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Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 1
CERTIFIED SIX SIGMA GREEN BELT
EXAMINATION PAPER
Guideline for paper
Total No. of Question is 100.
The minimum passing marks is 40%
Each question carries 1 mark.
Answer all the questions.
Total: 100 Marks
1. The Following is a sample data set.
10 8 8 6 5
What is the variance of this data set?
a. 3.0
b. 3.8
c. 7.3
d. 7.4
2. An auditor should use a histogram in a quality audit to do which of the following?
a. Provide objective evidence that the audited uses statistical process control (SPC)
b. Expose patterns that are normally difficult to detect
c. Interpret data for a trend chart
d. create a stratified tally diagram
3. Comparing how a process is actually performed against the documented work instruction for that
process is an example of which of the following techniques?
a. Quantitative
b. Qualitative
c. Statistical
d. Random sampling
4. Attribute sampling should be used when
a. The data are measurements in metric units.
b. Ayes-or-no decision is to be made.
c. The population has variability.
d. A multi-stage sampling plan is needed.
…………………………..
16. The primary purpose of a project charter is to
a. Subdivide the project into smaller, more manageable components
b. Provide management with a tool for selecting a project that addresses business needs
c. Provide management with a tool to ensure that project deadlines are met
d. Provide the project manager with authority to apply organizational resources to project activities
17. Sample selection of parts for inspection must be selected at random to ensure
a. A minimum sample size.
b. The probability of not rejecting the lot
c. The probability of accepting the lot
d. Finding typical characteristics of the lot.
18. Which of the following are bases for establishing calibration intervals?
I. Stability
II.Purpose
III.Degree of usage
a. I and II only
b. I and III only
c. II and III only
d. I, II, and III
19. Specification limits are derived from which of the following?
a. Process capability studies
b. Process control charts
c. Customer requirements
d. Historical data
20. The primary purpose of a control chart is to
a. Set Specifications and tolerances
b. compare operations.
c. Determine the stability of a process.
d. Accept or reject a lot of material
21. When a control chart is used on a new process, capability can be assessed at which of the following
times?
a. Before the chart is first started
b. After the first ten points are plotted
c. When the plotted points hug the centerline
d. After the process is shown to be in control
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 4
22. Precision is best described as
a. A comparison to a known standard
b. The achievement of expected outgoing quality
c. The repeated consistency of results
d. The difference between an average measurement and the actual value
23. The overall ability of two or more operators to obtain Consistent results repeatedly when measuring
the same set of parts and using the same measuring equipment is the definition of
a. Repeatability
b. Precision
c. Reproducibility
d. Accuracy
24. Which of the following conditions must be met for a process to be in a state of statistical control?
a. Most of the product out by the process is in specification.
b. All subgroup averages and rang are within control limits.
c. All variation has been completely removed
d. Previously optimal process settings are used.
25. Which of the following measures of dispersion is equal to the sum of deviations from the mean
squared divided by the sample size?
a. Range
b. Standard deviation
c. Variance
d. Mode
26. An X and R chart is used to
a. Indicate process variation
b. Specify design Limits
c. Interpret costs
d. Identify customer expectations
……………………………….
40. Process data being used in the initial set-up of a process are assumed have a normal distribution. If the
nominal (target) is at the center of the distribution, and the specification limits are set at = 3 from the
center the Cpk is equal to
a. -0.25
b. 1.00
c. 1.33
d. 1.67
41. A green belt is going to monitor the number of defects on different size samples. Which of the
following control chart would be most appropriate?
a. u
b. np
c. c
d. p
42. Correction, over-production, inventory, and motion are all examples of
a. waste
b. 5S target areas
c. Noise
d. Value-added activities
43. The primary factor in the successful implementation of six sigma is to have
a. The necessary resources
b. The support/leadership of top management
c. Explicit customer requirements
d. A comprehensive training program
44. Which of the following types of variation is LEAST likely to occur in sequential repetitions of a
process over a short period of time?
a. Cyclical
b. Positional
c. Temporal
d. Seasonal
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 7
45. The primary reason that most companies implement six sigma is to
a. Reduce defects
b. Improve Processes
c. Improve profit
d. Increase customer satisfaction
46. The term used to describe the risk of a type I error in a test of hypotheses is
a. Power
b. Confidence level
c. Level of significance
d. Beta risk
47. One characteristic of attributes data is that it is always
a. continuous
b. Discrete
c. Expensive to collect
d. Read from a scale of measurement
48. Which of the following tests may be used to determine whether a sample comes from a population
with an exponential distribution?
a. T
b. F
c. Chi-square
d. ANOVA
49. Which of the following tools are appropriate for a quality engineer to use in qualifying a process that
has variable data?
I. An and R control chat
II. A his to gram
III. A cc hart
IV. A p chart
a. I and II only
b. II and III only
c. III and IV only
d. I, II, and IV only
50. The correlation coefficient for the length and weight of units made by a process is determined to be
0.27. if the process were adjusted to reduce the weight of each unit by 0.5 ounce, the correlation
coefficient of the length and weight of the units made by the new process would be equal to
a. 0.50
b. 0.27
c. 0.23
d. -0.23
51. A form, in either diagram or table format, that is prepared in advance for recording data is known as a
a. Cause-and-effect diagram
b. Pareto chart
c. Flowchart
d. Check sheet
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 8
52. A major drawback of using histogram in process control is that they
a. do not readily account for the factor of time
b. Are relatively difficult to construct and interpret
c. Require too many data points
d. Require too many intervals
53. Which of the following tools would be of the greatest use for finding the most efficient path and
realistic schedule for the completion of a project?
a. Interrelationship diagram
b. Activity network diagram
c. Tree diagram
d. Affinity diagram
54. A control plan is designed to do which of the following?
a. Supplement information contained in operator instructions
b. Support the production scheduling system
c. Provide a documented system for controlling processes
d. Provide a method for tracking the design review process
55. To determine the average number of nonconforming parts over time, which of the following attribute
control chart would be most appropriate?
a. A chat
b. Np chart
c. P chart
d. U chat
56. Which of the following techniques is most appropriate for generating continuous improvement ideas?
a. Tree diagram
b. Brainstorming
c. Prioritization matrix
d. Interrelationship diagraph
57. Which of the following tools is used extensively quality function deployment (QFD)?
a. Affinity diagram
b. Matrix diagram
c. Cause and effect diagram
d. Activity network diagram
58. Which of the following tools is most likely to be organizing a list of ideas generated during a
brainstorming session?
a. Activity network diagram
b. Affinity diagram
c. Histogram
d. Process control chart
59. Which of the following tools would be most appropriate for collecting data to study the symptoms of
a problem?
a. A check sheet
b. A flow diagram
c. A force field analysis
d. An activity network diagram
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 9
60. Kaizen is defined as
a. Re-engineering
b. Lean manufacturing
c. Continuous improvement
d. Error –proofing
61. The LEAST informative of the four measurement scales is the
a. Ratio
b. Nominal
c. Ordinal
d. Interval
62. Which of the following can used to determine the goodness of fit of a distribution to a data set?
a. T test
b. ANOVA
c. F rest
d. Chi square test
