Practicing the CBSE Sample Papers for Class 12 Business Studies with Solutions Set 2 allows you to get rid of exam fear and be confident to appear for the exam.
CBSE Sample Papers for Class 12 Business Studies Set 2 with Solutions
Time: 3 Hours.
Max. Marks: 80
General Instructions:
- This question paper contains 34 questions.
- Marks are indicated against each question.
- Answers should be brief and to the point.
- Answers to the questions carrying 3 marks may be from 50 to 75 words.
- Answers to the questions carrying 4 marks may be about 150 words.
- Answers to the questions carrying 6 marks may be about 200 words.
Question 1.
Sales forecasting is the basis on which a business firm prepares its annual plan for production and sales.
Which features of planning is highlighted in the above case?
(a) Planning focuses on achieving objectives.
(b) Planning is continuous.
(c) Planning is the primary function of management.
(d) Planning is futuristic.
Answer:
(d) Planning is futuristic.
Explanation: Planning is always looking ahead and thus planning is a futuristic function in which managers make predictions and assumptions for future on the basis of past experiences and trends.
Question 2.
Name the principle of management suggested by Henri Fayol, which advocates that, to ensure smooth operation. In a business it is essential that members of the organisation respect the rules that govern it. Discipline can be maintained by employing superiors at all levels and penalising workers in case or errors made by them.
(a) Authority and responsibility
(b) Esprit De Corps
(c) Principle of discipline
(d) None of these
Answer:
(d) None of these
Explanation: The principle discussed in the above question is principle of discipline which states that there should be superiors at every level with clear and fair agreement between superior and subordinates.
Question 3.
“Planning requires logical and systematic thinking rather than genuine work.” Which feature of planning is highlighted here?
(a) Pervasive
(b) Futuristic
(c) Psychological activity
(d) Continuous
Answer:
(c) Psychological activity
Explanation: Planning is just a process of thinking regarding the activities required to achieve the desired goals, not doing the activities. Hence, it is a psychological activity.
Question 4.
The picture given below depicts which of the following features of the business environment?
(a) Uncertainty
(b) Complex in nature
(c) Dynamic
(d) Directions
Answer:
Complex in nature
Explanation: The business environment is complex because it consists of several interrelated elements that keep on changing. Many forces constitute the business environment. For example, it is difficult to know the impact of economic, social, political, technological and other forces on changes in demand for a product or service.
Question 5.
Two dancers, two speakers, tw’o actors and two writers will always differ in demonstrating their skills. In the same way students of management also, apply these principles differently depending on how creative they are. Above lines highlights the nature of management. Identify the nature of management
(a) Management is an art.
(b) Management is a science.
(c) Management is both art and science.
(d) Management is a profession.
Answer:
(a) Management is an art.
Explanation: Management as art requires continuous practice and personal skills . It involves the practical application of theoretical knowledge. It is creative in nature.
Question 6.
Rahul was running a media company. He observed that the performance of the employee was not up to the mark. So, he performed a function of management which reviews the operations in a business unit. Identify the function of management.
(a) Planning
(b) Organising
(c) Directing
(d) Controlling
Answer:
(d) Controlling
Explanation: Controlling means to compare the actual performance with the standards set during planning. Thus, Rahul is performing the control function so as to improve the performance of his employee.
Question 7.
The principles of management enhance the understanding of relationship between human and material resources for the achievement of organizational goals. Identify the feature of the principles of management being described in the given statement.
(a) Cause and effect relationships
(b) Optimum utilisation of resources and effective administration
(c) Formed by practice and experimentation
(d) Mainly behavioural
Answer:
(b) Optimum utilisation of resources and effective administration.
Explanation: The principles of management emphasise on planned activities and systematic organisation of men and material in the organisation to get maximum benefit from them to fulfill organisational goals.
Question 8.
With the introduction of photostat machines in the market, the carbon paper industry was adversely affected. Which component of environment was responsible for it?
