides a way to handle the systems or subsystems by way of
simplification, coupling and decoupling of subsystems.

The system development schedule – A schedule is made for the

development of the system. While preparing the schedule due
consideration is given to the importance of the system in the overall
information requirement. Due regard is also given to logical system
development.
 Spring 2010

Hardware and Software Plan – Giving due regard to the technical

and operational feasibility, the economics of investment is worked
out. Then the pain of procurement is made after selecting the
hardware and software.

Development of information systems

1. Development and implementation of MIS – Once the plan for
MIS is made, the development of the MIS, calls for
determining the strategy of development. The development
strategy determines where to begin and in what sequence the
development can take place with the sole objective of
assuring the information support.
2. Prototype approach – When the system is complex, the
development strategy is prototyping of the system.
Prototyping is a process of progressively ascertaining the
information needs, developing methodology, trying it out on a
smaller scale with respect to the data and the complexity,
ensuring that it satisfies the needs of the users, and assess the
problem of the development and implementation.
3. Life cycle approach – There are many systems or sub-systems

in the MIS which have a life cycle, that is, they have birth and
death. Their emergency may be sudden or may be a part of
the business need, and they are very much structured and rule
based. They have 100% clarity of inputs and their sources, a
definite set of outputs in terms of contents and formats.
 Spring 2010

4. Implementation of Management information system – The

implementation of the system is a management process. It
brings about organizational change, it affects people and
changes their work style.

Q 4. Explain in detail the necessity and importance of Systems

Design in MIS.

A. The business application system demands designing of systems

suitable to the application in project.

The major steps involved in the design are the following:

Input Design - Input design is defined as the input requirement

specification as per a format required. Input design begins long
before the data arrives at the device. The analyst will have to
design source documents, input screens and methods and
procedures for getting the data into the computer.

Output Design – The design of the output is based on the

requirement of the user – manager, customer etc. The output
formats have to very friendly to the user. Therefore the designer
has to ensure the appropriateness of the output format.

Development – When the design and its methodology is approved,

the system is developed using appropriate business models. The
 Spring 2010

development has to be in accordance to a given standard. The

norms have to be strictly adhered to.

Testing – Exhaustive and thorough testing must be conducted to

ascertain whether the system produces the right results. Testing is
time consuming: Test data must be carefully prepared, results
reviewed and corrections made in the system. In some instances,
parts of the system may have to be redesigned. Testing an
information system can be broken down into three types of
activities: unit testing, system testing and acceptance testing. Unit
testing or program testing consists of testing each program
separately in the system. The purpose of such testing is to
guarantee that programs are error free, but this goal is realistically
impossible. Instead, testing should be viewed as a means of locating
errors in programs, focusing on finding all ways to make a program
fail. Once pinpointed, problems can be corrected. System testing
tests the functioning of the information system as a whole. It tries
to determine if discrete modules will function together as planned
and whether discrepancies exist between the way the system
actually works and the way it was conceived. Among the areas
examined are performance time, capacity for file storage and
handling peak loads, recovery and restart capabilities and manual
procedures. Acceptance testing provides the final certification that
the system is ready to be used in a production setting. Systems tests
are evaluated by users and reviewed by management. When all
 Spring 2010

parties are satisfied that the new system meets their standards, the
system is formally accepted for installation.

Implementation and Maintenance

Conversion – Conversion is the process of changing from the old
system to the new system. Four main conversion strategies can be
employed. They are the parallel strategy, the direct cutover
strategy, the pilot strategy and the phased strategy.

In a parallel strategy both the old system and its potential

replacement are run together for a time until everyone is assure
that the new one functions correctly. This is the safest conversion
approach because, in the event of errors or processing disruptions,
the old system can still be used as a backup. But, this approach is
very expensive, and additional staff or resources may be required to
run the extra system.

The direct cutover strategy replaces the old system entirely with
the new system on an appointed day. At first glance, this strategy
seems less costly than the parallel conversion strategy. But, it is
a very risky approach that can potentially be more costly than
parallel activities if serious problems with the new system are
found. There is no other system to fall back on. Dislocations,
disruptions and the cost of corrections are enormous.
The pilot study strategy introduces the new system to only a limited
area of the organization, such as a single department or operating
 Spring 2010

unit. When this version is complete and working smoothly, it is

installed throughout the rest of the organization, either
simultaneously or in stages.

The phased approach strategy introduces the new system in stages,

either by functions or by organizational units. If, for example, the
system is introduced by functions, a new payroll system might begin
with hourly workers who are paid weekly, followed six months later
by adding salaried employees( who are paid monthly) to the system.
If the system is introduced by organizational units, corporate
headquarters might be converted first, followed by outlying
operating units four months later.

Moving from an old system to a new system requires that end users
be trained to use the new system. Detailed documentation showing
how the system works from both a technical and enduser standpoint
is finalized during conversion time for use in training and everyday
operations. Lack of proper training and documentation contributes
to system failure, so this portion of the systems development
process is very important.

Production and maintenance

After the new system is installed and conversion is complete, the
system is said to be in production. During this stage the system will
be reviewed by both users and technical specialists to determine
how well it has met its original objectives and to decide whether
 Spring 2010

any revisions or modifications are in order. In some instances, a

formal post implementation audit document will be prepared. After
the system has been fine tuned, it will need to be maintained while
it is in production to correct errors, meet requirements or improve
processing efficiency.

Once a system is fully implemented and is being used in business

operations, the maintenance function begins. Systems maintenance
is the monitoring, or necessary improvements. For example, the
implementation of a new system usually results in the phenomenon
known as the learning curve. Personnel who operate and use the
system will make mistake simply because they are familiar withit.
Though such errors usually diminish as experience is gained with a
new system, they do point out areas where a system may be
improved

Q 5. Explain in detail about e-business, e-commerce and e-

collaboration. Give suitable
examples.