63. A fair coin is tossed 10 times. What are the expected mean and variance of the number of heads?
Mean variance
a. 0.5 0.025
b. 5.0 2.500
c. 5.0 5.000
d. 10.0 5.000
64. A process capability analysis is NOT used to
a. Determine the ability of a process to meet specifications
b. Maintain a process in a state of statistical control
c. Establish new specifications
d. Prioritize competing processes
65. A type of line graph used to assess the stability of a process is called a
a. Control chart
b. Pareto chart
c. Check sheet
d. cause and effect diagram
66. A process produces nonconformities according to a distribution. If the mean of the nonconformities is
25, what is the standard deviation?
a. 2.5
b. 5.0
c. 12.5
d. 25.0
67. Five six-sided dice are rolled together 100 times. Two histograms are constructed: one for the 500
individual results and one for the 100 averages of five results. In this situation, the individual results
follow a uniform distribution, while the averages follow which of the following distributions?
a. Normal
b. Student’s t
c. Binomial
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 10
d. Uniform
68. A calibrated micrometer was used to take 10 replicated measures of a reference standard. If X
m=0.073, and the true value of the reference standard is 0.075, what is the bias of the micrometer?
a. 0.001
b. 0.002
c. 0.073
d. 0.075
69. The power of a test for the difference between means is measured by
a. A
b. 1-a
c. B
d. 1-b
70. A process is stable and its output is normally distributed. The process has a specification of
16.73=0.01. What is the maximum process standard deviation if the Cp must be=1.5?
a. 0.0011
b.0.0022
c. 0.0041
d. 0.0133
71. Which of the following is the most effective technique for prioritizing critical factors foe problemsolving?
a. Venn diagram
b. Scatter diagram
c. Pareto diagram
d. Cause and effect diagram
72. The main advantage of a matrix diagram is that it
a. Displays all the possible causes related to a problem
b. Displays the strength of relationship between each paired combination of variables
c. Identifies, analyzes, and classifies the cause and effect relationship that among all critical issues
d. Identifies a sequence of actions and materials entering a process
73. Poka-yake is best defined as
a. Improving machine efficiency
b. Reducing field failures to virtually zero
c. Capturing the voice of the customer
d. Preventing controllable defects
74. Which of the following describes the 95% confidence interval of a 20% absentee rate in a department
with 30 people?
a. 6% to 34%
b. 8% to 32%
c. 13% to 27%
d. 17% to 23%
75. Which of the following are needed to calculate the process capability index,Cp?
a. The specification limits and the mean
b. The specification limits and s^ (Sigma Cap)
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 11
c. The process mean and s^(Sigma Cap)
d. The upper and lower specification limits
76. Repeatability and reproducibility are terms that operationally define
a. Bias
b. Accuracy
c. Discrimination
d. Precision’
77. A method that classifies data without significantly reducing accuracy or precision is known as
a. Bias adjustment
b. Statistical efficiency
c. Blocking
d. Coding
78. If a process has a variance of 4 units and a specification of 96+4, what is the process performance
index (Pp)?
a. 0.33
b. 0.66
c. 1.00
d. 1.50
79. If a histogram has a distribution that is bimodal this indicates that the
a. Process is in control
b. Distribution is abnormal
c. Data collected is accurate
d. data has two points
80. Which of the following best describes how an affinity diagram is used?
a. Grasping organizational performance relative to contrasting data
b. Prioritizing data from most signification to least significant
c. Grouping ideas that are created during brainstorming
d. Identifying when a process is in control
81. Warranty claims are classified in which of the following cost of quality groups?
a. Internal failure
b. External failure
c. Appraisal
d. Prevention
82. At what stage of the problem-solving process would a team most likely use a cause-effect diagram?
a. Description of the process associated with the problem
b. Definition of the problem and its scope
c. Organization of possible problem causes
d. Collection of data to identify actual causes
83. Steel bars are cut to cylindrical shafts by means of a lathe. The diameter and allowable tolerance of
the shaft is 2.00=.001 inch. A control chart is used to monitor the quality level of the process. Which of
the following plots on the control chart might indicate a problem of wear on the lathe?
a. The diameter of a single shaft above 2.001 inch
b. the diameter of a single shaft below 1.999 inch
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 12
c. An Apparent increasing trend in the shaft diameters
d. Erratic in-tolerance or out-of-tolerance diameter measurements
84. A sample consists of one or more units of product drawn from a lot or batch on the basis of
a. Defect of the product
b. Random selection
c. Size of the product
d. When the inspection process was completed
85. What is the percent yield for a normally distributed process in which the item length specification is
5.750=0.004, X is 5.752, and the standard deviation is 0.002?
a. 15.73%
b. 19.15%
c. 47.72%
d. 83.99%
86. In preparation for construction of a cause and effect diagram, it is important to
a. Plot separate chart for each source
b. Focus only on what makes thing go wrong
c. Record everything people suggest
d. Validate possible root cause
87. Which of the following tools should be used a team is generating and prioritizing a list of options that
include highly controversial issues?
a. Brainstorming
b. Affinity diagram
c. Nominal group technique
d. 5 whys
88. If a distribution is normal, u=50 s=15, what percentage of data will be less than 30?
a. 59.18%
b. 40.82%
c. 9.18%
d. 1.33%
89. A company is receiving an unusually high number of returns from various customers. The first step in
investigating the problem would be to
a. Check the inspection records
b. Establish the correlation of the returns to shipments
c. Brainstorm the potential causes
d. Classify the returns by type and degree of serious
90. Which of the following is the best definition of a flow chart?
a. A diagram used to structure ideas into useful categories
b. An illustration used to analyze variation in a process
c. A picture used to separate steps of a process in sequential order
d. An analytical tool used to clarify opposing aspects of a desired change
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 13
91. Which of the following activities would NOT contribute to the effective functioning of a team?
a. Eliminating unnecessary activities
b. Development team performance measures
c. Defining process in detail
d. Monitoring each member’s performance
92. What is the standard deviation of the population below?
10, 4, 16, 12, 8
a. 4.00
b. 4.47
c. 16.00
d. 20.00
93. Which of the following tools would be most appropriate for collecting data to study the symptoms of
a problem?
a. Check sheet
b. Flow diagram
c. Force-field analysis
d. Activity network diagram
94. Which of the following measures is a sufficient statistic for the parameter u?
a. Median
b. Mid-range
c. Mean
d. Mode
95. Positional, cyclical, and temporal variations are most commonly analyzed in
a. SPC charts
b. Multi-vari charts
c. Cause and effect diagram
d. Run charts
96. Which of the following describes the deming method for continuous improvement?
a. Cost of quality analysis
b. Process map
c. Tree Diagram
d. Plan-do-check-act cycle
97. in analysis of variance, Which of the following distributions is the basis for determining whether the
variance estimates are all from the same population?
a. Chi square
b. Student’s
c. Normal
d. F
98. Which of the following statement best describes the set all value of a random variable?
a. It is finite.
b. It is an interval
c. It can be discrete or continuous.
d. It can be tracked by using control charts or scatter plots.
Examination Paper of Six Sigma Green Belt
IIBM Institute of Business Management 14
99. Which of the following is the best description of randomization?
a. A technique used to increase the precision of an experiment
b. A means of assuring representative sampling
c. The repetition of an observation or measurement
d. The relationship between two or more variables
100. When the order of items is not important, which of the following is the method to use to determine
the number of sets and subsets of items?
a. Combination
b. Permutation
c. Factorization
d. Simulation