(a) Economic
(b) Political
(c) Technical
(d) All of the above
Answer:
(c) Technical
Explanation: Improvement in technology makes the old methods and techniques obsolete.
Question 9.
Ayaan got selected as a sales officer in one of the leading sales companies. He was given a brief introduction about the company and its policies and regulations. Identify the step in the process of staffing which Ayaan is going through.
(a) Selection
(b) Employment interview
(c) Orientation or induction
(d) Training and development
Answer:
(c) Orientation or Induction
Explanation: Once the right candidates are selected, the organisation makes the employees familiawith the working units and working environments through various orientation programs. So Ayaan has to go through orientation or induction process
Question 10.
As the incharge of a small scale factory which deals in manufacturing glassware, Raghu guides his subordinates and clarifies their doubts in performing a task, so that they are able to achieve the work targets given to them. Identify the function of management being described in the above lines.
(a) Planning
(b) Staffing
(c) Directing
(d) Organising
Answer:
(c) Directing
Explanation: As Raghu is guiding his subordinates and clarifies his doubts, he is engaged in directing function. Directing function of management refers to the process of instructing, guiding, motivating, leading people in the organisation to achieve its objectives.
Question 11.
Since more number of people have become beauty and health conscious, our economy has witnessed an unprecedented surge in the number of health and beauty spas and wellness clinics. Related feature of business environment being described in the above lines is:
(a) totality of external forces
(b) dynamic nature
(c) inter-relatedness
(d) relativity
Answer:
(c) inter-relatedness
Explanation: Different elements or parts of business environment are closely inter-related. Thus, as people are becoming aware of their health, it would result in increase in demand of health products.
Question 12.
Statement – I: Marketing is the function of business concerned with fulfilling the needs and wants of the consumers.
Statement – II: Marketing occupies an important position in the organisation. Choose the correct option from the options given below:
(a) Statement I is true and II is false.
(b) Statement II is true and I is false.
(c) Both the statements are true.
(d) Both the statements are false.
Answer:
(c) Both the statements are true.
Explanation: Both the statements are true because marketing helps to find the needs and wants of the customers and see how those needs can be fulfilled. On the other hand marketing is one of the most important activities of the organisation as it helps to generate revenue for the organisation.
Question 13.
Match Column-I with their respective Statements in Column II.
| Column-I | Column-II |
| (a) Product | (i) It is the amount of money customers have to pay to obtain the product. |
| (b) Price | (ii) It include activities that communicate availability, features, merits, etc., of the products to the target customers and persuade them to buy it. |
| (c) Place | (iii) It means goods or services or ‘anything of value’, which is offered to the market for sale. |
| (d) Promotion | (iv) It includes activities that make firm’s products available to the target customers. |
(a) (ii), (i), (iv), (iii)
(b) (i), (iii), (iv), (ii)
(c) (iii), (i), (iv), (ii)
(d) (i), (ii), (iii), (iv)
Answer:
(c) (iii), (i), (iv), (ii)
Question 14.
SEBI was established on_____and its headquarter is situated at______.
(a) 12th April, 1988, Mumbai
(b) 12th April, 1990, Mumbai
(c) 12th May, 1988, Delhi
(d) 12th May 1990, Delhi
Answer:
(a) 12th April, 1988, Mumbai
Explanation: It was established on 12 April, 1988 and given Statutory Powers on 30 January, 1992 hrough the SEBI Act, 1992. Its headquarter is situated in Mumbai.
Question 15.
A complaint can be filed against a seller, manufacturer or a dealer of goods whose goods are____in any manner.
(a) perfect
(b) flawless
(c) defective
(d) none of these
Answer:
(c) defective
Explanation: Any consumer can file a complaint against a seller, manufacturer or dealer of goods whose goods are defective in any manner.
Question 16.
Which of the following statements is incorrect about the stock exchange?
(a) It provides a platform for buying and selling new securities.
(b) It curbs the marketability of the securities.
(c) By providing a ready market, it extends liquidity to the securities.
(d) It provides a platform for buying and selling old securities.
Answer:
(b) It curbs the marketability of the securities.