A. In E-business enterprise traditional people organization based on

'Command Control' principle is absent. It is replaced by people
organization that is empowered by information and knowledge to
perform their role. They are supported by information systems,
application packages, and decision-support systems. It is no longer
functional, product, and project or matrix organization of people
 Spring 2010

but E-organization where people work in network environment as a

team or work group in virtual mode. Ebusiness enterprise is more
process-driven, Technology-enabled and uses its own information
and knowledge to perform. It is lean in number, flat in structure,
broad in scope and a learning organization. In E-business enterprise,
most of the things are electronic, use digital technologies and work
on databases, knowledge bases, directories and document
repositories. The business processes are conducted through
enterprise software like ERP, SCM, and CRM supported by data
warehouse, decision support, and knowledge management systems.
Today most of the business organizations are using Internet
technology, network, and wireless technology for improving the
business performance measured in terms of cost, efficiency,
competitiveness and profitability. They are using E-business,
Ecommerce solutions to reach faraway locations to deliver product
and services. The enterprise solutions like ERP, SCM, and CRM run
on Internet (Internet / Extranet) & Wide Area Network (WAN). The
business processes across the organization and outside run on
Etechnology platform using digital technology. Hence today's
business firm is also called E-enterprise or Digital firm.

E-COMMERCE is a second big application next to ERP. It is essential

deals with buying and selling of goods. With the advent of intent
and web technology, E-Commerce today covers an entire
commercial scope online including design and developing,
marketing, selling, delivering, servicing, and paying for goods. Some
 Spring 2010

E-Commerce application add order tracking as a feature for

customer to know the delivery status of the order.

The entire model successfully works on web platform and uses

internet technology.

Ecommerce process has two participants, namely Buyer and Seller,

like in traditional business model. And unique and typical to E-
commerce there is one more participant to seller by authorization
and authentication of commercial transaction.

E-Collaboration every business has a number of work scenarios

where group of people work together to complete the tasks and to
achieve a common objective. The group could be teams or virtual
teams with different member strength. They come together to
platform a task to achieve some results. The process is called
Collaboration. The Biggest
Advantage of ECollaboration

It taps the collective wisdom, knowledge and experience of the

members. The collaboration team or group could be within the
organization and between the organizations as well.

Since, E-Collaboration works on an internet platform and uses web

technology, work group/team need not be at one physical location.
 Spring 2010

Q 6. What is an internet? Explain the differences between internet,

intranet and extranet.

A. Internet is a global network of interconnected computers,

enabling users to share information along multiple channels.
Typically, a computer that connects to the Internet can access
information from a vast array of available servers and other
computers by moving information from them to the computer's local
memory. The same connection allows that computer to send
information to servers on the network; that information is in turn
accessed and potentially modified by a variety of other
interconnected computers. A majority of widely accessible
information on the Internet consists of inter-linked hypertext
documents and other resources of the World Wide Web (WWW).
Computer users typically manage sent and received information
with web browsers; other software for users' interface with
computer networks includes specialized programs for electronic
mail, online chat, file transfer and file sharing.

Difference between internet, intranet and extranet as follow:

Extranet :
An extranet is a private network that uses the Internet protocols
and the public telecommunication system to securely share part of
a business's information or operations with suppliers, vendors,
partners, customers, or other businesses. An extranet can be
 Spring 2010

viewed as part of a company's intranet that is extended to users

outside the company. An extranet requires security and privacy.

A new buzzword that refers to an intranet that is partially

accessible to authorized outsiders.
Whereas an intranet resides behind a firewall and is accessible only
to people who are members of the same company or organization,
an extranet provides various levels of accessibility to outsiders. You
can access an extranet only if you have a valid username and
password, and your identity determines which parts of the extranet
you can view. An extranet is somewhat very similar to an intranet.
Extranets are designed specifically to give external, limited access
to certain files of your computer systems to:

Intranet:
An internal use, private network inside an organisation that uses the
same kind of software which would also be found on the Internet.
Inter-connected network within one organization that uses Web
technologies for the sharing of information internally, not world
wide. Such information might include organization policies and
procedures, announcements, or information about new products.

An intranet is a restricted-access network that works like the Web,

but isn't on it. Usually owned and managed by a company, an
intranet enables a company to share its resources with its
 Spring 2010

employees without confidential information being made available to

everyone with Internet access.

Internet:
An electronic network of computers that includes nearly every
university, government, and research facility in the world. Also
included are many commercial sites. It started with four
interconnected computers in 1969 and was known as ARPAnet. A
network of computer networks which operates world-wide using a
common set of communications protocols. The vast collection of
inter-connected networks across the world that all use the TCP/IP
protocols.

A global network connecting millions of computers. A worldwide

network of computer networks. It is an interconnection of large and
small networks around the globe. The Internet began in 1962 as a
resilient computer network for the US military and over time has
grown into a global communication tool of more than 12,000
computer networks that share a common addressing scheme.
 Spring 2010

Adarsh Avva

Roll No. – 511013900

Center Code – 03120

Program Name - MBA

Semester – Second

Subject – Financial Management

Subject Code – MB 0046

Assignment Set – 1
 Spring 2010

Q 1. a. Explain the meaning of market with its features

A.
What is Market?

Originally, a “Market” was a public place in a town or

village, where household provisions and other objects were
available for sale. The definition of market has expanded in this
globalized world. The traders may be spread across a whole town,
or city or region or a country and yet form a market. For example,
stock market, Oil & Oilseeds market, Steel or Metals market etc.
where people across the countries can participate in the
business without being face to face.

