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INDUSTRIAL MANAGEMENT



Importance of Management:- Accomplishment of Goals.

Effective utilization of resources

Sound organization

Providing vision and foresight

Harmony in work

Help and motivates employees in achieving personal objectives.

Development of society and nation.



MANAGEMENT AS SCIENCE OR ART

MANAGEMENT AS A SCIENCE:-

Science is a systematized body of knowledge pertaining to particular field

of enquiry.

Contains concepts, hypotheses, theories and principles to explain cause and

effect relationship between 2 or more factors. To be organized as science, a discipline should have:-

Have a method of scientific enquiry

Establish cause and effect relationship

Principles should be verifiable

Ensure predictable results

Universal applications

Management is systematized body of knowledge and the researchers uses

scientific techniques to collect and analyse data about human cause and

effect relationship.

Management is called as a science but its not a perfect science.



R easons for inexactness of management as science:-

Many principles of mgmt. not supported by research.

Difficult to establish cause and effect relationship

Applications of principles depends upon situations and factors.

Mgmt. deals with the people at work and it is very difficult to predict their behavior

accurately.

MANAGEMENT AS AN ART:-

Art signifies the application of knowledge and personal skills to brings out desired

result.

Science is learnt, an art is practiced.

Science is to seek knowledge and art is to apply knowledge.

Features of AR T:-

Denotes personal Skills

Signifies practical knowledge

Helps in achieving concrete results

Creative in nature



Management as an art :- Practice of management does involve the use of knowledge of

management concepts, principles and techniques.

Manager has to apply his personal skills to deal with various

problems in org.

Management is situational

Art of management can be mastered through continuous practice. Management is creative.

MANAGEMENT AS BOTH SCIENCE AND ART:-

Its both science and art.

Science as contains certain universal truth

Art as managing requires application of certain skills which are personal possession of manager.

Manager be a applied scientist, possess the specialised knowledge

of mgmt. and skills to put this knowledge into practice.

Its been remarked that management is the oldest of arts and the

youngest of science.



MANAGEMENT AS A PROFESSION

Profession ³ an occupation backed by specialised body

of knowledge and training and to which entry is

regulated by representative body.

R equirement of Profession:-

a) Specialised field of knowledge

b) R estricted entry based on the knowledge and training

c) R epresentative or professional association

d) Ethical code of conduct for self ± regulation.e) Social recognition

f) Professional fee.



ProfessionalProfessional CriteriaCriteria ManagementManagement

Specialised body of knowledge It has a systematised body of knowledge andprinciples

Entry based on education and

training

Entry does not require any prescribed qualification

and training

Professional Association No professional assc. Of which membership isessential. In India, AIMA but not essential to hold itsmembership to be a manager

Code of Ethics Managers are not bound by any common code of conduct.

Service responsibilities Service is not the only goal for management.Growing concern for social responsibility of mgmt.



Management can be considered a profession :-

Mgmt. is supported by well defined body of knowledge that

can be taught and learnt.

There is need for the formal education and training in

management to acquire competency for application of

management principles, techniques and skills.

C ertain associations of managers have been formed in

different countries in the world.

Several associations of Managers like AIMA have prescribed

code of conduct for their members.

Managers are aware about their social res ponsibilities that¶s

how they are guided by service motive.

Management cant be fully regarded as a profession:-

E ntry to management profession is not restricted .

Need not to have a all India re presentative association.

There are no ethical code of conduct for the managers.



DEVELOPMENT OF I.M.

History can be traced to the industrial revolution in

England and other European nations during 18th and19th century.

Development of different schools of mgmt. during

industrial revolution, rise of factory system, growth of

trade unionism, expansion of industrial trade,consumerism, etc.

Harold Koontz ³ Management theory Jungle´ due to

divergent direction of management thoughts.



Industrial Revolution:- R esult of invention from 1760 to 1820.

Need of inventions due to increased demand of products due

to widening of markets.

Beyond the capacity of the industry to meet increasing

demand with labor intensive techniques. Some prominent inventions:-

James Hargreaves µspinning genny¶ (1764), R ichard Arkwright µ

waterframe¶ (1779), Crompton µ Mule spinner¶ , Cartwright µ

Powerloom¶, and invention of steam engines.

Significant contributions of Industrial revolution were:-

i. Growth of engineering industries

ii. R ise of chemical industries

iii. Use of power driven machines.

iv. R evolution in iron making

v. Advancement in coal mining.

vi. Development of means of transport.



Impact of industrial revolution on

IndustrialManagement:-

Large scale production

Change of form of ownership

Factory system

Specialisation



EMINENT CONTRIBUTORS

Robert Owen (1771-1858):-

Started factory at Manchester for manufacturing textile

machinery.