Explanation: It rather promotes the marketability of securities.
Question 17.
Name the process that enables the management to foresee the fund requirements, both the quantum and the timing.
(a) Financial management
(b) Capital budgeting decisions
(c) Dividend decision
(d) Financial planning
Answer:
(d) Financial planning
Explanation: Financial planning is the process that enables the management to foresee the fund requirements, both the quantum as well as the timing.
Question 18.
From the point of view of business, which one of the following is a reason because of which consumer protection is important?
(a) Dynamic environment
(b) Fast technological development
(c) Government intervention
(d) Competitive market
Answer:
(c) Government intervention
Explanation: Consumer protection is important so as to avoid any kind of government restrictions on business.
Question 19.
Which one of the following is not an element of marketing mix?
(a) Product
(b) Physical distribution
(c) Product pricing
(d) Production process
Answer:
(d) Production process
Explanation: Production process is not a part of marketing mix. The elements of marketing mix are product price, place and promotion.
Question 20.
Arrange the following steps involved in the process of financial planning in the correct sequence.
(a) Estimation of expected profit, Preparation of a sales forecast, Preparation of financial statements
(b) Preparation of a sales forecast, Preparation of financial statements, Estimation of expected profit
(c) Preparation of a sales forecast, Estimation of expected profit, Preparation of financial statements
(d) Preparation of financial statements, Estimation of expected profit, Preparation of a sales forecast
Answer:
(b) Preparation of a sales forecast, Preparation of financial statements, Estimation of expected profit
Explanation: The process of financial planning is preparing a sales forecast, financial statements, and estimating expected profit.
Question 21.
Dharam is a well-known businessman in the field of publishing. He owes the success of his business to his own education in business management and his team of certified management consultants. Therefore, he decides to send both his children Danush and Damini abroad to acquire a degreein business management in their individual area of expertise. He feels that all over the world there is marked growth in management as a discipline, but still it is not considered to be a full-fledged profession for certain reasons.
In the context of the above case:
(i) Explain the reasons because of which Dharam considers management as a discipline.
(ii) Critically examine the various reasons because of which management is not considered to be a full fledged profession.
Answer:
(i) Dharam considers management as a discipline because there exist a number of theories and principles on management which have been formulated by various management experts. It is taught in various schools and colleges, all over the world, as a separate subject of study.
(ii) Management is not considered to be a full-fledged profession because of the following reasons:
(a) Restricted entry: Unlike management, the entry to the other professions is restricted through an examination or eligibility criteria like specific percentage in a particular degree or diploma. However, management as profession does not fulfill this criterion as anyone can be called a manager regardless of his/her academic qualifications.
(b) Professional association: Unlike managers, all working professionals have to be a member of an affiliated professional association which regulates their entry, grants certificate of practice and formulates and enforces code of conduct. For example, the practicing lawyers have to be a member of Bar Council of India.
Question 22.
After setting the performance standards the next step in the controlling process is the ‘measurement of actual performance’. Explain this step in the process of controlling.
Answer:
Once the standards are set, the next step is to evaluate the actual performance of the activities. There are various techniques to measure the performance such as personal observation, sample checking, performance reports, etc. The checking should be done in reliable manner so that correct standards are made for comparison.
Comparing with standards can be done after the completion of work or during the work in progress. For example, while assembling small parts a bigger machine, the parts can be checked before assembling it. This would ensure the continuous monitoring of the small parts as well as the final machine.
Question 23.
Explain briefly ‘transfers’ and ‘promotions’ as internal sources of recruitment.
OR
Which methods of training and development should the company initiate? Explain giving reasons.
Answer:
Transfers: Transfers involve shifting of an employee from one job to another, one department to another or from one shift to another, without a change in the responsibilities and status of an employee. Promotions: It involves shifting of an employee to higher position carrying higher responsibilities, facilities, status and pay. Vacant positions at the higher level are filled by suitably promoting employees from the lower level. To continue to work with greater efficiency and productivity, an employee needs encouragement and motivation which can be done through promotions.
