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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.
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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
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4. Sources of finance available
5. The capital structure of a company
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 NPVIn Milliions
Years Revenue / Cost Loan Installment FI Installment PVF @ 14% NPV from Bank Loan NPV from FI Loan0 (50.00) - 1 (50.00) (50.00) 1 45.00 38.34 39.47 0.877 5.84 4.85 2 45.00 38.34 39.47 0.769 5.12 4.26 3 45.00 38.34 39.47 0.675 4.50 3.73 4 68.00 38.34 39.47 0.592 17.56 16.89 5 68.00 38.34 39.47 0.519 15.40 14.82 6 68.00 38.34 39.47 0.456 13.51 13.00 7 68.00 38.34 39.47 0.400 11.85 11.40 8 68.00 38.34 39.47 0.351 10.40 10.00 9 30.00 38.34 39.47 0.308 (2.56) (2.91) 10 30.00 38.34 39.47 0.270 (2.25) (2.55) 10 55.00 0.270 14.84 14.84
44.21 38.32 NPV
The company should expand its capacity
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Q 5. 2 What is the annual installment of bank loan?
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
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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.
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.
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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.
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
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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.
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
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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.
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.
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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
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
Spring 2010
Subject Code – MB 0047
Assignment Set – 1
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
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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.
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
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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 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
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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.
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
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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.
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.
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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 development has to be in accordance
to a given standard. The norms have to be strictly adhered
to.
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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 parties are
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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.
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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 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.
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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 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
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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 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,
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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 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
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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.
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;
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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 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
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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 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
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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.
Adarsh Avva
Roll No. – 511013900
Spring 2010
Center Code – 03120
Program Name - MBA
Semester – Second
Subject – Financial Management
Subject Code – MB 0046
Assignment Set – 1
Q 1. a. Explain the meaning of market with its features
A.
What is Market?
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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.
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
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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:
1. Each party has something that could be of value to other
party.
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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
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goods and services. Stocking and delivering, bulk breaking,
and selling the goods and 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
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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 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.
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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, 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
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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
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.
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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.
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
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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
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.
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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.
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
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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 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
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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. 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
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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
Locally manufactured laptops usually have a sound local
warranty that can span over a time period of a year and
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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
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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 BusinessEvery customer has equal value and represents a small % of revenue
There are a small number of big customers that account for a large % of revenue
Sales are made remotely, the manufacturer doesn't meet the customer
Sales are made personally, the manufacturer gets to know the customer
Products are the same for all customers. The service element is low
Products are customised for different customers. Service is highly valued
Purchases are made for personal use - image is important for its own sake
Purchases are made for others to use - 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 tender and negotiation
The purchase event is conducted professionally and includes tender and negotiation.
The exchange is one of transaction. There is no long-time view (financial services differ)
The exchange is often one of strategic intent. There is the potential for long term value
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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
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priced too high. For example, when the cellular services
started in India cost of the incoming calls and outgoing calls
were charged at Rs 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.
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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.
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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:
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)
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Adarsh Avva
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.
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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 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,
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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.
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.
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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.
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
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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.
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.
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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.
It helps in con be reforming the design and any
shortcomings can be rectified at low cost.
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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
• 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
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• 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.
Monitoring and Controlling Process Group Processes
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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-
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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,
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supporting 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.
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Adarsh Avva
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
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disciplines come together to study the strategies of
different components. After appropriate analysis of the
various 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
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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.
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
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minimise the passengers waiting time and reduce
congestion, formulate suitable transportation policy,
thereby reducing the costs and time of trans-shipment.
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
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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 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
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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 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
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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 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.
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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.
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:
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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.
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
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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.
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.
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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 )
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
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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.
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
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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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