The essential features of a market are

(i) Existence of a commodity / item which is to be dealt with,
(ii) The existence of buyers and sellers,
(iii) A place; be it a certain region, a country or the entire world
and even a virtual place like the internet and
(iv) Interactions between buyers and sellers to facilitate
transactions.

Q 1. b Marketing is more than just an exchange process. How can

you prove the validity of this statement?

A.
 Spring 2010

Today s marketing system has evolved from the time of a simple

barter of goods through the stage of a money economy to
today s complex marketing. Throughout all these stages,
exchanges have been taking place. In small town and villages there
were artisans such as carpenters, weavers, potters blacksmiths,
barbers and others such service providers who produced goods
and services not only for their own consumption but also for
exchanging with others what they could not produce but needed.
This was barter system of exchange. For a transaction to take place
between two parties, it was necessary that there be needs and
wants on both sides.

The development of money came to act as a common

medium, and the exchange process became very easy and
convenient.

Thus, exchange is an act of obtaining a desired product or

service from someone by offering something in return. This
exchange process will continue as long as human society exists
because satisfying one s needs is the basic instinct of human beings
and no one can produce everything that he /she needs. For an
exchange process to take place, between two or more parties, few
conditions have to be met.

They are:
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1. Each party has something that could be of value to other party.

2. Each party has desire, willingness and ability to exchange.
3. Each party is capable of communicating and delivering.
4. Each party has the freedom to accept or reject the offer.

Q 2. a. Examine how a firm’s micro environment operates when

compared with its macro or external environment.

A.
Analyzing the Micro Environment of the Organization

Marketing department alone cannot satisfy all the needs of

customer. Therefore it is essential to integrate the functions
of suppliers, publics, internal departments and intermediaries
in creating the value to the customer. These forces are known as
organization’s micro environment. Microenvironment: The forces
which are very close to company and have impact on value creation
and customer service.

Marketing intermediaries:

These are firms which distribute and sell the goods of the company
to the consumer. Marketing intermediaries play an important role
in the distribution, selling and promoting the goods and services.
Stocking and delivering, bulk breaking, and selling the goods and
 Spring 2010

services to customer are some of the major functions carried out by

the middlemen. Retailers, wholesalers, agents, brokers, jobbers and
carry forward agents are few of the intermediaries. Retailers are
final link between the company and the customers. Their role in the
marketing of product is increasing every day.

Q 2. b Mention the key points in one of the four buyer behavior

models

A. Buyer Behavior Models

The influence of social sciences on buyer behavior has prompted

marketing experts to propound certain models for explaining buyer
behavior. Broadly, they include the economic model, the learning
model, the psychoanalytical model and the sociological model.

1) The Economic Model: According to the economic model of

buyer behavior, the buyer is a rational man and his buying decisions
are totally governed by the concept of utility. If he has a
certain amount of purchasing power, a set of needs to be met
and a set of products to choose from, he will allocate the
amount over the set of products in a very rational manner with
the intention of maximizing the utility or benefits.

2) The Learning Model: According to the learning model which

takes its cue from the Pavlovian stimulus response theory, buyer
 Spring 2010

behavior can be influenced by manipulating the drives, stimuli

and responses of the buyer. The model rests on man’s ability at
learning, forgetting and discriminating. The stimulus response
learning theory states that there develops a bond between behavior
producing stimulus and a behavior response (S. R. Bond) on account
of the conditioning of behavior and formation of habits. This
theory may be traced to Pavlov and his experiments on
salivating dogs. Pavlov‘s experiments brought out associations by
conditioning. In his well known research with dogs, a bell was rung
every time food was served to a dog. Eventually, the dog started
salivating each time upon hearing the bell though no food was
served. The dog s behavior is conditioned; it is related to
behavior-producing stimulus (bell ringing) and behavior response
(salivation). The S.R. bond so established causes a set pattern of
behavior learnt by the object – dog. In terms of consumer
behavior, an advertisement would be a stimulus whereas
purchase would be a response.

Q 3. a. State the meaning of Marketing Information System and

Marketing Research

A. A management information system (MIS) is a system or process

that provides information needed to manage organizations
effectively. Management information systems are regarded to be a
subset of the overall internal controls procedures in a business,
which cover the application of people, documents, technologies,
 Spring 2010

and procedures used by management accountants to solve business

problems such as costing a product, service or a business-wide
strategy. Management information systems are distinct from regular
information systems in that they are used to analyze other
information systems applied in operational activities in the
organization. Academically, the term is commonly used to refer to
the group of information management methods tied to the
automation or support of human decision making, e.g. Decision
Support Systems, Expert systems, and Executive information
systems.

Marketing Research

Marketing Research provides information to marketing manager

when he/she encounters marketing problems. This may involve
conducting Marketing Research survey by collecting primary data.
These surveys may be conducted by the marketing department
itself or it can hire services of an external marketing research
agency.
Analytical Marketing Systems Also known as Marketing Decision
Support systems (MDSS), this is a co-ordinate collection of data,
systems, tools and techniques with supporting software and
hardware by which an organization gathers and interprets
relevant information from business and environment and turns it
into a basis for marketing action. All the data which is generated
through the other three systems described above are stored in a
 Spring 2010

data base. The storage and retrieval capability of decision

support system allows the collection and use of a wide variety of
data throughout the company. Senior managers can access the
data base and continually and monitor sales, markets,
performance of the sales people and other marketing systems as
well.

Q 3. b. Explain the various steps involved in the business buying

process

A.
Business Buying Process

Consumer passes through five different stages while purchasing the

product.