OR
The company can use ‘On-the-job’ and ‘Off-the-job’training methods.
The merits or benefits of ‘On-the-job’ are:
1. It is a practical method.
2. The trainee can contribute towards the real/ actual work.
3. Separate arrangements need not be done.
If the ‘Off-the-job’ methods are used then the benefits derived are:
1. Vestibule training helps in avoiding modem and expensive equipments from being damaged.
2. Conference helps to develop conceptual knowledge and reduce, resistance to change.
Question 24.
What are the functions of stock exchange?
OR
What are the advantages of screen-based trading?
Answer:
Ensures marketability and liquidity of existing securities by providing a ready and continuous market for the sale and purchase of securities.
1. It supports in defining the prices of the securities through the forces of demand and supply.
2. It promotes the habit of investment and saving among the general public.
3. It offers a legal framework for fair and safe dealings.
4. It assists the companies in raising finance, thus facilitating capital formation and economic growth.
5. It offers scope for healthy speculation in a controlled and restricted way.
OR
1. As the investors get access to the stock market in real-time, there is complete transparency in dealings.
2. It provides a common platform for the exchange of securities, thereby increasing efficient transactions by saving time, effort and money.
3. This virtual market has a very extensive reach; hence it increases its liquidity.
Question 25.
Explain the importance of Controlling.
OR
Planning is looking ahead and controlling is looking back. Comment
Answer:
Controlling refers to the process of comparison of actual performance with planned performance and taking corrective actions to mitigate deviations.
Importance of Controlling:
1. Accomplishes organisational goals: It helps in achieving organisational goals through continuous monitoring the performance of employees.
2. Accuracy: It helps the managers to judge the objectivity and accuracy of the standards.
3. Optimum utilization of resources: It tries to efficiently use the resources available with company.
4. Motivation: It motivates employees to perform better.
5. Order and discipline: Controlling creates the environment of order and discipline in an organisation.
6. Coordination: It leads to coordination in action through proper and timely guidance
OR
Planning and controlling are inseparable. Planning is the primary function of every organisation. It is the thinking process, which means looking ahead or making plans that how desired goal will be achievedm in future. Thus it is known as forward looking function. On the other hand controlling is a systematic function which measures the actual performance. It compares and analyses the whole performance of an organisation and takes correction actions.
Thus, it is a backward-looking function but the statement “Planning is looking ahead and controlling is looking back” is partially correct because it should be understood that planning is guided by past experiences and the corrective action initiated by controlfunction aims to improve future performance. Thus, planning and controlling are both backward-looking as well as a forward looking functions
Question 26.
How directing helps in the efficient and effective functioning of the organisation? Explain by giving any three points.
OR
What is the meaning of Directing ? What are its characteristics?
Answer:
Directing is one of the important functions of management that must tobe performed in every organisation. It refers to the procedure wherein the employees of an organisation are instructed, motivated and guided to achieve definite goals and objectives. The managers not only guide the employees on how a particular work is to be done but also keep an eye on whether their orders are being correctly followed or not. In fact, every step in the organisation is initiated through directing.
The following mention points highlight the significance of directing in an organisation:
1. Accomplishment of objectives: Directing is a function that sets the ball rolling. It helps in motivating people to perform the actions in order to fulfill organisational goals and objectives.
2. Addition of efforts: Directing integrates the individual efforts of employees and channelises them towards the achievement of organisational goals, which also avoid the conflicts between individuals.
3. Growth of employees: By guiding the employees to work in the right direction, directing promotes better employees’ growth. In other words, directing helps the individuals to realise their potential through effective motivation, thereby encouraging them to put in their best efforts in the work. Therefore as per the above discussion we can say that directing helps in the efficient and effective functioning of the organisation, as it enables to adapt to the changes that occur in the working environment.