Became Managing director of Charlton Twist company.

Began cooperative moment in 1828 in R ochdale, England. R eferred as Father of Personnel Management.

Worked for developing spirit of coop. between management

and works.

Practiced the idea that workers should be treated as human,

made prov. like reduced working hours, housing facilities,education of workers and children, etc.

He preached personnel mgmt. pays dividend to the employees

and is an essential part of every manager¶s job.



Charles Babbage (1792-1871):- British mathematician at Cambridge University from 1828 to 1839.

Invented mechanical calculator in 1832 and conceived analytical

machine in 1833 later termed as computer.

Known for the book ³ On the Economy of Machinery and

Manufacture´ (1832).

Perceived that methods of science and mathematics could be applied

to solve factory problems.

He was an mathematical management scientist

Especially interested in economics of division of labor and the

development of scientific principles.

Daniel C. McCallum:- Tried to find out solutions to managerial inefficiencies, plaguing rail

roads at that time.

Approach to run railroad was one of system, commonsense, reports

and control.

Initiated job descriptions, promotions on the basis of merits andmade eo le res onsible and accountable for their o erations.



APPROACHES TO MANAGEMENT

Empirical Approach.

Operational Approach

Contingency Approach.

Systems Approach

Quantitative Approach

Behavioral Science Approach

Human Relation Approach.

Management Process Approach

Scientific Management Approach



Scientific Management:- Industrial Revolution in England necessitated the

development of new management principles and practices.

Need of bringing people together for the purpose of working

together.

Establishment of formal organizational structure, formal linesof authority, factory systems and procedures.

Management movement known as ³ Scientific Management´

Fredrick Winslow Taylor (1865-1915), emphasized the need

the need for adopting scientific approach.

Important aspects, standard time, standard output, standardcost, standardisation of production process, change in the

attitude of management and workers.

Supporters, Henry L. Gantt, Frank Gilberth, Lillian Gilberth,

Harrington Emerson, etc.



Management Process Approach:- Perceive management as a process consisting of planning,

organising, commanding and controlling.

R egards management as a universal process.

The process school is also called as ³ Traditional´ or

³Universalist´ school. Henry Fayol is regarded as the father of this school.

Supporters, Oliver Sheldon, J.D. Mooney and Chester I.

Bernard.

Human Relations Approach:-

R ecognising the importance of human element in org.

Elton Mayo, Hawthrone Experiment and investigated the

myriad of informal relationships, social cliques, patterns of

communication and informal leadership.

Lead to trend known as ³ Human relation movement´



Behavioral Science Approach:- Utilises and uses the methods and techniques of social sciences such

as psychology, sociology, social psychology and anthropology.

Pioneer of this school, Gantt and Munsterberg.

As per them, study of management must be centered around the

people and their interpersonal relations.

Concentrated on motivation, individual drives, group relations,

leaderships, group dynamics and so forth.

Contributors, Abraham Maslow, Fredrick Herzberg, Victor Vroom,

Douglas McGregor.

Quantitative Approach:- Using of scientific tools for providing scientific basis for managerial

decisions.

Management problems can be expressed in terms of mathematical

symbols and relationships.

Linear programming, CPM, PER T, Break even analysis, Game

theory and queuing theory widely popular.



Systems Approach:- Composed of elements or subsystems that are related and

dependent on each other.

Based on generalization that an organisation is a system and its

components are inter-related and independent.

Basic feature, more importance given to the overall effectiveness

of the system rather then sub-system.

Founder, Chester I. Bernard.

Emphasises on the communication and decision process through

out the organisation.

Contingency Approach:- Also known as situational approach.

Basis, internal functioning of organisation must be consistent

with the demands of technology and external environment and

needs of its members.

Suggest, there is no one best way to handle any management

problem.

3 major parts :- i) environment, ii) management concepts,

principles and techniques , iii) contingent r¶ship between the two.



Operational Approach:- Advocated by Koontz and O¶Donnell.

Recongnises there is a central core of knowledge about

managing which exist in management such as line and staff,

patterns of departmentation, span of management, managerial

appraisal and various managerial control techniques.

Regards management as universally applicable body of knowledge that can be brought to bear at all levels of managing and

in all types of enterprises.

Also recognises actual problem manager face and the envt. in

which they operate may vary between enterprises and levels.

Emperical Approach:- Management is the study of the experience of managers.

Knowledge based on experience of successful managers can be

applied by other managers in solving problems and in making

decisions.

Based on the analysis of the past experience and uses the case

method of study and research.



APPLICATIONS OF INDUSTRIALMANAGEMENT

elps in development of the org. for achievement of group goals.

Helps in finding out efficient and economical work methods.

Helps to find out the economic lot size work required during processing.