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Examination Paper – Project Management
1
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Project Management
Guidelines for paper
Total No. of Questions is 100.
The minimum passing marks is 50%.
Each Question carries 1 mark.
Answer all the Questions.
Multiple Choices: Total Marks: 100
1. A ________________ is a temporary endeavor undertaken to create a unique product, service, or
result.
a) Program
b) Process
c) Project
d) Portfolio
2. Which of the following is not a potential advantage of using good project management?
a) Shorter development times
b) Higher worker morale
c) Lower cost of capital
d) Higher profit margins
3. Which of the following is not an attribute of a project?
a) Projects are unique
b) Projects are developed using progressive elaboration
c) Projects have a primary customer or sponsor
d) Projects involve little uncertainty
4. Which of the following is not part of the triple constraint of project management?
a) Meeting scope goals
b) Meeting time goals
c) Meeting communications goals
d) Meeting cost goals
5. The first stage of any project is
a) Proposal
b) Conceptualization
c) Implementation
d) Management
………………………………..
19. ___________________ involves measuring progress toward project objectives and talking
corrective actions.
a) Initiating
b) Planning
c) Executing
d) Monitoring and controlling
20. What type of report do project teams create to reflect on what went right with the project?
a) Lessons – learned report
b) Status report
c) Final project report
d) Business case
21. Project manager is responsible for
a) Overseeing change
b) Cross functional activities
c) Ever changing set of tasks
d) All above
22. Many people use ________________ to have a standard format for preparing various project
management documents.
a) Methodologies
b) Templates
c) Project management software
d) Standards
23. What is the last step in the four – stage planning process for selecting information technology
projects?
a) Information technology strategy planning
b) Business area analysis
c) Project planning
d) Resource allocation
24. A new government law requires an organization to report data in anew way. Under which
category would a new information system project to provide this data fall?
a) Problem
b) Opportunity
c) Directive
d) Regulation
25. A __________________ is a document that formally recognizes the existence of a project and
provides direction on the project’s objectives and management.
a) Project charter
b) Preliminary scope statement
c) Business case
d) Project management plan
……………………….
33. What major restaurant chain terminated a large project after spending $170 million on it,
primarily because they realized the project scope was too much to handle?
a) Burger King
b) Pizza Hut
c) McDonalds
d) Taco Bell
34. Scope ____________________ is often achieved by a customer inspection and then sign – off on
key deliverables.
a) Verification
b) Validation
c) Completion
d) Close – out
35. Project management software helps you develop a _________________, which serves as a basis
for creating Gantt charts, assigning resources, and allocating costs.
a) Project plan
b) Schedule
c) WBS
d) Deliverable
36. WBS (Work Breakdown Structure) is also known as
a) Chunking
b) Unbundling
c) Both (a) & (b)
d) None
37. What is the first process in planning a project schedule?
a) Milestone definition
b) Activity definition
c) Activity resource estimation
d) Activity sequencing
38. Predecessors, successes, logical relationships, leads and lags, resource requirements, constraints,
imposed dates, and assumptions are all examples of ___________________.
a) Items in an activity list
b) Items on a Gantt chart
c) Milestone attributes
d) Activity attributes
………………………
47. Which of the following statement is false?
a) “Growing grass” was on the critical path for a large theme park project.
b) The critical path is the series of activities that determine the earliest time by which a
project can be completed.
c) A forward pass through a project network diagram determines the early start and
early finish dates for each activity.
d) Fast tracking is a technique for marking cost and schedule trade-offs to obtain the
obtain the greatest amount of schedule comparison for the least incremental cost.
48. _____________________ is a method of scheduling that considers limited resources when
creating a project schedule and includes buffers to protect the project completion date.
a) Parkinson’s Law
b) Murphy’s Law
c) Critical path analysis
d) Critical chain scheduling
49. _______________ is a resource scarified or foregone to achieve a specific objective or something
given up in exchange.
a) Money
b) Liability
c) Trade
d) Cost
Examination Paper – Project Management
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IIBM Institute of Business Management
50. What is main goal of project cost management?
a) To complete a project for as little cost as possible
b) To complete a project within an approved budget
c) To provide truthful and accurate cost information on projects
d) To ensure that an organization’s money is used widely
51. A fundamental of ‘Theory of Constraints’ (TOC) is to manage systems by focusing on the
constraints, termed as
a) Watermark
b) Bottleneck
c) Tick-sheet
d) None
52. “An activity will expand to fill the time available”; it is
a) Newton’s Law
b) Parkinson’s Law
c) Einstein’s Law
d) None
…………..
64. _______________ generates ideas for quality improvements by comparing specific project
practices or product characteristics to those of other projects or products within or outside the
performing organization.
a) Quality audits
b) Design of experiments
c) Six Sigma
d) Benchmarking
65. What tool could you use to determine whether a process is in control or out of control?
a) A cause – and – effect diagram
b) A control chart
c) A run chart
d) A scatter chart
66. Complication to the critical path represents the formation of compound series of activities often
involving different paths which has been termed
a) The critical chain
b) The critical path
c) TOC
d) Resource path
67. Six Sigma’s target for perfection is the achievement of no more than ________________ defects,
errors, or mistakes per million opportunities.
a) 6
b) 9
c) 3.4
d) 1
68. The seven run rule states that if seven data points in a row on a control chart are all below the
mean, above the means, or all increasing or decreasing, then the process needs to be examined for
_________________ problems.
a) Random
b) Non – random
c) Six Sigma
d) Quality
69. What is the preferred order for performing testing on information technology projects?
a) Unit testing, integration testing, system testing, user acceptance testing
b) Unit testing, system testing, integration testing, user acceptance testing
c) Unit testing, system testing, user acceptance testing, integration testing
d) Unit testing, integration testing, user acceptance testing, system testing
Examination Paper – Project Management
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IIBM Institute of Business Management
70. ___________________ is known for his work on quality control in Japan and developed the 14
points for Management in his text Out of the Crisis.
a) Juran
b) Deming
c) Crosby
d) Ishikawa
71. The theory of constraints (TOC) is successfully applied in
a) Planning
b) Checking
c) Manufacturing
d) Controlling
72. PMI’s OPM3 is an example of a ____________________ model or framework for helping
organization improve their processes and systems.
a) Benchmarking
b) Six Sigma
c) Maturity
d) Quality
73. Which of the following is not part of project human resource management?
a) Resource estimating
b) Acquiring the project team
c) Developing the project team
d) Managing the project team
74. _________________ causes people to participate in an activity for their own enjoyment.
a) Intrinsic motivation
b) Extrinsic motivation
c) Self motivation
d) Social motivation
75. At the bottom of Maslow’s pyramid or hierarchy of needs are _____________ needs.
a) Self – actualization
b) Esteem
c) Safety
d) Physiological
76. ________________ power is based on a person’s individual charisma.
a) Affiliation
b) Referent
c) Personality
d) Legitimate
Examination Paper – Project Management
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IIBM Institute of Business Management
77. What technique can you use to resolve resource conflicts by delaying tasks?
a) Resource loading
b) Resource leveling
c) Critical path analysis
d) Over allocation
78. Which of the following is not a tool or technique for managing project team?
a) Observation and conversation
b) Project performance appraisals
c) Issue logs
d) Social Styles Profile
79. What do many experts agree is the greatest threat to the success of any project?
a) Lack of proper funding
b) A failure to communicate
c) Poor listening skills
d) Inadequate staffing
80. Which communication skill is most important for information technology professionals for career
advancement?
a) Writing
b) Listening
c) Speaking
d) Using communication technologies
81. Which of the following is not a process in project communication management?
a) Information planning
b) Information distribution
c) Performance reporting
d) Managing stakeholders
82. A building may not be constructed unless the planning permission for it has been obtained, this is
the
a) Legal constraint
b) Quality constraint
c) Cost constraint
d) Logic constraint
83. A ________________ report describes where the project stands at a specific point in time.
a) Status
b) Performance
c) Forecast
d) Earned value
Examination Paper – Project Management
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IIBM Institute of Business Management
84. __________________ is an uncertainly that can have a negative or positive effect on meeting
project objectives.
a) Risk utility
b) Risk tolerance
c) Risk management
d) Risk
85. A person who is a risk - ______________ receives greater satisfaction when more payoffs is at
stake and is willing to pay a penalty to take risks.
a) Averse
b) Seeking
c) Neutral
d) Aware
86. Which risk management process involves prioritizing based on their probability and impact of
occurrence?
a) Risk management planning
b) Risk identification
c) Qualitative risk analysis
d) Quantitative risk analysis
87. The 7-S framework of project management issues was promoted by
a) McJonald and Co.
b) McKinsly and Co.
c) J & K Co.
d) None
88. Your project involves using a new release of a software application, but if that release is not
available, your team has ______________ plans to use the current release.
a) Contingency
b) Fallback
c) Reserve
d) Mitigation
89. A risk _________________ is a document that contains results of various risk management
processes, often displayed in a table or spreadsheet format.
a) Management plan
b) Register
c) Breakdown structure
d) Probability / impact matrix
Examination Paper – Project Management
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IIBM Institute of Business Management
90. Your project team has decided not to use an upcoming release of software because it might cause
your schedule to slip. Which negative risk response strategy are you using?
a) Avoidance
b) Acceptance
c) Transference
d) Mitigation
91. For non critical activities, network diagrams build in …………………………. at the start of
activities.
a) Temporary
b) Buffer
c) Slack
d) Anywhere
92. If a project being undertaken by a particular project team, then these are referred as
a) Resource capability
b) Resource capacity
c) Resource calendar
d) Resource pool
93. The term ‘hedgehog syndrome’ means
a) Management problem
b) Solving problem
c) Repetition of problem
d) Find out a problem
94. What is the first procurement process?
a) Planning contracting
b) Planning purchasing and acquisitions
c) Requesting seller responses
d) Procurement management planning
95. The _____________ is the point at which the contractor assumes total responsibility for each
additional dollar of contract cost.
a) A breakeven point
b) Share ratio point
c) Point of reconciliation
d) Point of total assumption
96. We’re standing on this hill here. We want to be on that hill over there, this is
a) View
b) Vision
c) Mission
d) Aim
Examination Paper – Project Management
16
IIBM Institute of Business Management
97. A ______________________ is a document prepared by a seller when there are different
approaches for meeting buyer needs.
a) RFP
b) RFQ
c) Proposal
d) Quote
98. Buyers often prepare a ______________________ list when selecting a seller to make this
process more manageable.
a) Preferred
b) Short
c) Qualified suppliers
d) BAFO
99. A proposal evaluation sheet is an example of a(n) ______________________.
a) RFP
b) NPV analysis
c) Earned value analysis
d) Weighted scoring model
100. __________________ is a term used to describe various procurement functions that are
now done electronically.
a) E – procurement
b) eBay
c) E – commerce
d) EMV