OR
Meaning: Directing function of management is concerned with instructing, guiding, inspiring and motivating the employees in the organisation so that these efforts result in achievement of organisational goals. Definition:
“Directing is telling people what to do and seeing that they do it to the best oftheir ability.” Characteristics of Directing:
1. Directing initiates action: Other functions prepare a base or setting of action, i.e., how action has to be carried on, the directing initiates or starts action.
2. Directing takes place at every level: Directing is a pervasive function as it is performed by managers at all levels and in all locations.
3. Human Element: Directing function involves study and moulding of human behaviour. It improves interpersonal and intergroup relationship.
4. Directing flows from top to bottom: Directions are given by managers to their subordinates. Directing starts from top level and flows to lower level.
5. Continuous function: Directing is a continuous process. A manager cannot just rest after issuing orders and instructions, he has to guide, supervise and motivate after issuing orders.
6. Executive function: Directing function is carried out by all managers and executives at all levels throughout the working of an enterprise. —Ernest Dale
Question 27.
Explain briefly ‘Casual Callers’ and ‘Labour Contractors’ as external sources of recruitment.
Answer:
Casual callers: It is an external source of recruitment. Generally the large business organisation maintains an applications file in which they keep all the pending applications which the job seekers leave at the reception counter. Sometimes the application of suitable candidates who were not selected in the previous year’s selection process, are also kept in application file. This application file is considered as a waiting list. Whenever there is a job vacancy the suitable candidates from the waiting list are called and persuaded to apply for the jobs available.
Labour contractors: It is also an external source of recruitment. In this, organisation tells its requirement of labour to contractors. Contractors maintain close contact with labours and they provide the required number of unskilled workers at short notice, when the need arises, and the contractor charges commission for this work
Question 28.
What is meant by ‘Capital Structure’? Explain any two factors that affect the capital structure of a company.
Answer:
Capital structure is referred to as the combination of owners funds (equity) and borrowed funds (debt) for financing its fund requirements. It can be calculated as debt/equity ratio i.e., debt/equity or as the proportion of debt in the total capital i.e., Debt + Equity. Factors that affect the capital structure are as follows:
Cost of equity: Cost of equity means the expected rate of return on equity capital assuming risk involved. It is the rate of dividend on shares. When the company increases debt, the financial risk faced by equity holders also increases, as a result their rate of return may increase. Therefore company cannot uses debt beyond certain points, cost of equity may go up sharply and share price may decrease. Hence, for maximisation of shareholders, wealth, debt can be used only up to a level.
Flotation cost: It refers to the cost of raising funds such as broker’s commission and underwriting commission. The higher the flotation cost involved in raising funds from a particular source, the lower is its proportion in the capital structure. For instance, if public issue of shares involves higher flotation cost than debt, then the company would opt for more of debt and less of equity in the capital structure.
Question 29.
“Money market is essentially a market for short term funds”. Discuss.
Answer:
The money market refers to the market for the trading of short term securities and funds. Securities traded in the money market have a very short maturity period ranging from one day to one year. Such assets act as a close substitute for cash or money. Due to their short maturity period, they are also known as ‘Near Money instruments’. Money market instruments act as an important source of finance for working capital requirements.
In addition, they enjoy a high degree of liquidity. DFHI discounts money market securities offers a ready market for them. In addition, securities traded in the money market are safe and secure as the transactions are made in instruments issued by the financial institutions and those who are financially strong companies. Common instruments traded in the money market are treasury bills, commercial paper, call money, certificate of deposit, etc.
Question 30.
As a well-informed consumer, what kind of quality certification marks you will look for before buying ‘products?
Answer:
I will look some quality certification marks before buying and these are as follows:
1. FPO (Fruit Products Order1955): It contains specification and quality control requirements regarding the production and marketing of processed fruits and vegetables, sweetened aerated water, vinegar and synthetic syrups.
2. ISI : ISI mark is a certification mark for industrial products in India. It is the most popular and recognised certification mark in the Indian subcontinent. This mark ensures that the product conforms to the Indian standards mentioned by the Indian Standard Institute.