Helps in schedule of work.Tries to find out standard performances.

Maintains discipline though control over the employees.

Keeps co-ordination among the staff at various levels.

Proper distribution of work and machines among the workers to secure

maximum output.

It improves efficiencies.Suggest new ideas and improvements.

Helps in cost control, rating and budgetary control.

Makes arrangement for payment on scientific basis.

Takes care of trade, finance, insurance, store and banking policies.

Gives due importance to labor grievances and their psychology.Helps in improving the competitive position of the organisation.



SCOPE OF IM

EngineeringManagementEngineeringManagement

Improvement of work conditionImprovement of work condition

InternalInternal

Vendor Development,

Customer Need Analysis, etc.

Vendor Development,

Customer Need Analysis, etc.

ExternalExternal

Lighting, Noiseandvibration,

fatigue,ventilations, etc.

Lighting, Noiseandvibration,

fatigue,ventilations, etc.

Improvement inManagerialDecisions

Improvement inManagerialDecisions

Organizationalproblems:-Leadership,

Motivation, Automation, Org.

culture, etc.

Organizationalproblems:-Leadership,

Motivation, Automation, Org.

culture, etc.

Improvement inWorkplace,method andprocedures

Improvement inWorkplace,method andprocedures

Work study,system analysis,layout planning,

planning, directing,control,

scheduling, etc

Work study,system analysis,layout planning,

planning, directing,control,

scheduling, etc

Improvement inproduct and

services

Improvement inproduct and

services

TQM, Value engg.,Business process

re-engg.,Benchmarking.

TQM, Value engg.,Business process

re-engg.,Benchmarking.



ACTIVITIES OF I.M. Manufacturing Engineering:-

i. Equipment selection and specialization

ii. Design of tools, jigs and fixtures.

Methods of Engineering:-

i. WorkMeasurement

ii. Determination of allowances

iii. Computation of standard time

Production planning and control:-

i. Material Management ( Raw material, semi-finished , finished and

components)

ii. Machines and manpower iii. Routing

iv. Estimating

v. Scheduling

vi. Dispatching

vii. Expediting

viii. evaluation



Plant layout and material handing.

Organization management

Inspection and quality control

Wages and incentives

Budgetary control and cost control.



FUNCTIONS OF INDUSTRIALENGINEERING.

Organization and management methods.

Plant location and plant layout

Materials handling methods. Methods engineering.

Time study

Production, planning and control.

Statistical quality control Cost control

Job evaluation

Wage incentives

Operation research.



PRODUCTIVITY



DEFINITION No single definition of productivity.

European Productivity Council ³ is an attitude of mind. It is a

mentality of progress , of the constant improvement of that

which exist. It is the certainty of being able to do better today

than yesterday, and continuously. It is the constant

adaptation of economic and social life to changing conditions;

it is the continual effort to apply new techniques and

methods. It¶s the faith in human progress´.

Another definition widely acceptable andcommonly used ³ productivity as the ratio of output to

input in a productive system´.

As per definition productivity can be improved by either:- Producing more output with the same inputs, or

Using lesser inputs to produce same output.



Different views on productivity from different perspectives:-

Economics:- effect of envt. and govt. regulation.

Industrial engg.:- Stress on effects of methods and work flow onproductivity.

Psychologist and management:- job design or other human relationapproach.

Complexity to define productivity, as it encompasses inputs,

outputs ad the conversion process of techno-social-commercial environment of production system.

Difficult to measure when end product is multiple commodities,not homogeneous in nature and has a number of by-products.

Out is converted into standard hours i.e. time allowed for a product delivered to stores by an individual worker or a group of workers.

Eg. Total time allowed to product 1 unit = 15 mins (.25 hrs.)

Units to be produced: 1000 units

Total time = .25 x 1000 = 250 hours.

Standard time is calculated with consideration to ideal situation with

respect to normal speed of a worker and his willingness to work.



Productivity = Labor utilisation X Labor efficiency

= Standard hours X Available shift hours

Available shift hrs. Actual hours worked

= Standard hours/ Actual hours worked

In capitalist industry labor productivity has little significance.



PRODUCTIVITY, EFFICIENCY AND EFFECTIVENESS

Efficiency:- It is the ratio of actual output attained to the

standard expected output. Indicates how well the resources

are utilised to accomplish the targets or results.

Effectiveness:- Degree of accomplishing the objectives. Productivity:- The combined result or effect of efficiency

and effectiveness.

Productivity Index:- Performance achieved

Input resources consumed

= Effectiveness/Effeciency



Efficiency, Effectiveness and productivity of a production system



DIFFERENT APPROACHES Partial Productivity:-

Defined on the basis of class of the input being considered.

Eg. Increase in labor and its impact on the increased output isrepresented by productivity.