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CASE: 1       GEORGE DAVID

George David has been CEO of United Technologies Corporation (UTC) for more than a decade. During that time he has received numerous accolades and awards for his performance as a CEO. Under his leadership UTC, a $343 billion conglomerate whose operating units include manufacturers of elevators (Otis Elevator), aerospace products (including Pratt & Whitney jet engines and Sikorsky helicopters), air conditioning systems, and fire and security systems, has seen earnings grow at 10–14 percent annually—impressive numbers for any company but particularly for a manufacturing enterprise.

According to David, a key to United Technologies’ success has been sustained improvements in productivity and product quality. The story goes back to the 1980s when David was running the international operations of Otis Elevator. There he encountered a Japanese engineer, Yuzuru Ito, who had been brought in to determine why a new elevator product was performing poorly. David was impressed with Ito’s methods for identifying quality problems and improving performance. When he was promoted to CEO, David realized that he had to lower the costs and improve the quality of UTC’s products. One of the first things he did was persuade Ito to work for him at UTC. Under David, Ito developed a program for improving product quality and productivity, known as Achieving Competitive Excellence (ACE), which was subsequently rolled out across UTC. The ACE program has been one of drivers of productivity improvements at UTC ever since.
Early in his tenure as CEO, David also radically reorganized UTC. He dramatically cut the size of the head office and decentralized decision making to business divisions. He also directed his accounting staff to develop a new financial reporting system that would give him good information about how well each division was doing and make it easier to hold divisional general managers accountable for the performance of the units under them. He then gave them demanding goals for earnings and sales growth and pushed them to improve processes within their units by implementing the ACE program.
At the same time David has always stressed that management is about more than goal setting and holding people accountable. Values are also important. David has insisted that UTC employees adhere to the highest ethical standards, that the company produce that have minimal environmental impact, and that employee safety remain the top consideration in the work-place.

When asked what his greatest achievement as a manager has been, David refers to UTC’s worldwide employee scholarship program. Implemented in 1996 and considered the hall-mark of UTC’s commitment to employee development, the program pays the entire cost of an employee’s college or graduate school education, allows employees to pursue any subject at an accredited school, provides paid study time, and awards UTC stock (up to $10,000 worth in the United States) for completing degrees. Explaining the program, David states, “One of the obligations that an employer has is to give employees opportunities to better themselves. And we feel it’s also very good business for us because it generates a better workforce that stays longer.”

David states that one of his central tasks has been to build a management team that functions smoothly over the long term. “People come to rely upon each other,” he says. “You have the same trusting relationships. You know people; they know you. You can predict them; they can predict you. All of that kind of begins to work, and it accelerates over the tenure of a CEO. If you have people bouncing in and out every two to three years, that’s not good.”


According to Sandy Weill, former chairman of Citicorp and a UTC board member, David has the right mix of toughness and sensitivity. “When somebody can't do the job he’ll try to help; but if that person is not going to make it work, that person won't be on the job forever.” At the same time Weill says, “He does a lot of things that employees respect him for, I think he is a very good manager. Even though David is demanding, he can also listen—he has a receive mode as well as a send mode.”


Questions

1.    What makes George David such a highly regarded manager?
2.    How does David get things done through people?
3.    What evidence can you see of David’s planning and strategizing, organizing, controlling, leading, and developing?
4.    Which managerial competencies does David seem to posses? Does he seem to lack any?


