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 examples of internal stimuli are customer s
desire, attitude or perception and external stimuli are
advertising etc. From both stimuli customers understand the
need for the product. Here marketer should understand what
customers needs have that drew customers towards the product
and should highlight those in the communication strategy.
 Spring 2010

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.

In this stage marketer should give detailed information about

the product. The communication should highlight the attributes
and advantages of the product in this stage so that he created the
positive image about the product.

3. Evaluation of alternatives: After collecting the 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
 Spring 2010

e. Durability
At this stage marketer should provide comparative
advertisements to evaluate the different brands. The
advertisement should be different for different segments and
highlight the attribute according to the segment.

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 marketer. The marketer 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 expected then he develops
dissatisfactions. Marketer should keep an eye on how consumer
uses and disposes the product. In some durable goods Indian
consumer want resale value also. Many automobile brands that
were not able to get resale value lost their market positions.
 Spring 2010

Q 4. a. Suppose you need to conduct a small marketing research

study in your neighborhood regarding the purchase and use of
detergent powders. What will be your approach in the process?

A.
New Product Survey

Marketing research is the systematic gathering, recording, and

analysis of data about issues relating to marketing products and
services. The term is commonly interchanged with market research;
however, expert practitioners may wish to draw a distinction, in
that market research is concerned specifically with markets, while
marketing research is concerned specifically about marketing
processes.
Marketing research is often partitioned into two sets of categorical
pairs, either by target market:
• Consumer marketing research, and
• Business-to-business (B2B) marketing research
Or, alternatively, by methodological approach:
• Qualitative marketing research, and
• Quantitative marketing research
Consumer marketing research is a form of applied sociology that
concentrates on understanding the preferences, attitudes, and
behaviors of consumers in a market-based economy, and it aims to
understand the effects and comparative success of marketing
campaigns. The field of consumer marketing research as a
 Spring 2010

statistical science was pioneered by Arthur Nielsen with the

founding of the ACNielsen Company in 1923.
Thus, marketing research may also be described as the systematic
and objective identification, collection, analysis, and dissemination
of information for the purpose of assisting management in decision
making related to the identification and solution of problems and
opportunities in marketing. The goal of marketing research is to
identify and assess how changing elements of the marketing mix
impacts customer behavior.

Q 4. b As a consumer, what factors will you consider when you have

to buy a laptop? How will you arrive at a decision whether or not to
buy a particular brand? Once you have selected a brand, identify
the various marketing P’s for that brand.

A. Factors for buying a product & 4 P’s of marketing

Laptops are complex little machines with a variety of configuration

options which can lead to very confusing buying decisions. In this
article, we are going to cover out factors that one should consider
before purchasing a laptop. These 6 factors are the crux of any
laptop purchase and by using these as a guideline, you can land the
most appropriate mobile PC for your needs.
1. Weight
The lighter the laptop, the easier it is to move around. Prices
usually have an inverse relationship with the weight of a laptop.
 Spring 2010

Hence the lightest of laptops will almost (always) cost more than
the heaviest ones.
Another relationship is the features of a laptop which would affect
the weight of the laptop, which can be if it has a powerful graphics
card, or a larger screen etc. The laptop will end up being
comparatively heavier and more expensive. So keep a look out for
that.
2. Power Consumption
Battery life is critical for users who are on the go. On an average
workload, a regular low budget laptop would easily give you 2.5 to 3
hours of battery time. A fairly good machine would easily clock in 4
hours.
These are battery times for regular 6-cell batteries and 9-cell
batteries have longer backup times. However, power consumption
varies from manufacturer to manufacturer and model to model.
Additional features usually result in a powerful drain on battery
supply. If you are mostly mobile, power consumption becomes a
critical factor to consider.
3. Processing Power
Laptops are almost more expensive than a desktop with similar
specifications and so, it is essential to opt for a level of processing
power that matches your current and near future needs.
For office work only, an entry-level processor such as the single
core Celeron is more than enough. For multimedia enthusiasts and
power users, a Core 2 duo or equivalent processor is recommended.
4. Warranty
 Spring 2010

Locally manufactured laptops usually have a sound local warranty

that can span over a time period of a year and beyond.
International warranties allow one to take a laptop to any country
and in case of trouble, hand it to the sales and support outlet there
for repair.
Most warranties allow non-physically damaged laptops to be
repaired or replaced free of cost in the first year and cover parts
and repairs in the following years at an approximate cost to the
customer.
5. Operating System
For most users, the operating system (OS) plays a very important
role. If one opts for Windows Vista, the laptop is likely to be more
expensive mostly because the OS requires the latest hardware.
Of course, it is a feature rich operating environment but that is the
price one pays for the latest and the greatest. Other than that, a
user can choose from Linux, Windows XP and Mac OS X.

VARIOUS MARKETING 4P’s

Marketing decisions generally fall into the following four
controllable categories:
• Product
• Price
• Place (distribution)
• Promotion
 Spring 2010

Q 5. a. What are the features of Business markets? How are they

different from consumer markets?

A.

Business vs consumer markets

To help explain the differences between business and consumer

markets, It is worth drawing some comparisons between the two.