Same for capital productivity, material productivity, etc. Advantages:-

Good diagnostic measure to identify areas where improvements may be done.

Easy to calculate as independent of other inputs.

Easy to understand.

Easy pin-pointing the logic for improvement.

Easy to benchmark (compare) with other industries.

Data may be easily generate

Limitations:- Misleading if used out-of-context.

Doesnt contain overall effect of the system of performance.

Focused areas of improvement are difficult to identify.

It gives the myopic view of performance.

Misses holistic approach.



Productivity of Labor = Output

Number of workers or No. of man hours

Man Hrs = No. of workers employed x No. of hrs. worked.

Capital Productivity = Output

Total Capital Employed

Productivity of Material = Output

Material

Productivity of machine = Output

Machine Hrs. worked

Productivity of Land = Output

Area of Land used.



TOTAL FACTOR PRODUCTIVITY Ratio of net input to the sum of labor and capital

inputs.

Net output = Total output Intermediate goods or services

Labor + capital inputs Labor + capital Input Advantages:-

Relatively easy to compile data from company records

Preferred as easy to compare in cross-industry context.

Limitations:-

Many important inputs like material , energy, etc., are ignored. Net-output does not reflect the efficiency of prod. System in a

proper way.



TOTAL PRODUCTIVITY It¶s the ratio of total output to the sum of all input factors.

Advantages:-

Considers all the outputs and inputs factors.

More accurate representation of real economic performances.

Easy for top management to understand the company

performance.

If used with the partial productivity, areas of improvement may

be identified.

Easy for cost accountants to compare.

Easy to do sensitivity analysis.

Limitations:-

Difficult to generate company wise and sector wise data.

Many indirect measures of input/output are ignored.

TPI = Total production of goods and services

Labor + Capital + Materials + Power



PRODUCTIVITY AND PROFITABILITY Basic Productivity Ratio:- Prod. = Output/Input.

Productivity may be measured in terms of physical units,

monetary units, depending upon the availability of data and

requirement of specific situations. Increase in the productivity occurs when the ratio of output

to input rises from one period to the next.

Profitability = (Revenue ± Cost)/ Investment

Profitability can be increased by reducing costs and that

would also increase the productivity. A decrease in the price of the product may lead to

decrease profitability even though productivity my be rising

or vis-à-vis.



IMPORTANCE OF PRODUCTIVITY

Increase inProductivity

Reduction inCost

Increase inProfits

Competitiveadvantage

BetterQuality of

life



FACTORS AFFECTINGPRODUCTIVITY

Categories of factors

Internal factors:-

a) Technological factor :-

Size and capacity of plant

Product design and standardisation

Timely supply of material and fuel

Rationalisation and automation measures

Repairs and maintenance

Production planning and control

Plant layout and location

Material handling system

Inspection and quality control

Machinery and equipment used

R

esearch and development Inventory control.

Internal Factors or controllable

External Factors or uncontrollable



b). Human Factors:- Existence of adequate skilled personnel in the org. for increasing the

productivity.

Two forces which affect the productivity of human labor are:-

i. Ability to work

ii. Willingness to work.

c). Financial Factors:-

Adequate amount of capital required for running the org.

d). Material and Energy:-

Efforts to reduce consumption of energy and materials.

Factors to be considered:-

i. Selection of quality material

ii. Control of wastage

iii. Effective stock control

iv. Development of sources of supply

v. Optimum energy utilization and energy savings.



External Factors:- Natural factors ( physical, geographical and climatic conditions)

Sociological Factors ( social customs, traditions and social institutions)

Government policy (industrial policies, licensing policies, taxation

policy, etc.

Managerial Talent ( Professional managers)



FACTORS FOR INCREASINGINDUSTRIAL PRODUCTIVITY

Improved raw materials

Better technology

Scientific selection and training of workers

Work study

Research and development

Good working conditions

Provision for incentives

Harmonious relationship Quality and cost consciousness

Workers participation in management

Quality Circles (small group of workers which regularly meets to

discuss problems, investigate causes, recommend solutions and

authorised to take corrective actions)



PRODUCTION SYSTEMS Process by which goods and services are created.

Other words, conversion of raw materials into semi-finished ad finished products with the help of certain

production process.

Aim of any prod. system is produce economically thegoods and services required by the customers.

Essential to plan, organize, direct and control.

All these activities together known as production

management.

Performed by the production manager.



PRODUCTION MANAGEMENT

Concept of Production:- Traditionally used with the reference to manufacturing activity

resulting in output of goods.

Scope have been widened as its also include the production of

services, as banking, insurance, teaching, defense , etc. Production function of acquiring inputs ( materials, capital,

manpower, etc.) and transforming them into goods andservices desired by customers.