CASE: 2        BOOM AND BUST IN TELECOMMUNICATIONS

In 1997 Michael O'Dell, the chief scientist at World-Com, which owned the largest network of “Internet backbone” fiber optic cable in the world, stated that data traffic over the Internet was doubling every hundred days. This implied a growth rate of over 1,000 percent a year. O'Dell went on to day that there was not enough fiber optic capacity to go around, and that “demand will far outstrip supply for the foreseeable future.”
Electrified by this potential opportunity, a number companies rushed into the business. These firms included Level 3 Communications, 360 Networks, Global Crossing, Qwest Communications, World-Com, Williams Communications Group, Genuity Inc., and XO Communications. In all cases the strategic plans were remarkably similar: Raise lots of capital, build massive fiber optic networks that straddled the nation (or even the globe), cut prices, and get ready for the rush of business. Managers at these companies believed that surging demand would soon catch up with capacity, resulting in a profit bonanza for those that had the foresight to build out their networks. It was a gold rush, and the first into the field would stake the best claims.
However, there were dissenting voices. As early as October 1998 an Internet researcher at AT&T Labs named Andrew Odlyzko published a paper that de-bunked the assumption that demand for Internet traffic was growing at 1,000 percent a year. Odlyzko’s careful analysis concluded that growth was much slower—only 100 percent a year! Although still large, that growth rate was not nearly large enough to fill the massive flood of fiber optic capacity that was entering the market. Moreover, Odlyzko noted that new technologies were increasing the amount of data that could be sent down existing fibers, reducing the need for new fiber. But with investment money flooding into the market, few paid any attention to him. WorldCom was still using the 1,000 percent figure as late as September 2000.
As it turned out, Odlyzko was right. Capacity rapidly outstripped demand, and by late 2002 less than 3 percent of the fiber that had been laid in the ground was actually being used! While prices slumped, the surge in volume that managers had bet on did not materialize. Unable to service the debt they had taken on to build out their networks, company after company tumbled into bankruptcy—including WorldCom, 360 Networks, XO Communications, Global Crossing. Level 3 and Qwest survived, but their stock price had fallen by 90 percent, and both companies were saddled with massive debts.

Questions

1.    Why did the strategic plans adopted by companies like Level 3, Global Crossing, and 360 Networks fail?
2.    The managers who ran these companies were smart, successful individuals, as were many of the investors who put money into these businesses. How could so many smart people have been so wrong?
3.    What specific decision-making biases do you think were at work in this industry during the late 1990s and early 2000s?
4.    What could the managers running these companies done differently that might have led to a different outcome?





CASE: 3       DOW CHEMICAL

A handful of major players, compete head-to-head around the world in the chemical industry. These companies are Dow Chemical and Du Pont of the United States, Great Britain’s ICI, and the German trio of BASF, Hoechst AG, and Bayer. The barriers to the free flow of chemical products between nations largely disappeared in the 1970s. This, along with the commodity nature of bulk chemicals and a severe recession in the early 1980s, ushered in a prolonged period of intense price competition. In such an environment, the company that wins the competitive race is the one with the lowest costs. Dow Chemical was long among the cost leaders.
For years Dow’s managers insisted that part of the credit belonged to its “matrix” organization. Dow’s organizational matrix had three interacting elements: functions (such as R&D, manufacturing, and marketing), businesses (like ethylene, plastics, and pharmaceuticals), and geography (for example, Spain, Germany, and Brazil). Managers’ job titles incorporated all three elements (plastics marketing manager for Spain), and most managers reported to at least two bosses. The plastics marketing manager in Spain might report to both the head of the worldwide plastics business and the head of the Spanish operations. The intent of the matrix was to make Dow operations responsive to both local market needs and corporate objectives. Thus the plastics business might be charged with minimizing Dow’s global plastics production costs, while the Spanish operation might determine how best to sell plastics in the Spanish market.
When Dow introduced this structure, the results were less than promising: Multiple reporting channels led to confusion and conflict. The many bosses created an unwieldy bureaucracy. The overlapping responsibilities resulted in turf battles and a lack of accountability. Area managers disagreed with managers overseeing business sectors about which plants should be built where. In short, the structure, didn’t work. Instead of abandoning the structure, however, Dow decided to see if it could made more flexible.
Dow’s decision to keep its matrix structure was prompted by its move into the pharmaceuticals business is very different from the bulk chemicals business. In bulk chemicals, the big returns come from achieving economies of scale in production. This dictates establishing large plants in key locations from which regional or global markets can be served. But in pharmaceuticals, regulatory and marketing requirements for drugs vary so much from country to country that local needs are far more important than reducing manufacturing costs through scale economies. A high degree of local responsiveness is essential. Dow realized its pharmaceutical business would never thrive if it were managed by the same priorities as its mainstream chemical operations.
Accordingly, instead of abandoning its matrix, Dow decided to make it more flexible to better accommodate the different businesses, each with its own priorities, within a single management system. A small team of senior executives at headquarters helped set the priorities for each type of business. After priorities were identified for each business sector, one of the three elements of the matrix—function, business, or geographic area—was given primary authority in decision making. Which element took the lead varied according to the type of decision and the market or location in which the company was competing. Such flexibility that all employees understand what was occurring in the rest of the matrix. Although this may seem confusing, for years Dow claimed this flexible system worked well and credited much of its success to the quality of the decisions it facilitated.
By the mid-1990s, however, Dow had refocused its business on the chemicals industry, divesting itself of its pharmaceutical activities where the company’s performance had been unsatisfactory. Reflecting the change in corporate strategy, in 1995 Dow decided to abandon its matrix structure in favor of a more streamlined structure based on global product divisions. The matrix structure was just too complex and costly to manage in the intense competitive environment of the time, particularly given the company’s renewed focus on its commodity chemicals where competitive advantage often went to the low-cost producer. As Dow’s then-CEO put it in a 1999 interview, “We were an organization that was matrixed and depended on teamwork, but there was no one in charge. When things went well, we didn’t know whom to reward; and when things went poorly, we didn’t know whom to blame. So we created a global divisional structure and cut out layers of management. There used to be eleven layers of management between me and the lowest-level employees; now there are five.


Questions
1.    Why did Dow Chemical first adopt a matrix structure? What benefits did it hope to derive from this structure?
2.    What problems emerged with this structure? How did Dow try to deal with them? In retrospect, do you think those solutions were effective?
3.    Why did Dow change its structure again in the mid-1990s? What was Dow trying to achieve this time? Do you think the current structure makes sense given the industry in which Dow operates and the strategy of the firm? Why?
