Consumer Business
Every customer has equal value and There are a small number of big
represents a small % of revenue customers that account for a large % of
revenue
Sales are made remotely, the Sales are made personally, the
manufacturer doesn't meet the manufacturer gets to know the
customer customer
Products are the same for all Products are customised for different
customers. The service element is low customers. Service is highly valued
Purchases are made for personal use - Purchases are made for others to use -
image is important for its own sake image is important where it adds value
to customers
The purchaser is normally the user The purchaser is normally an
integrator, someone down the supply
chain is the user.
Costs are restricted to purchase costs Purchase costs may be a small part of
the total costs of use
The purchase event is not subject to The purchase event is conducted
tender and negotiation professionally and includes tender and
negotiation.
The exchange is one of transaction. The exchange is often one of strategic
There is no long-time view (financial intent. There is the potential for long
services differ) term value
 Spring 2010

Q 5. b. List out the 5 important prerequisites of effective

segmentation by giving suitable examples

A.
Important prerequisites of effective segmentation
Requisites of Effective Segmentation

To be useful, market segmentation must exhibit some

characteristics that
are as follows:

1. Measurable and Obtainable: The size, profile and other

relevant characteristics of the segment must be measurable
and obtainable in terms of data. If the information is not
obtainable, no segmentation can be carried out. For example,
Census of India provides the data on migration and education
level, but does not specify how many of the migrated
employees are educated and if educated how many are in
white collared jobs. If a company wants to target white color
collared employees who are migrated to particular city, it will not
able to measure the same.
2. Substantial: The segment should be large enough to be
profitable. For consumer markets, the small segment might
disproportionably increase the cost and hence products are priced
too high. For example, when the cellular services started in India
cost of the incoming calls and outgoing calls were charged at Rs
 Spring 2010

12/minute. As the number of subscribers grew, incoming calls

became free. Further growth of subscribers resulted in
lowering tariffs for outgoing calls to the lowest level in the world.

3. Accessible: The segment should be accessible through

existing network of people at an affordable cost. For example,
Majority of the rural population is still not able to access the
internet due to the high cost and non-availability of connections
and bandwidth.

4. Differentiable: The segments should be different from each

other and may require different 4Ps and programs. For
example, Life Insurance Corporation of India needs separate
marketing programs to sell their insurance plans, unit plans,
pension plans and group schemes.

5. Actionable: The segments which a company wishes to pursue

must be actionable in the sense that there should be sufficient
finance, personnel, and capability to take them all.
 Spring 2010

Q 6. Explain briefly the important bases for segmenting markets and

then identify the bases for these products by giving appropriate
reasons:
i) A digital wrist watch
ii) Sunglasses
iii) Air-cooler
iv) Dictionary

A.
Important bases for segmenting markets

It is widely thought in marketing that than segmentation is an art,

not a science.
The key task is to find the variable, or variables that split the
market into actionable segments
There are two types of segmentation variables:
(1) Needs
(2) Profilers
The basic criteria for segmenting a market are customer needs. To
find the needs of customers in a market, it is necessary to
undertake market research.
Profilers are the descriptive, measurable customer characteristics
(such as location, age, nationality, gender, income) that can be
used to inform a segmentation exercise.
The most common profilers used in customer segmentation include
the following:
 Spring 2010

Profiler Examples
Geographic
• Region of the country
• Urban or rural
Demographic
• Age, sex, family size
• Income, occupation, education
• Religion, race, nationality
Psychographic
• Social class
• Lifestyle type
• Personality type
Behavioural
• Product usage - e.g. light, medium ,heavy users
• Brand loyalty: none, medium, high
• Type of user (e.g. with meals, special occasions)

Adarsh Avva
 Spring 2010

Roll No. – 511013900

Center Code – 03120

Program Name - MBA

Semester – Second

Subject – Production & Operations Management

Subject Code – MB 0044

Assignment Set – 1
 Spring 2010

Q 1. Explain the various automated systems for transfer of materials

in the production plant? Illustrate your answer by considering an
example of an automobile showroom

A. Basically, automation system comes to reduce labour power and

time in the production. Here we can see the evolution systems with
some examples. The goods requited by society were produces in
small quantities by craftsman who would know the need of the
community and produced them by their own hands with simple
tools. The apprentices or by another craftsman, who would make
them to meet the requests made.

The parts and components used to make these machines had to be

replaced when they wore making parts so that interchangeability
was achieved made setting up standards and specifications
important for meeting

The craftsmen gave way to engineers, workers, superiors and

inspectors. Division of labour became necessary to achieve
efficiencies and the jabs that became specialized. Competition has
necessitated improved quality, reduced sates and better services to
the customer.

Automation systems cost huge sums of money and therefore a deep

analysis of the various factors has to be done. For services,
automation usually means labour saving devices in education, long
 Spring 2010

distance learning technology helps in supplementing class room

instruction. The facilitating goods that are used are web site and
videos.

Automation in the banking sector has resulted in ATMs which same

the banks a huge amount customer satisfaction. Automation is ideas
when the service provided or the product manufactured is highly
standardized.

Some extent of automation can be designed even with

customization i. e. product or service a meant to produce or deliver
low volume specific to a requirement. The advantages of
automation is it has low variability and will be more consistent on a
repetitive basis.

The machines have sensing and control devices that enable them to
operate automobile. The simplest of them called machine
attachments replace human effort. They guide, locate, move and
achieve revise position by means of came, optical sensing. Load
sensing mechanisms and activate the controls to remove human
intention.

Robots are higher in the order of automation as they perform a

variety of tasks. They are designed to move movements according
to programmers written into the computer that inside them.
 Spring 2010

With the help of automation, inspection of component can be done

100% ensures highest quality identification and movement of
materials are helped by bar codes which are read and fed into the
system far monitoring quantity, location, movement etc. They help
the automated systems to start information and provide information
for effecting any changes necessary. To make effective use of
automated machines, we need to have the movement of materials
from and to different time as stores, automated, Automated
storage and Retrieval systems- ASRS- receive orders for materials
from anywhere in the production area, collect materials in the
works times. Computers and information systems are used for
placing orders for matters, give commands adjust inventory records
which show the location and quantity of materials needed.