Output it measured in terms of predetermined standards of quantity,quality and time schedules and provides feedback to input andtransformation subsytems for corrective actions.

Inputs: humans,

financial , physical,

technological.

Transformat

-ion process

Outputs:

goods and

services

Control

Input-output model



Production Management:- As per Elwood S. Buffa, Prod. Mgmt. deals with decision

making related to production process, so that resulting goods

and services is produced according to the specifications, inthe amounts and by schedule demanded and at minimumcost.

In simple words, prod. Mgmt. deals with the managerial functionsrelated to the design of the production system and operationand control of the production system i.e. production planning andcontrol.



FUNCTION AND SCOPE OF

PRODUCTION MANAGEMENT

Design of product

Design of production system

Production planning and control

Selection of location

Layout of plant

Selection of plant and equipment

Research and development



TYPES OF PRODUCTION SYSTEM

Prod. system a framework within which conversion of input into output occurs.

Types of production system:- A. Production or continuous manufacturing.

a) Line production or synthetical industries.

b) Flow production or analytical industries

B. Job production

C. Intermittent production



CONTINUOUS PRODUCTION

Where facilities are standardised as to routines and flowsince inputs are standardised.

Involves continuous production of goods in anticipation of customer demand rather then in response to customerdemand.

Eg. Petroleum, chemical, cement, steel and sugarindustries.

Classified: (i) Flow or analytical industries (ii) Line orsynthetical industries.

Flow or analytical industries:- Breaks up the material into several parts along with the processor

production.

Arrangement is not flexible.

Eg. Oil refinery.



Mass Production or synthetical industries:- Involves mixing upto two or more materials to manufacture a product.

Identical particles are produced in vary large quantities.

Eg. Electrical appliances.

Continuous manufacturing process lends to standardizationof prod. techniques and to mechanization, in order to keep

labor cost comparatively lower. Main characteristics :-

Flow of material is continuous with little or no queuing at any stageof processing.

Machines and plant layout ( Special purpose machines and plant and assembly stages are laid out on the basis of product layout).

Material handling comparatively less, firstly materials move throughshort distance between stages and secondly material handling ismechanised by conveyors and transfer machines.

Relatively low skilled labor is necessary.

Manufacturing cycle time is very short.

Supervision is relatively easier as only few instructions are required.

Interruptions due to breakdowns and absenteeism seriously affect rod.



JOB ORDER PRODUCTION Manufacture of products to meet specific customer

requirements of special orders.

Quantity is usually small.

Mainly concerned with special projects, models, proto-types,special machinery or equipments to perform specialised and

specific tasks, components or sub-assemblies to providereplacement or repairs.

3 types of on the basis of regularity of production:-i. A small number of pieces produced only once.

ii. A small number of pieces produced intermittently when the need arises.

iii. A small number of pieces produced periodically at a known intervals of time.

Planning become complex as one order all together different from the other.

Skilled labor is required to handle variety of jobs.

Eg. Brick making, shoe industry, customized machine making.



Output is mainly governed by the plant capacity andimmediate increase in plant capacity is impractical.

Scheduling is dependent on the assessment of productiontimes.

Main Characteristics:-

Small production runs, single or product designed andmanufacture strictly to customer specifications.

Flow of materials and components between different stages,highly discontinuous due to imbalanced operation.

Relatively longer manufacturing cycle time as relatively longdelays occur due to lack of materials, imbalanced work flow, designchanges , etc.

Machines are arranged according to process layout as it differfrom product to product.

Highly skilled and versatile workers are necessary.

Highly competent general engineers used for close supervision.

Unit cost of production is high as cannot take advantage of largescale buying and automation.



BATCH PRODUCTION Manufacture of number of similar articles, either to meet a

specific order or to satisfy continuous demand.

When the production of particular batch is completed, plant and equipment can be used for the production of similar or

other products. 3 types under batch production:-

i. A batch produced only once.

ii. A batch produced repeatedly at irregular intervals when the needarises.

iii. A batch produced periodically at known intervals to satisfy

continuous demand. 2 principle problems:-

Size of the batch ( number of components to be produced per lot)

Scheduling of production.

Solution depends on whether the production is governed

by the external orders or whether the plant is producingfor internal consum tion.



Characteristics:- Characterised by short production run and frequent changes in set

ups.

It needs high investment.

Planning, routing and scheduling changes with fresh batch of orders.

Skilled labor capable of handling variety of jobs is required.

Supervisors need considerable knowledge of specific process. Plant and equipment are procured and arranged to obtain flexibility.

Material handling is less as compared to job order production.

Disruptions due to machine breakdown, absenteeism do not seriouslyaffect production as another machinery can be used, another operatorfrom another machine can be shifted.