CASE: 4       REBRANDING MCJOBS

As with most fast-food restaurant chains, McDonald’s needs more people to fill jobs in its vast empire. Yet McDonald’s executives are finding that recruiting is a tough sell. The industry is taking a beating from an increasingly health-conscious society and the popular film Supersize Me. Equally troublesome is a further decline in the already dreary image of employment in a fast-food restaurant. It doesn’t help that McJob, a slang term closely connected to McDonald’s, was recently added to both Merriam-Webster’s Collegiate Dictionary and the Oxford English Dictionary as a legitimate concept meaning a low-paying, low-prestige, dead-end, mindless service job in which the employee’s work is highly regulated.
McDonald’s has tried to shore up its employment image in recent years by improving wages and adding some employee benefits. A few years ago it created the “I’m loving it” campaign, which took aim at a positive image of the golden arches for employees as well as customers. The campaign had some effect, but McDonald’s executives realized that a focused effort was needed to battle the McJob image.
Now McDonald's is fighting back with a “My First” campaign to show the public—and prospective job applicants—that working at McDonald's is a way to start their careers and develop valuable life skills. The campaign’s centerpiece is a television commercial showing successful people from around the world whose first job was at the fast-food restaurant. “Working at McDonald's really helped lay the foundation for my career,” says ten-time Olympic track and field medalist and former McDonald's crew member Carl Lewis, who is featured in the TV ad. “It was the place where I learned the true meaning of excelling in a fast-paced environment and what it means to operate as part of a team.”
Richard Floersch, McDonald's executive vice president of human resources, claims that the company’s top management has deep talent, but the campaign should help to retain current staff and hire new people further down to hierarchy. “It’s a very strong message about how when you start at McDonald's, the opportunities are limitless,” says Floersch. Even the McDonald's application form vividly communicates this message by showing a group of culturally diverse smiling employees and the caption “At McDonald's You Can Go Anywhere!”
McDonald's has also distributed media kits in several countries with factoids debunking the McJob myth. The American documentation points out that McDonald's CEO Jim Skinner began his career working the restaurant’s front lines, as did 40 percent of the top 50 members of the worldwide management team, 70 percent of all restaurant managers, and 40 percent of all owner/operators. “People do come in with a ‘job’ mentality, but after three months or so, they become evangelists because of the leadership and community spirit that exists in stores,” says David Fairhurst, the vice president for people at McDonald's in the United Kingdom. “For many, it’s not a job, but a career.”
McDonald's also hopes the new campaign will raise employee pride and loyalty, which would motivate the 1.6 million staff members to recruit more friends and acquaintances through word of mouth. “If each employee tells just five people something cool about working at McDonald's, the net effect is huge,” explains McDonald's global chief marketing officer. So far the campaign is having the desired effect. The company’s measure of employee pride has increased by 14 percent, loyalty scores are up by 6 percent, and 90-day employee turnover for hourly staff has dropped by 5 percent.
But McDonald's isn't betting on its new campaign to attract enough new employees. For many years it has been an innovator in recruiting retirees and people with disabilities. The most recent innovation at McDonald's UK, called the Family Contract, allows wives, husbands, grandparents, and children over the age of 16 to swap shifts without notifying management. The arrangement extends to cohabiting partners and same-sex partners. The Family Contract is potentially a recruiting tool because family members can now share the same job and take responsibility for scheduling which family member takes each shift.
Even with these campaigns and human resource changes, some senior McDonald's executives acknowledge that the entry-level positions are not a “lifestyle” job. “Most of the workers we have are students—it’s a complementary job,” says Denis Hennequin, the Paris-based executive vice president for McDonald's Europe.


Questions

1.    Discuss McDonald's current situation from a human resource planning perspective.
2.    Is McDonald's taking the best approach to improving its employer brand? Why or why not? If you were in charge of developing the McDonald's employer brand, what would you do differently?
3.    Would “guerrilla” recruiting tactics help McDonald's attract more applicants? Why or why not? If so, what tactics might be effective?

































CASE: 5       TRANSFORMING REUTERS

London-based Reuters is a venerable company. Established in 1850 and devoted to delivering information around the world by the fastest means available—which in 1850 meant a fleet of 45 carrier pigeons—by the late 1990s the company had developed into one of the largest providers of information in the world. Although Reuters is known best to the public for its independent, unbiased news reporting, 90 percent of Reuters’ revenues are generated by providing information to traders in financial markets. In the 1990s the company used a proprietary computer system and a dedicated telecommunications network to deliver real-time quotes and financial information to Reuters terminals—devices that any self-respecting financial trader could not function without. When Reuters entered the financial data business in the early 1970s, it had 2,400 employees, most of them journalists. By the late 1990s its employee base had swelled to 19,000 most of whom were on the financial and technical side. During this period of heady growth Reuters amassed some 1,000 products, often through acquisitions, such as foreign-language data services, many of which used diverse and sometimes incompatible computer delivery systems.
The late 1990s were the high point for Reuters. Two shocks to Reuters’ business put the company in a tailspin. First came the Internet, which allowed newer companies, such as Thompson Financial Services and Bloomberg, to provide real-time financial information to any computer with an Internet connection. Suddenly Reuters was losing customers to a cheaper and increasingly ubiquitous alternative. The Internet was commoditizing the asset on which Reuters had built its business: information. Then in 2001 the stock market bubble of the 1990s finally broke; thousands of people in financial services lost their jobs; and Reuters lost 18 percent of its contracts for terminals in a single year. Suddenly a company that had always been profitable was losing money.
In 2001 Reuters appointed Tom Glocer as CEO. The first nonjournalist CEO in the company’s history, Glocer, an American in a British-dominated firm, was described as “not part of the old boys’ network.” Glocer had long advocated that Reuters move to an Internet-based delivery system. In 2000 he was put in charge of rolling out such a system across Reuters but met significant resistance. The old proprietory system had worked well, and until 2001 it had been extremely profitable. Many managers were therefore reluctant to move toward a Web-based system that commoditized information and had lower profit margins. They were worried about product cannibalization. Glocer’s message was that if the company didn’t roll out a Web-based system, Reuters’ customers would defect in droves. In 2001 his prediction seemed to be coming true.
Once in charge, Glocer again pushed an Internet-based system, but he quickly recognized that Reuters’ problems ran deeper. In 2002, the company registered its first annual loss in history, £480 million, and Glocer described the business as “fighting for survival.” Realizing that dramatic action was needed, in February 2003 Glocer launched a three-year strategic and organizational transformation program called Fast Forward. It was designed to return Reuters to profitability by streamlining its product offering, prioritizing what the company focused on, and changing its culture. The first part of the program was an announcement that 3,000 employees (nearly 20 percent of the workforce) would be laid off.
To change its culture Reuters added an element to its Fast Forward program known as “Living Fast,” which defined key values such as passionate and urgent working, accountability, and commitment to customer service and team. A two-day conference of 140 managers, selected for their positions of influence and business understanding rather than their seniority, launched the program. At the end of the two days the managers collectively pledged to buy half a million shares in the company, which at the time were trading at all-time low.


After the conference the managers were fired up; but going back to their regular jobs, they found it difficult to convey that sense of urgency, confidence, and passion to their employees. This led to the development of a follow-up conference: a one-day event that included all company employees. Following a video message from Glocer and a brief summary of the goals of the program, employees spent the rest of the day in 1,300 cross-functional groups addressing challenges outlined by Glocer and proposing concrete solutions. Each group chose one of “Tom’s challenges” to address. Many employee groups came up with ideas that could be rapidly implemented—and were. More generally, the employees asked for greater clarity in product offerings, less bureaucracy, and more accountability. With this mandate managers launched a program to rationalize the product line and streamline the company’s management structure. In 2003 the company had 1,300 products. By 2005 Reuters was focusing on 50 key strategic products, all delivered over the Web. The early results of these changes were encouraging. By the end of 2004 the company recorded a £380 million profit, and the stock price had more than doubled.


Questions

1.    What technological paradigm shift did Reuters face in the 1990s? How did that paradigm shift change the competitive playing field?
2.    Why was Reuters slow to adopt Internet-based technology?
3.    Why do you think Tom Glocer was picked as CEO? What assets did he bring to the leadership job?
4.    What do you think of Glocer’s attempts to change the strategy and organizational culture at Reuters? Was he on the right track? Would you do things differently?