3. Hallmark: BIS certification scheme for gold jewelry items.
4. Earthen Pitcher: For labelling environment-friendly products.
5. AGMARK: It is a grading standard for agricultural commodities and livestock products.
6. Wool mark: It signifies 100% pure wool
Question 31.
‘The social environment of business is important for a business enterprise.’ Explain.
OR
What do you understand by demonetisation? State some of the features of demonetisation.
Answer:
A business is a part of the society in which it operates. The buying and consumption habits of the people, their languages, customs, tastes and preferences etc., are the factors that influence the business. Businessmen should be alert enough to visualise the factors that directly or indirectly affect their organisation. The social environment consists of the sum total of a society’s beliefs, customs, practices and behaviours.
It is, to a large extent, an artificial construct that can be contrasted with the natural environment in which we live. A business is subordinate to an external social environment and also its own internal social environment. The external social environment gives both perils and opportunities for a business. Businesses that break to accommodate to social preferences associated with their goods and services will fail.
The failure of any establishment in adapting to the changes in the social environment would certainly lead to dissatisfaction amongst its consumers and its products being rejected. Cooperation between business and society will see business boom and will help growth of professional managers. This shift of demand can even endanger the very survival of a business. For example, equal pay for male and female workers, demand for reservation in jobs for minorities and women etc.
OR
The term demonetisation means to invalidate all the currency notes of a particular denomination by the government of a country. The Indian Government demonetised the two largest denomination notes of ₹500 and ₹1000 on 8th of November 2016 by the Prime Minister Shri Narendra Modi. PM Modi also introduced new currency of ₹500 and ₹2000 after demonetisation. The aim of this move was to curb corruption and illegal activities and stop hoarding of black money.
Features of demonetisation are:
1. After demonetisation, cash is deposited into banks for exchanging with new notes was to track black money hidden by tax evaders.
2. Government introduced demonetisation to reduce tax evasion.
3. Demonetisation reduces the cash transactions in the economy which means more savings through the
financial system and improving tax payment system.
4. Demonetisation facilitates tax administration, and paves way for a cashless economy.
Question 32.
‘Organising involves a series of steps in order to achieve the desired goals.’ Explain these steps.
OR
Explain the concept of ‘Functional Structure’ of an organisation. Also, explain any four disadvantages of functional structure.
Answer:
Organising refers to the process of bringing together physical, financial and human resources and establishing productive relations among them for the achievement of specific goals.
Organising is a process which involves the following steps:
Identification and division of work: The first step in organising is to identify or divide the total work to be done into specific jobs. Dividing the total work into jobs is necessary because the entire work cannot be done by an individual. Division of work facilitates specialisation of efforts and skills.
Grouping jobs and departmentalization: The second step in organising is to combine or group similar or related jobs into larger units called departments, divisions or sections. This grouping process is called departmentation/departmentalisation. Work that is divided into jobs, thus, gets combined to facilitate unity of effort. The departments or work units so created are linked together on the basis of their interdependence.
Assignment of duties: After considering qualifications, experience and aptitudes of people, group of activities are assigned to an individual who is best suited to perform it.
Establishing authority reporting relationships: The fourth step in the process of organising is the creation of authority relationships among the job-holders or job positions. In fact, the various members of the organisation, who perform the jobs are linked by authority-responsibility relations through the process of organising. In other words, an authority structure is created in this step.
OR
A functional structure involves grouping of the functions of similar nature. Each group forms a separate department that reports to one head. For example, departments may be divided on the basis of functions such as production, human resources, etc. that will report to the managing director of the organisation. The disadvantages of a functional structure are:
Less emphasis on organisational objectives: A functional structure places more emphasis on departmental objectives over organisational objectives. Hence, functional structure may lead to the formation of functional empires where a particular function is given undue importance with respect to the overall organisational objectives.
Problems in coordination: As an organisation grows bigger in size, the increasing number of activities are grouped into different departments. With this, the coordination among these departments becomes difficult to achieve, thereby resulting in delayed decision-making thus loss in revenue.