Eg. Electronic goods, medicines, eatable products, etc.



CHARACTERISTICS OF PRODUCTION

SYSTEMSCharacteristics Job order type Batch

ProductionContinuousproduction

Examples Prototype models,machine tools, spcl.Projects, large turbogenerators, shipbuilding material, etc.

Shoe-making, clothmanufacturing, castingprocess, chemicalplants, etc.

Automobile industry,electrical appliances,household appliances,sugar mills, toy manf.Co., glass manf., etc.

End Product qualityand product design

Non-standard. Verysmall. The product design changes fromone order to another

Standard (similar) widerange of products aremanufactured in smallquantities of lots. Theproduct design changesfrom lot according to

product specifications

Standard (identical).Few standards productsare manufactured inlarge quantities. Theproduct design is to bedone only once.

Equipment Used General Purpose General Purpose Special purpose

Type of plant layout Process Plant (functional)

Process layout orcombination

Product layout

Skill of Worker Highly skilled to handlespecial jobs

Skilled since there isfrequent changes in

product design machineset up for each lot

Semi-skilled orunskilled. Since

manufacturing activitiesbecome routine function

Characteristics Job order type Batch production Continuous



Characteristics Job order type Batch production Continuousproduction

Supervising difficulties Much Less Quite less

Material handling

equipment

Mobile Less mobile, conveyors

can also be used

Built in type wide scope

for mechanised materialhandling systems

In Process inventories High Relatively low Low, since production iscontinuous

Unit Cost of item High Less Quite less

Prior Planning Complex Easy Very easy

Control Complex Easy Very easy

Balance of load Easier and flexible Relatively difficult Very difficult coz of perfect balancing of prod.Line

Job instructions Complex and in details asthe job changes everytime

Few job instructions whenthe prod. of another lot begins.

Only at the out set of new job. Once instructionsgiven becomes routine

Investment in machineand equipment

Few machines arerequired as arranged inprocess layout.Investment in machine is

less

Investment in machinescomparatively more

High investment inmachine since there maybe duplication of machinefor each production line



ORGANIZATIONAL OWNERSHIP

Firm an ownership organization which combines factorsof production in a plant for the purpose of producing goodsor services and selling them at profit.

Selection of type of ownership:- Size and nature of business to be started

Technical difficulties.

Market competition and scope of the articles in the market.

Capital required

Limitations and restrictions put forth by the Govt. in connection

with grant of loans , foreign exchange and other such things.



TYPES OFOWNERSHIP

PrivateEnterprise

Individualownership

PartnershipJoint Stockcompanies

Private Ltd. co.

Public Ltd. co.

Co-operativesector

enterprise

Producer co-op. society

Consumer co-op.

Housing co-opsociety

Credit co-opsociety

Public sectorEnterprise

Govt. Deptt.

Govt. co.

Statutory corp.

StatutoryBoard.



INDIVIDUAL OWNERSHIP

Also known as single proprietorship or one man business

Simplest and oldest form.

Individual entrepreneur supplies the entire capital.

Organises and manages and take entire risk.

Have the entire authority and responsibility for decision making,policy making and working.

Profits and losses are of his own.

Can be started by anyone having initiative, tact, selling aptitudeand little capital.

Legal Liability:- covers all his possessions and creditor can collect

his personal property. Applications:-

For small scale business requiring small capital which can be spared byone man. Eg. Agriculture, cottage industries, retail trade, etc.

Where the risk cover is not to heavy.

Where management by one person is possible.

Where local market is available.



Advantages:-

Simple and easy

Least legal formalities

Quick decisions and prompt actions

Quality production

Better labor relationship

Personal attention to customers

Small capital Maintenance of secrecy

Incentive

Flexibility.

Disadvantages:-

Limited capital

Unlimited liability Personal limitations

Small income

Cannot compete with a big business

Short life ( if a owner dies business may collapse

Division of labor is not possible (one man show)

No economies of large scale.



P ARTNERSHIP ORGANIZATION At one stage of development it becomes impossible for one man to

control the business and to contribute the necessary capital.

Enters into a partnership with other person who can provide theassistance as well as capital for business.

Partnership may be formed to start a new business altogether.

Formed usually to combine capital, labor and varied skills.

Partnership is owned by 2 or more people (upto 20).

Shares powers, responsibilities and profits according to agreement.

As per Indian Partnership Act, 1932 The relation between twoor more persons who have agreed to share profit of a business,

carried on by all or any of them acting for all. Formation:-

Formed either verbally or written agreement (preferred).

Written agreement is known as Partnership Deed.

Contains terms and conditions relating to partnership and regulations governinginternal management.

Lay down rights and duties of partners.