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Case 1: Zip Zap Zoom Car Company
   
Zip Zap Zoom Company Ltd is into manufacturing cars in the small car (800 cc) segment.  It was set up 15 years back and since its establishment it has seen a phenomenal growth in both its market and profitability.  Its financial statements are shown in Exhibits 1 and 2 respectively.
    ……………..
    To maintain an annual dividend of 10 per cent, an additional Rs. 35 crore has to be kept aside.  Hence, the expected available net cash inflow is Rs. 185.27 crore (i.e. Rs. 220.27 – Rs. 35 crore)
Question:
Analyse the debt capacity of the company. 



CASE – 2   GREAVES LIMITED

Started as trading firm in 1922, Greaves Limited has diversified into manufacturing and marketing of high technology engineering products and systems. The company’s mission is “manufacture and market a wide range of high quality products………………



Questions

1.    How profitable are its operations? What are the trends in it? How has growth affected the profitability of the company?
2.    What factors have contributed to the operating performance of Greaves Limited? What is the role of profitability margin, asset utilisation, and non-operating income?
3.    How has Greaves performed in terms of return on equity? What is the contribution of return on investment, the way of the business has been financed over the period?


















CASE – 3   CHOOSING BETWEEN PROJECTS IN ABC COMPANY

ABC Company, has three projects to choose from. The Finance Manager, the operations manager are discussing and they are not able to come to a proper decision. Then they are meeting a consultant to get proper advice. As a consultant, what advice you will give?

The cash flows are as follows. All amounts are in lakhs of Rupees.

Project 1:
Duration 5 Years
Beginning cash outflow = Rs. 100
Cash inflows (at the end of the year)
Yr. 1 – Rs 30; Yr. 2 – Rs 30; Yr. 3 – Rs 30; Yr.4 – 10; Yr.5 – 10

Project 2:
Duration 5 Years
Beginning Cash outflow Rs. 3763
Cash inflows (at the end of the year)
Yr. 1 – 200; Yr. 2 – 600; Yr. 3 – 1000; Yr. 4 – 1000; Yr. 5 – 2000.

Project 3:
Duration 15 Years
Beginning Cash Outflow – Rs. 100
Cash Inflows (at the end of the year)
Yrs. 1 to 10 – Rs. 20 (for 10 continuous years)
Yrs. 11 to 15 – Rs. 10 (For the next 5 years)

Question:
If the cost of capital is 8%, which of the 3 projects should the ABC Company accept?




















CASE – 4   STAR ENGINEERING COMPANY

Star Engineering Company (SEC) produces electrical accessories like meters, transformers, switchgears, and automobile accessories like taximeters and speedometers.
    SEC buys the electrical components, but manufactures all mechanical parts within its factory which is divided into four production departments Machining, Fabrication, Assembly, and Painting—and three service departments—Stores, Maintenance, and Works Office.
    …………………
    The accountant who had to visit the company’s banker, passed on the papers to you for the required analysis and cost computations.

REQUIRED

Based on the data given in Exhibits A and B, you are required to:

1.    Complete the attached “overhead cost distribution sheet” (Exhibit C).
Note: Wherever possible, identify the overhead costs chared directly to the production and service departments. If such direct identification is not possible, distribute the costs on some “rational basis.

2.    Calculate the overhead cost (per direct labour hour) for each of the four producing departments. This should include share of the service departments’ costs.

3.    Do you agree with:
a.   The procedure adopted by the company for the distribution of overhead costs?
b.   The choice of the base for overhead absorption, i.e. labour-hour rate?



Case 5: EASTERN MACHINES COMPANY

Raj, who was in charge production felt that there are many problems to be attended to. But Quality Control was the main problem, he thought, as he found there were more complaints and litigations as compared to last year. With the demand increasing, he does not want to take any chances.

……………………
Namdeo: We should ask somebody from our statistics dept. to attend to this problem.

As a Statistician, advice what kind of Sampling schemes can we consider, and what factors will influence choice of scheme. What are the questions we should ask Mr. Namdeo, who works in the assembly line?

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IIBM Institute of Business Management
Semester-1 Examination Paper MM.100
Principles and Practice of Management
Section A: Objective Type (30 marks)
•This section consists of Multiple Choices & Short Notes type Questions.
•Answer all the Questions.
•Part one carries 1 mark each & Part two carries 5 marks each.
Part one:
Multiple Choices:
1. A plan is a trap laid to capture the ________.
a. Future
b. Past
c. Policy
d. Procedure
2. It is the function of employing suitable person for the enterprise
a. Organizing
b. Staffing
c. Directing
d. Controlling
3. ___________ means “ group of activities & employees into departments”
a. Orientation
b. Standardization
c. Process
d. Departmentation
4. This theory states that authority is the power that is accepted by others
a. Acceptance theory
b. Competence theory
c. Formal authority theory
d. Informal authority theory
5. It means dispersal of decision-making power to the lower levels of the organization
a. Decentralization
b. Centralization
c. Dispersion
d. Delegation
Examination Paper Semester I: Principles and Practice of Management
IIBM Institute of Business Management
6. This chart is the basic document of the organizational structure
a. Functional chart
b. Posts chart
c. Master chart
d. Departmental chart
……………………3. Write a short note on “Line Organization.”
4. Write a short note on ‘Acceptance theory’.
END OF SECTION A
Examination Paper Semester I: Principles and Practice of Management
IIBM Institute of Business Management
Section B: Case lets (40 marks)
•This section consists of Case lets.
•Answer all the questions.
•Each Case let carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150-200 words).
Case let 1
Mr. Vincent, the Manager of a large supermarket, was taking a management course in the
evening programme at the local college. The Professor had given an interesting but disturbing
lecture the previous night on the various approaches to management. Vincent had always thought
that management involved just planning, organizing and controlling. Now this Professor was
saying that management could also be thought of as quantitative models, systems theory and
analysis, and even something called contingency relationships. Vincent had always considered
himself a good manager, and his record with the supermarket chain had proved it. He thought of
himself, “I have never used operations research models, thought of my store as an open system,
or developed or utilized any contingency relationship. By doing a little planning ahead,
organizing the store, and making some things got done, I have been a successful manager. That
other stuff just does not make sense. All the professor was trying to do was complicate things. I
guess I will have to know it for the test, but I am sticking with my old plan, organize and control
approach to managing my store.”
Questions
1. Critically analyze Mr. Vincent’s reasoning.
2. If you were the professor and you knew what was going through Vincent’s mind, what would you
say to Vincent?
Case let 2
The Regional Administration Office of a company was hastily set up. Victor D’Cuhna a young executive
was directly recruited to take charge of Data Processing Cell of this office. The data processing was to
help the administrative office in planning and monitoring. The officer cadre of the administrative office
was a mix of directly recruited officers and promotee officers (promotion from within the organization).
Females dominated the junior clerical cadre. This cadre was not formally trained. The administrative
office had decided to give these fresh recruits on-the-job training because when results were not upto the
expectations blame was brought on the Data Processing Cell. Victor D’Cuhna realized that the
administrative office was heading for trouble……………………
. D’Cuhna countered that had
there been a male clerk in her place he would have scolded him too. When females enjoyed equal rights
with males, D’Cuhna felt he must remain impartial. Nevertheless, D’Cuhna was transferred to another
place. The transfer to another place, rather than to another department in same place, was particularly
humiliating to him. A shocked and disillusioned D’Cuhna quit the enterprise.
Questions
1. Diagnose the problem and enumerate the reasons for the failure of D’Cuhna?
2. What could D’Cuhna have done to avoid the situation in which he found himself?
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200-250 words).
1. What is Training? Explain the different methods of training?
2. Explain Decision-Making process of an organization?
S-1-91110
END OF SECTION B