Conflicts: It may happen that the interests of different departments are not compatible with each other and there may be some conflict. For instance, sales department may wish to introduce a new promotional scheme for the customers (say, buy one and get one free), but the finance department may not approve the same due to lack of funds. Such incompatibility often leads to conflicts among different departments.
Inflexibility: As each department specialises in its particular function, the employees ofa department have a limited set of skills that is applicable to only one particular function. This results in a high degree of inflexibility in the organisation, as over a period of time, different departments develop a narrow perspective and do not have experience in the diverse activities.
Question 33.
‘Serious Business’ is a balloon manufacturing firm. With the arrival of foreign firms, it feels the pressure of improving its business strategy. Because of the firm’s advance planning, it could not suddenly bring changes in its plans as the whole organisation had started implementing the decided plan. But this year the organisation wants to ensure success. However, the firm knows that the external environment is changeable and continues to vary in a fast manner. The organisation wants to prepare in advance for a better future.
It has decided to allocate a portion of its budget specifically for proper planning as it knows there are going to be expenses like Expert’s fee, survey charges, etc. Which limitations of planning have been identified in the above case? Also explain two more limitations which are not highlighted in the above case.
Answer:
The limitations of planning highlighted in the above case are:
1. Planning leads to rigidity. Because of the firm’s advance planning it could not suddenly bring changes in its plans as the whole organisation had started implementing the decided plan.
2. Planning may not work in a dynamic environment. However, the firm knows that the external environment is changeable and continues to vary in a fast manner.
3. Planning involves huge costs. It has decided to allocate a portion of its budget specifically for proper planning as it knows that there are going to be expenses like Expert’s fee, survey charges, etc. Other limitations which are not highlighted in the above case are:
1. Planning is a time-consuming process: Sometimes plans to be drawn up take so much of time that there is not much time left for their implementation.
2. Planning does not guarantee success: The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action or it becomes meaningless. Managers have a tendency to rely on previously tried and tested successful plans.
Question 34
A car manufacturing and selling company has reached its coverage in three continents. Definitely the client base is huge. The company deals with its clients through selected showrooms owned by creditworthy people. The channel related decision is a successful decision of the company. It could have gone for the direct ownership of the distribution centres but due to the extra amount of finance involved prevented the company from doing so. Recently a car was launched by a company.
The company has decided to make this car available in a new country where the reach is a little difficult and the company will have to use innovative ideas in one component of physical distribution. The company is known world over for its innovation in different areas. When it comes to promotional ideas the company always depends upon one component of promotion mix which is of paid form and has an identified sponsor.
Doing business is always full of challenges. Last year a competitor blamed the company for using the above referred component of promotion mix for selling a car which was not upto the standards but even then, people purchased it because of the promotional efforts made by the company.
1. Which type of channel is used by the car company to reach to its customers?
2. Which factor has resulted in the nature of channel the company has adopted for selling the cars?
3. Which component of physical distribution has been highlighted in the above case in which company will have to bring innovation?
4. Which component of promotion mix has been highlighted in the above case which is used by the company usually
5. Which drawback of promotion mix has been highlighted in this case?
Answer:
1. The type of channel used by the car company to reach its customers is ‘indirect channel (one level)’. The company deals with its clients through selected showrooms owned by creditworthy people.
2. The factor which has made the company go for the indirect channel (one level) is ‘company policies’. The company doesn’t want to take extra financial burden by owning the distribution centres.
3. The component of physical distribution in which the company will have to bring its innovation is ‘transportation’. The company has decided to make this car available in a new country where the reach is a little difficult and the company will have to use innovative ideas in one component of physical distribution.
4. The component of promotion mix highlighted in the above case is ‘advertising’. When it comes to promotion of ideas the company always depends upon advertisement which is paid form and has an identified sponsor.
5. The drawback of the promotion mix which has been highlighted in the above case is ‘advertising encourages sale of inferior products’. Last year a competitor blamed the company for using the above referred component of promotion mix for selling a car which was not upto the standards but even then, people purchased it because of its robust advertisement campaign.