Have to be duly stamped and sealed and registered in Court of Law.



Enjoys legal status and serve as legal evidence.

Contains of Deed:- Name of the firm

Nature of business

Date of starting of business

Duration of partnership

Rate of interest in the capital invested.

Money contributed by each partner. Allotment of managerial functions among partners.

Share profit and loss and proportion.

Salary if any allowed to managing partners.

Basis of inclusion of new partners.

Amount which can be withdrawn by each partner.

Aim of partnership and manner of dissolution.

Provision of arbitration for settling the disputs.

Statement to be prepared by partners containing:- Name of the firm.

Place of business principal place and branches if any.

Name and addresses of all partners

Date of joining the firm in case of every partner.

Duration if any.



TYPES OF P ARTNERS

Participate in the working

Jointly responsible for liab., obligations anddefects.

General Partner

Liability and debts limited to the extent of capital.

Not entitled to interfere in the administation

Limited partner

Take active part in the formation and management of business and may also get salary in addition of profit.

Active or ManagingPartner

Dont take active part in business.

Contribute capital and get the part of profit.

Sleeping and silent partner

Lend their reputed name for the companys reputation

Dont invest money nor take part in the management.Nominal Partner

Below 18 yrs of age.

Allowed with the consent of other partners.

Liability limited to their investment.Minor Partner



Advantages:- Easy formation

More capital

Diverse talent

Less possibility of error of judgement

Prompt decisions

Large economies

Personal factor ( personal relationship with employees and the customers) Division of labor

Simple dissolution

Cautious and sound approach.

Disadvantages:- Unlimited liability

Short life ( death or retirement of any partner, it can come to an end) Insufficient capital

Disagreement

Less secrecy

Non-transfer of partnership

No direct relation between efforts and rewards

Lack of public confidence.

Parameter Individual ownership Partnership



p p

Membership Individual owner Minimum 2 and max. 50

Formation No agreement is required Through Partnership Deed

Capital Limited capital Comparatively larger capital

Registration Not required Necessary under the Partnership Act, 1932

Risk/Profit Individual owner bear entire risk andenjoy entire profit

Risk spread among partners andprofit is shared as per agreement

Management Individual manages entire business Shared by the partners

Secrecy Individual owner can easily maintainthe secrets

Can be leaked if partner leaves thebusiness.

Soundness ofDecisions

Individual not be expert in all aspectsof business

Problem examined from more thanone view point hence decisions aremore sound

Suitability For small scale business Small as well as medium scalebusiness

Division of labor Not possible Partners may divide the workamong themselves.



JOINT-STOCK COMP ANY

Formed and registered under Indian Companies Act, 1956.

Capital is contributed by a large number of persons, in theform of shares of different values.

The purchaser of shares are known as shareholders.

Managing body i.e. Board of Directors, elected byshareholders.

Definition of company an artificial person having anindependent legal entity and a perpetual succession withdistinctive name and a common seal having a commoncapital divided into shares of fixed value which aretransferable and carry limited liability.



CHARACTERISTICS

Created by registering or incorporating an association of persons under the Company Act.

Has a separate legal entity distinct of its members.

Artificial person

Perpetual life and a very stable existence.

Have a common seal.

Separation of ownership from management.

Limited liability of shareholders.

Lower tax liability. Easy transferability of shares

Wide distribution of risk of loss.

Large membership

Statutory regulations provided under Indian Companys Act,

1932.



Definition of Joint-stock company legal business ownedby the shareholders having limited liability and managedby an elected Board of directors.

Formation:- Promoter prepares a scheme of business.

Secure the cooperation of 6 more persons ( min. 7 to form a co.).

Promoters prepares the following documents:- Memorandum of association

Articles of association

List of persons who have consented to be the Directors of the company along withthe consent in writing of such persons.

Declaration by an advocate confirming all the requirement of Act fulfilled.

Name and addresses of promoters.

Memorandum of Association contains:- Name of the company

Its name and objectives

Location of head office.

Amount of share capital

Kind and value of each share. Declaration of limited liabilit .



ShareholdersBoard of Directors

Auditor

Executivecommittee

GeneralManager

Sales deptt.

Purchase deptt.

AccountingDeptt.

Production

Deptt.

Bankers

Organization structure of Joint-Stock company.



TYPES OF JOINT STOCK

COMP ANIES 2 types of joint stock companies:-

Private limited company

Public limited company

Private Limited Company:-

Capital collected from the private partners, some may be active whileothers being sleeping.

Restricts the right to transfer shares and avoid public to take up shares

Number of member between 2 to 50, excluding employee and ex-employee shareholders.

Need not to file documents like consent of directors, list of directors, etc.

with the Registrar of Joint Stock Companies. Need not obtain certificate of commencement of business from the Registrar.