Automated guided vehicle systems- AGVS – are pallet trucks and

unit load carriers follow embedded guide wires or paint strips to
destinations as programmed.

In an automobile showroom we can see all the work automatically

with latest machine.

Q 2. State the important considerations for locating an automobile

plant? Collect information on layout planning of an automobile plant
from various sources and furnish the same

A.
 Spring 2010

To locate an automobile company or plant many thing should be

consider. For an automobile plant automated flaw lines, automated
assembly lines, flexible manufacturing systems, global transition
rapid prototyping. Building manufacturing flexibility things are
necessity.

About the automated flow lines we can say it is a machine which is

linked by a transfer system which moves the parts by using handling
machines which are also automated, we have an automated flow
line.

Human intervention ma is needed to verify that the operations ate

taking place according to standards. When these cab be achieved
with the help of automation and the processes are conducted with
self regulation, we will have automated flow lines established.

In fixed automation or hard automation, where one component is

manufactured using services operations and machines it is possible
to achieve this condition. We assume that product life cycles are
sufficiently stable to interest heavily on the automate flow lines to
achieve reduces cast per unit.

Product layouts ate designed so that the assembly tasks are

performed in the sequence they are designed at each station
continuously. The finished item came out at the end of the line.
 Spring 2010

In automated assembly lines the moving pallets move the materials

from station to station and moving arms pick up parts, place them
at specified place and system them by perusing, riveting, & crewing
or even welding. Sensors will keep track of there activities and
move the assembles to the next stage.

The machines are arranged in a sequence to perform operations

according to the technical requirements.

The tools are loaded, movements are effected, speeds controlled

automatically without the need for worker’s involvement.

The flexibility leads to better utilization of the equipments. It

reduces the numbers of systems and rids in reduction of investment
as well as a space needed to install them. One of the major cancers
of modern manufacturing systems is to be able to respond to market
Demands which have uncertainties.

Prototyping is a process by which a new product is developed in

small number so as to determine the suitability of the materials,
study the various methods of manufactured, type of machinery
required and develop techniques to over come problems that my be
encountered when full scale manufacture is undertaken.

Prototypes do meet the specification of the component that enters

a product and performance can be measured on these.
 Spring 2010

It helps in con be reforming the design and any shortcomings can be

rectified at low cost.

Flexibility has three dimensions in the manufacturing field. They

are variety, volume and time. There demands will have to be
satisfied. In that sense they become constraints which restrict the
maximization of productivity. Every business will have to meet the
market demands of its various products in variety volumes of
different time.

Flexibility is also needed to be able to develop new products or

make improvements in the products fast enough to cater to shifting
marker needs.

Manufacturing systems have flexibility built into them to enable

organization meet global demand. You have understood how the
latest trends in manufacturing when implemented help firms to stay
a head in business.

Q 3. Who are the players in a project management? What are the

various roles and responsibilities of the players in a project
management?

A. The players:
Individual and Organisations
 Spring 2010

• That are actively involved in the project

• Whose interest may be affected positively or negatively by the
outcome success or failure of the project
• Exert influence over the project and its result
• Players are also called stakeholders of the projects
• Project Manager-the individual responsible for managing the
project
• Customer-the individual or organization who will use the
product-the end result of the project
• Performing organization-the enterprise whose employees are
most directly involved in doing the work of the project.
• Sponsor-the individual or group within or external to the
performing organisation that funds the project

Q 4. What are the various steps in project monitoring and

controlling a project?

A.
Monitoring and Controlling
Monitoring and Controlling consists of those processes performed to
observe project execution so that potential problems can be
identified in a timely manner and corrective action can be taken,
when necessary, to control the execution of the project. The key
benefit is that project performance is observed and measured
regularly to identify variances from the project management plan.
 Spring 2010

Monitoring and Controlling Process Group Processes

Monitoring and Controlling includes:
• Measuring the ongoing project activities (where we are);
• Monitoring the project variables (cost, effort, scope, etc.)
against the project management plan and the project performance
baseline (where we should be);
• Identify corrective actions to address issues and risks properly
(How can we get on track again);
• Influencing the factors that could circumvent integrated
change control so only approved changes are implemented
In multi-phase projects, the Monitoring and Controlling process also
provides feedback between project phases, in order to implement
corrective or preventive actions to bring the project into
compliance with the project management plan.

Q 5. Explain the necessity and objectives of SCM?

A.
SCM is the abbreviation of supply chain Management. It is
considered by many express worldwide as the ultimate solution
towards efficient enterprise management.

Now, we explain the necessity and objectives of SCM-

 Spring 2010

SCM is required by and enterprise as a tow to enhance management

effectiveness with a following organizational objective:

Reduction of inventory

Enactment in functional effectiveness of existing systems like ERP,

Accounting. Software and Documentation like financial reports
statements ISO 9000 Documents etc.

Enhancement of participation level and empowerment level

Effective integration of multiple systems like ERP, communication

systems, documentation system and secure, Design R&D systems
etc.

Better utilization of resources- men, material, equipment and

money.

Optimization of money flow cycle within the organization as well as

to and from external agencies.

Enhancement of value of products, operations and services and

consequently, enhancements of profitability.
Enhancement of satisfaction level of customer and clients,
supporting institutions, statutory control agencies, supporting
 Spring 2010

institutions, statutory control agencies, suppliers and vendors,

employees and executives.

Enhancement of flexibility in the organization to help in easy

implementation of schemes involving modernization, expansion and
divestment, merges and acquisitions.

Q 6. What are the steps involved in SCM implementation?

A. There is many steps which involved in SCM implementation are-

Business Process, sales and marketing. Logistics, costing, demand
planning, trade- off analysis, environmental requirement, process
stability, integrated supply, supplier management, product design,
suppiers, customers, material specifications, etc.

