Long Answer Questions | Business Studies (BST) Class 12 - Commerce PDF Download

Q1: Home Creations Ltd is a well-known chain of large department store offering various types of products under one roof. The company owns fifty stores in various parts of the country. Each store is placed under the charge of a manager who is allowed to rim their stores autonomously by deciding about the products which may be promoted, the appointment of staff, ways to handle customer complaints etc. As these managers have a deeper knowledge of the local situations, it enables them to take these decisions effectively keeping in view the local circumstances and consumers’ needs. This approach helps to improve customer service and at the same time serves to boost morale and increase the job satisfaction of the store managers as it empowers them to innovate and use their initiatives.
(a) Identify and explain the policy followed by ‘Home Creations Ltd.’ to run their stores successfully.
(b) Also, give any three points highlighting the importance of the approach followed as identified in part (a) of the question.
Ans: (a) The approach followed by ‘Home Creations Ltd.’ to run their stores successfully is Decentralisation. Decentralized decision-making is any process where the decision-making authority is distributed throughout a larger group. It also connotes a higher authority given to lower level functionaries, executives, and workers. This can be in any organization of any size, from a governmental authority to a corporation.
(b) The importance of decentralisation is highlighted through the following points:

• Develops initiative among subordinates: Decentralisation helps the managers at the lower levels to take all those decisions, which are for the betterment of organisation, on their own and to develop solutions for solving the various problems they face. This helps in enhancing confidence and self-reliance among the employees.
• Develops managerial talent for the future: Decentralisation provides a chance to the employees to prove their abilities by handling various assignments independently. Such opportunities to take decisions increase their knowledge & experience at all levels. It also provides qualified manpower for fulfilling the top positions through promotions.
• Quick decision making: Decentralization promotes independent and quick decision making by subordinates as they are close to the operations and are in constant touch with all activities of their departments. Approval from various levels being not required, decisions can be taken much faster on their own.

Q2: In the context of the above case:
Ans: Span of management refers to the number of subordinates that can be effectively managed by a superior. It depends on the ability of the superiors, availability of time for supervision, the intelligence of subordinates and nature of work etc. Span of management gives shape to the organizational structure. It also helps an enterprise to adjust itself according to the environment changes. An effective manager is recognized through his span of management. The greater the span, the highly effective the manager.

Q3: What does the term ‘Span of management’ refer to?
Ans: 

• Defined inter-relationship: It specifies the relationships among various job positions and the nature of their inter-relationship. This clearly defines superior subordinate relationship.
• Rules and procedures: It lays down rules and procedures essential for their achievement and every individual is assigned a fixed authority or decision making power.
• More Emphasis on Work: Formal organisational structure lays more emphasis on work than interpersonal relations.
• Coordination: Formal organisation coordinates and integrates the efforts of various departments.
• Communication: Formal organisational structure creates a scalar chain of communication in the organisation.
• Purpose: It is created to achieve the organisational goals like productivity, profitability, survival, growth and efficiency. Each individual is assigned a specific job.

Q4: Describe the features of formal organisation?
Ans: Delegate authority due to the following reasons:

• It reduces the workload of managers. By sharing some of his own work with the subordinates, the manager is able to concentrate on more important jobs. This way he increases his own effectiveness and that of his subordinates. When delegation of authority takes place at all levels of the organisation it leads to proper division of work and assignment to all managers in a systematic manner.
• It increases morale of the subordinates: Delegation helps the subordinate to develop their capabilities to handle new and more challenging jobs. This gives him job satisfaction. it increases his morale, self confidence and efficiency to get promotion.
• It establishes a superior-subordinate relationship. The flow of authority from top to lower level of management is directed and controlled by the process of delegation. This gives meaning and content to the flow of authority and to managerial jobs.

Q5: Explain the statement. “Delegation of authority helps in reducing the workload of managers”.
Ans: Divisional structure: Any organization that divides its employees and other resources into different groups based on regional and product differences, such that each group is responsible and answerable for its own actions, has a divisional structure. Under the divisional structure, an organization is divided into different divisions or units on the basis of products or geographical area Each division is a self-contained, semi-autonomous business unit. Each unit has a divisional manager responsible for performance and who has authority over the unit. There are certain matters, which are determined at the apex level only, viz goal determination and policy formation. It is suitable for those enterprises where

• A large variety of products are manufactured.
• An organization grows and needs more employees and more departments.
• High degree of Specialization is required.

Advantages of the divisional structure are as follows:

• Accountability: The divisional organizational structure allows each division of a firm to be accounted for in isolation. It can easily be seen which department is successful in making profits while which are bearing losses. Product specialization helps in the development of varied skills.
• The team working: The divisional organizational structure allows people in a single division to interact with each other. The Principle of Unity of Direction, as well as Unity of Command, follows here. When all of them are working towards a single goal, the success of their division, the motivation is higher than ever.
• Organizational culture: Organizational culture is the values and the practices that persist in an organization. The divisional structure allows this type of culture to persist in a division.
• Autonomy in working: Every division of an organization in itself, is an independent entity and is free to follow practices in its own stride for the achievement of organizational objectives.

Q6: What is meant by divisional structure of organisation? State its advantages.
Ans: The company should adopt ‘Functional Organisational structure’ due to the following reasons:

• Specialization: As the Organization is divided into various departments on the basis of the functions to be performed like Production, Finance, Personnel, and Marketing, the employees working under these departments attain specialization in terms of the nature of the job performed.
• It Promotes Control and Coordination: Functional structure plays important role in promoting control and coordination within a department because workers perform similar jobs.
• Increasing managerial efficiency: Functional structure increases managerial and operational efficiency and thus leads to increase in profits.
• Reduction in cost: Functional structure helps in reducing the cost because it ensures that there is no overlapping of activities and minimal duplication of effort.

Q7: A company has its registered office in Delhi, manufacturing unit at Gurgaon and marketing and sales department at Faridabad. The company manufactures the consumer products. Which type of organisational structure should it adopt to achieve its target?
Ans: An organizational structure defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims. It specifies the relationships between people, work and resources. It allows correlation and coordination among human, physical and financial resources and this enables a business enterprise to accomplish desired goals.