Need not to circulate, the balance sheet, P /L account, etc. among itsmembers, but need to hold its annual general meeting.

Must get its account audited.

Have to send a certificate along with the annual return to the Registrar

stating does not have shareholders more than 50 excluding employee and ex-employee shareholders.



Public Limited

Company:-

Capital is collected from the company by the issue of shares.

Number of shareholders should not be less than 7, no limit for themaximum number of shareholders.

Have to file the documents like consent of Directors, list of directors,directors contract, etc., along with memorandum of association andarticles of association.

Have to issue prospectus to the public.

Have to allot shares within 180 days from the date of prospectus.

Can start business only after getting the certificate of commencebusiness.

Has to hold statutory meeting and to issue a statutory report toall members and also to Registrar of companies.

Easy transferability of shares.

Directors are subject to rotation

Have to get the account audited every year by registered auditor.

Send financial statement to all its members and to the registrar.

Had to hold general meeting every year.

Managing agents gets a fixed percentage of net profit every year.



Advantages:- Large capital

Limited liability of members

Transferability of shares.

Perpetual succession.

Specialist services

Risk is shared.

Have stability, efficiency and flexibility of management.

Disadvantages:- Too much legal formalities.

Managed by big shareholders.

Managed by the high paid official and objectives might contradict that

with of owners. Commitment of frauds are possible.

BODs can use their position for personal profits ( sell or purchase of shares)

Difficult to maintain secrecy.

Team spirit lacks.

Lack of accountability due to divided responsibility.

.No. Particulars Pvt. Ltd. Public Ltd.



1. Membership Confined to the close friends andrelatives, they contribute for capitaland public can not be invited.

Its open to the General public and anyperson can contribute and becomeshareholders.

2. Limits tomembership

Min. 2 and max. 50 Min. 7 and no max. limit.

3. Election ofdirectors

No need of holding statutory meetingto elect directors

Statutory meeting has to be held andthe shareholders elect the directors.

4. Resale of shares Cannot be resold or transferredwithout the consent of the co.

Shares can be easily resold and transferwithout the co. consent.

5. Audit of Accounts No legal provision of the audit of co.saccount.

Accts. have to be audited andcirculated among the members.

6. Min. capital Can be started with any amount without any legal binding

Min. lay down capital is legally requiredbefore starting of a business.

7. Name Has to use words Pvt. Ltd. at the

end of its name

Has to use only the word Ltd. at the

end of its name.

8. No. of Directors Min. 2 Min.3

9. Legal Control Less legal controls Regulations are more strict

10. Remuneration of

Directors

Less restrictions for Directors

remuneration

Remuneration of directors is restricted

to 11% of net profit.



COOPERATIVE ORGANIZATIONS

( SOCIETIES) Due to the hardships suffered by exploited class compelled

it to unite for their economic uplift through self and mutualhelp.

Lead to the evolution of cooperative movement.

Industrial coop. and consumer coop. were developed inGermany.

Definition of Coop. Organization:- it is a form of org., wherein persons, irrespective of caste, creed ad

religion voluntarily associate together as human beings, on the basis of

equality for the fulfillment of their common economic interest. As per ILO, A coop. org. is an association of persons, usually of

limited means, who have voluntarily joined together to achieve acommon economic even through the formation of a democraticallycontrolled organization, making equitable contributions to the capitalrequired and accepting a fair share of risks and benefits of theundertakings.



FEATURES

Voluntary organizations

Open memberships

Economic and democratic management

Profit is not important

Spirit of cooperation

Unity

Common interest

Cooperative status



AIM AND OBJECTIVES OF

INDUSTRIAL COOPERATIVES@ To purchase and supply raw materials, tools and equipment

to members.

@ To secure contracts and execute them with the help of

members.@ To market the finished goods of members.

@ To purchase machinery for giving on hire to members.

@ To borrow funds from members and non-members.

@ To grant loans and advances to members on the security of

raw-materials and finished goods belonging to them.

@ To undertake all such activities as are conducive orincidental to the accomplishment of aforesaid objectives.

@ To safeguard the interest of poorer sections of community.



FORMATION

Application to be submitted to the Registrar of Cooperative societies.

Application provide all essential information like name andaddress of the society, its aims and objectives, particulars

of share capital , etc.

Application should be signed by atleast 10 members.

Should be accompany duplicate copies of Bylaws i.e. rulesand regulation governing internal organization andmanagement of the society.

Registrar after scrutiny of documents will issue acertificate of registration and the society will be formed.



Producerss Cooperativesociety

Consumers CooperativeSociety

Housing Cooperative Society Credit Cooperative Society.

TYPES OFCOOP.

SOCITIES

unit-1 (industrial management))

Documents