Some important aspect of SCM-

The level of competition existing in the market and the impact of

competitive forces on the product development.

Designing and working on a strategic logic for better growth through

value invention.
Working out new value curve in the product development along with
necessary break point.

Adarsh Avva
 Spring 2010

Roll No. – 511013900

Center Code – 03120

Program Name - MBA

Semester – Second

Subject –Operations Research

Subject Code – MB 0048

Assignment Set – 1
 Spring 2010

Q 1. Describe in details the different scopes of application of

Operations Research.

A. Different Scope of Application of Operation research

Any problem, simple or complicated, can use OR techniques to find
the best possible solution. This section will explain the scope
of OR by seeing its application in various fields of everyday life.

(i) In Defense Operations: In modern warfare, the defense

operations are carried out by three major independent
components namely Air Force, Army and Navy. The activities in
each of these components can be further divided in four sub-
components namely: administration, intelligence, operations and
training and supply. The applications of modern warfare
techniques in each of the components of military organisations
require expertise knowledge in respective fields. Furthermore,
each component works to drive maximum gains from its
operations and there is always a possibility that the strategy
beneficial to one component may be unfeasible for another
component. Thus in defense operations, there is a requirement to
co-ordinate the activities of various components, which gives
maximum benefit to the organisation as a whole, having maximum
use of the individual components. A team of scientists from
various disciplines come together to study the strategies of
different components. After appropriate analysis of the various
 Spring 2010

courses of actions, the team selects the best course of action,

known as the ‘optimum strategy’.

ii) In Industry: The system of modern industries is so

complex that the optimum point of operation in its various
components cannot be intuitively judged by an individual. The
business environment is always changing and any decision useful at
one time may not be so good some time later. There is always a
need to check the validity of decisions continuously against
the situations. The industrial revolution with increased division
of labour and introduction of management responsibilities has
made each component an independent unit having their own
goals. For example: production department minimises the cost of
production but maximises output. Marketing department
maximises the output, but minimises cost of unit sales. Finance
department tries to optimise the capital investment and
personnel department appoints good people at minimum cost.
Thus each department plans its own objectives and all these
objectives of various department or components come to conflict
with one another and may not agree to the overall objectives
of the organisation. The application of OR techniques helps in
overcoming this difficulty by integrating the diversified
activities of various components to serve the interest of the
organisation as a whole efficiently. OR methods in industry can
be applied in the fields of production, inventory controls and
marketing, purchasing, transportation and competitive strategies.
 Spring 2010

iii) Planning: In modern times, it has become necessary for

every government to have careful planning, for economic
development of the country. OR techniques can be fruitfully
applied to maximise the per capita income, with minimum
sacrifice and time. A government can thus use OR for framing future
economic and social policies.

iv) Agriculture: With increase in population, there is a need

to increase agriculture output. But this cannot be done arbitrarily.
There are several restrictions. Hence the need to determine a
course of action serving the best under the given restrictions. You
can solve this problem by applying OR techniques.

v) In Hospitals: OR methods can solve waiting problems in

out-patient department of big hospitals and administrative
problems of the hospital organisations.

vi) In Transport: You can apply different OR methods to

regulate the arrival of trains and processing times minimise the
passengers waiting time and reduce congestion, formulate
suitable transportation policy, thereby reducing the costs and time
of trans-shipment.
 Spring 2010

vii) Research and Development: You can apply OR methodologies

in the field of R&D for several purposes, such as to control and
plan product introductions.

Q 2. What do you understand by Linear Programming Problem? What

are the requirements of L.P.P.? What are the basic assumptions of
L.P.P.?

A. LPP – Requirements & Basic Assumptions

Linear programming focuses on obtaining the best possible

output (or a set of outputs) from a given set of limited resources.

Minimal time and effort and maximum benefit coupled with the
best possible output or a set of outputs is the mantra of any
decision-maker. Today, decision-makers or managements have
to tackle the issue of allocating limited and scarce resources at
various levels in an organisation in the best possible manner. Man,
money, machine, time and technology are some of these common
resources. The management’s task is to obtain the best
possible output (or a set of outputs) from these given resources.

You can measure the output from factors, such as the profits, the
costs, the social welfare, and the overall effectiveness. In several
situations, you can express the output (or a set of outputs) as
a linear relationship among several variables. You can also
 Spring 2010

express the amount of available resources as a linear relationship

among various system variables. The management’s
dilemma is to optimise (maximise or minimise) the output or the
objective function subject to the set of constraints. Optimisation of
resources in which both the objective function and the constraints
are represented by a linear form is known as a linear
programming problem (LPP).

Requirements of LPP

The common requirements of a LPP are as follows.

i. Decision variables and their relationship
ii. Well-defined objective function
iii. Existence of alternative courses of action
iv. Non-negative conditions on decision variables

Basic Assumptions of LPP

1. Linearity: You need to express both the objective function

and constraints as linear inequalities.

2. Deterministic: All co-efficient of decision variables in the

objective and constraints expressions are known and finite.
3. Additivity: The value of the objective function and the
total sum of resources used must be equal to the sum of the
 Spring 2010

contributions earned from each decision variable and the sum of

resources used by decision variables respectively.

4. Divisibility: The solution of decision variables and resources can

be non-negative values including fractions.

Q 3. Describe the different steps needed to solve a problem by

simplex method.

A.
The Simplex Algorithm

To test for optimality of the current basic feasible solution of the

LPP, use the following algorithm called simplex algorithm. Let’s
also assume that there are no artificial variables existing in the
program.

Steps to solve simple algorithm

1) Locate the negative number in the last row of the simplex

table. Do not include the last
column. The column that has negative number is called the work
column.

2) Next, form ratios by dividing each positive number in the

work column, excluding the last row into the element in the same
 Spring 2010

row and last column. Assign that element to the work column to
yield the smallest ratio as the pivot element. If more than one
element yields the same smallest ratio, choose the elements
randomly. The program has no solution, if none of the element in
the work column is non-negative.

2) To convert the pivot element to unity (1) and then

reduce all other elements in the work column to zero, use
elementary row operations.

3) Replace the x -variable in the pivot row and first column by x-

variable in the first row pivot column. The variable to be
replaced is called the outgoing variable and the variable that
replaces it is called the incoming variable. This new first column is
the current set of basic variables.

4) Repeat steps 1 through 4 until all the negative numbers in the

last row excluding the last column are exhausted.

5) You can obtain the optimal solution by assigning the

value to each variable in the first column corresponding to the row
and last column. All other variables are considered as non-basic
and have assigned value zero. The associated optimal value of
the objective function is the number in the last row and last
column for a maximisation program, but the negative of this
number for a minimisation problem.
 Spring 2010

Q 4. Describe the economic importance of the Duality concept.

A. The linear programming problem is thought of as a

resource allocation model where the objective is to maximise
revenue or profit subject to limited resources. The associated
dual problem offers interesting economic interpretations of the
LP resource allocation model. Consider a representation of the
general primal and dual problems where primal takes
the role of a resource allocation model.

Economic interpretation of dual variables:

For any pair of feasible primal and dual solutions,

(Objective value in the maximisation problem) = (Objective
value in the minimisation problem).

At the optimum, the relationship holds as a strict equation.

Note: Here, the sense of optimisation is very important.

Hence, for any two primal and dual feasible solutions, the
values of the objective functions, when finite, must satisfy the
following inequality.
 Spring 2010

The strict equality, z = w, holds true when both the primal and dual
solutions are optimal. Consider the optimal condition z = w.
Given that the primal problem represents a resource allocation
model, you can think of z as representing the profit in rupees.
bi represents the number of units available of the resource i.
Therefore, we can express the equation z = w as profit (Rs) =
(units of resource i) x (profit per unit of resource i) This means
that the dual variables yi, represent the worth per unit of
resource i.

Note: Variables yi are also called as dual prices, shadow prices and
simplex multipliers. With the same logic, the inequality z < w
associated with any two feasible primal and dual solutions is
interpreted as (profit) < (worth of resources).

This relationship implies that as long as the total return from all the
activities is less than the worth of the resources, the
corresponding primal and dual solutions are not optimal.
Optimality is achieved only when the resources have been
exploited to their fullest extent, which can happen only when the
input equals the output (profit). Economically, the system is
said to be unstable (non optimal) when the input (worth of the
resources) exceeds the output (return). Stability occurs only when
the two quantities are equal.
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Sensitivity Analysis

In linear programming, all model parameters are assumed to be

constant. However; in real-life situations, the decision environment
is always dynamic. Therefore, it is important for the management
to know how profit would be affected by an increase or decrease in
the resource level, by change in the technological process, and by
change in the cost of raw materials. Such an
investigation is known as sensitivity analysis or post optimality
analysis.

The results of sensitivity analysis establishes upper and lower

bounds for input parameter values within which they can vary
without causing major changes in the current optimal solution.

Q 5. How can you use the Matrix Minimum method to find the initial
basic feasible solution in the transportation problem.

A.
Matrix Minimum method

Step 1: Determine the smallest cost in the cost matrix of the

transportation table. Let it be cij. Allocate xij = min ( ai, bj) in
the cell ( I, j )
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Step 2: If xij = ai cross the it h row of the transportation table,

decrease bj by ai and proceed to step 3.

If xij = bj cross the it h column of the transportation table,

decrease ai by bj and proceed to step 3.
If xij = ai = bj cross either the it h row or the it h column, but
not both.

Step 3: Repeat steps 1 and 2 to reduce transportation table until all

the rim requirements are satisfied. Whenever the minimum cost is
not unique, make an arbitrary choice among the minima.

Q 6. Describe the Integer Programming Problem. Describe the

Gomory’s All-I.P.P. method for solving the I.P.P. problem

A. Integer Programming Problem and Gomories All – IPP Method

The Integer Programming Problem (IPP) is a special case of Linear

Programming Problem (LPP), where all or some variables are
constrained to assume non-negative integer values. You can apply
this problem to various situations in business and industry where
discrete nature of the variables is involved in many decision-
making situations. For instance, in manufacturing, the
production is frequently scheduled in terms of batches, lots or
runs; in distribution, a shipment must involve a discrete number of
trucks or aircrafts or freight cars.
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Gomory’s All – IPP Method

An optimum solution to an IPP is obtained by using the

simplex method, ignoring the restriction of integral values. In the
optimum solution, if all the variables have integer values, the
current solution will be the required optimum integer solution.
Otherwise, the given IPP is modified by inserting a new
constraint called Gomory’s constraint or secondary constraint.
This constraint represents necessary conditions for integrability
and eliminates some non-integer solution without losing any
integral solution. On addition of the secondary constraint, the
problem is solved using dual simplex method to obtain an
optimum integral solution.

If all the values of the variables in the solution are integers,

then an optimum inter-solution is obtained, or else a new constraint
is added to the modified LPP and the procedure is repeated till the
optimum solution is derived. An optimum integer solution will be
reached eventually after introducing enough new constraints to
eliminate all the superior non-integer solutions. The
construction of additional constraints, called secondary or
Gomory’s constraints is important and needs special attention.
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