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IIBM Institute of Business Management
Semester-1 Examination Paper MM.100
Organizational Behaviour
Section A: Objective Type (30 marks)
•This section consists of Multiple Choice & Short Notes type Questions.
•Answer all the questions.
•Part One carries 1 mark each & Part two carries 5 marks each.
Part one:
Multiple choices:
1. It is the degree to which a person identifies with a particular organization and its goals, & wishes
to maintain membership in the organization
a. Job involvement
b. Terminal value
c. Attitude
d. Value
2. _________ means moving information from the hidden area to the open area
a. blind area
b. unknown area
c. public area
d. self disclosure
3. An approach in which the goals of one party are in direct conflict with the goals of the other party
a. Negotiation
b. Distributive bargaining
c. Stress
d. None
4. The measure of a person’s ability to operate within business organizations through social
communication & interactions
a. Transactional analysis
b. Interpersonal skill
c. Life position
d. Johari window
5. Where the source of power is in person’s control over rewarding outcomes, that power is called
a. Coercive power
b. Referent power
c. Legitimate power
d. Reward power
Examination Paper Semester I: Organizational Behaviour
IIBM Institute of Business Management
6. It means melting resistance to change; the people who will be affected by the change come to
accept the need for it
a. Organization
b. Unfreezing
c. Changing
d. Refreezing
7. This training is also known as laboratory training, encounter groups & T-groups
a. Sensitivity
b. Survey
c. Process
d. Team building
8. They are the things that come together to define a culture & reveal that the culture is about to
those who pay attention to them
a. Culture
………………………3. Write a note on ‘Reinforcement theory’.
4. Explain the terms ‘Attitudes and Values’.
END OF SECTION A
Examination Paper Semester I: Organizational Behaviour
IIBM Institute of Business Management
Section B: Case lets (40 marks)
•This section consists of Case lets.
•Answer all the questions.
•Each Case let carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Case let 1
M/s. ABC Ltd is a medium-sized engineering company producing a large-range of product lines
according to customer requirements. It has earned a good reputation as a quick and reliable supplier to its
customers because of which its volume of business kept on increasing. However, over the past one year,
the Managing Director of the company has been receiving customer complaints due to delays in dispatch
of products and at times the company has to pay substantial penalty for not meeting the schedule in time.
The Managing Director convened an urgent meeting of various functional managers to discuss the issue.
The marketing manager questioned the arbitrary manner of giving priority to products in manufacturing
line, causing delays in wanted products and over-stocking …………………………
o appoint
you, a bright management consultant with training in business management to suggest ways and means to
put his “house in order”.
Questions
1. How would you examine if there is any merit in the remarks of various functional managers?
2. What, in your opinion, could be the reasons for different Managerial thinking in this case?
3. How would you design a system of getting correct information about job status to identify delays
quickly?
4. What would you suggest to promote co-ordinate interaction of various people to meet the
scheduled dates?
Examination Paper Semester I: Organizational Behaviour
IIBM Institute of Business Management
Case let 2
Rajender Kumar was a production worker at competent Motors Limited (CML) which made components
and accessories for the automotive industry. He had worked at CML for almost seven years as a welder,
along with fifteen other men in the plant. All had received training in welding both on the job and through
company sponsored external programmes. They had friendly relations and got along very well with one
another. They played Volleyball in the playground regularly before retiring to the quarters allotted by the
company. They work together in the company canteen, cutting Jokes on each other and making fun of
everyone who dared to step into their privacy during lunch hour. ……………
At that point of time, silence descended on the canteen. Both groups looked at Rajender anxiously,
waiting to see which group he would choose to eat with.
Questions
1. Whom do you think Rajender will eat with? Why?
2. If you were one of the other foremen, what could you do to make Rajinder’s transition easier?
END OF SECTION B
Examination Paper Semester I: Organizational Behaviour
IIBM Institute of Business Management
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. A large unit manufacturing electrical goods which has been known for its liberal personnel
policies and fringe benefits is facing the problem of low productivity and high absenteeism. How
should the management improve the organizational climate?
2. The leader is expected to play many roles & therefore he must be qualified to guide others to
organizational achievement. On the basis of this explain the leadership skills & leadership traits.
S-1-91110
END OF SECTION C

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IIBM Institute of Business Management
Semester-1 Examination Paper MM.100
Managerial Economics
Section A: Objective Type (30 marks)
•This section consists of multiple choices & Short notes type questions.
•Answer all the questions.
•Part one carries 1 mark each & Part two carries 5 marks each.
Part one:
Multiple choices:
1. It is a study of economy as a whole
a. Macroeconomics
b. Microeconomics
c. Recession
d. Inflation
2. A comprehensive formulation which specifies the factors that influence the demand for the
product
a. Market demand
b. Demand schedule
c. Demand function
d. Income effect
3. It is computed when the data is discrete and therefore incremental changes is measurable
a. Substitution effect
b. Arc elasticity
c. Point elasticity
d. Derived demand
4. Goods & services used for final consumption is called
a. Demand
b. Consumer goods
c. Producer goods
d. Perishable goods
5. The curve at which satisfaction is equal at each point
a. Marginal utility
b. Cardinal measure of utility
c. The Indifference Curve
d. Budget line
Examination Paper Semester I: Managerial Economics
IIBM Institute of Business Management
……………………….
3. What is ‘Prisoner’s Dilemma’, of non cooperative game?
4. What is ‘Third degree Discrimation’?
END OF SECTION A
Examination Paper Semester I: Managerial Economics
IIBM Institute of Business Management
Section B: Case lets (40 marks)
•This section consists of Case lets.
•Answer all the questions.
•Each Case let carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Case let 1
The war on drugs is an expensive battle, as a great deal of resources go into catching those who buy or
sell illegal drugs on the black market, prosecuting them in court, and housing them in jail. These costs
seem particularly exorbitant when dealing with the drug marijuana, as it is widely used, and is likely no
more harmful than currently legal drugs such as tobacco and alcohol. There's another cost to the war on
drugs, however, which is the revenue lost by governments who cannot collect taxes on illegal drugs. In a
recent study for the Fraser Institute, Canada, Economist Stephen T. Easton attempted to calculate how
much tax revenue the government of the country could gain by legalizing marijuana. The study estimates
that the average price of 0.5 grams (a unit) of marijuana sold for $8.60 on the street, while its cost of
production was only $1.70. In a free market, a $6.90 profit for a unit of marijuana would not last for long.
Entrepreneurs noticing the great profits to be made in the marijuana ……………………….
Questions
1. Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case
above.
2. On the basis of the analysis of the case above, what is your opinion about legalizing marijuana in
Canada?
Case let 2
Companies that attend to productivity and growth simultaneously manage cost reductions very differently
from companies that focus on cost cutting alone and they drive growth very differently from companies
that are obsessed with growth alone. It is the ability to cook sweet and sour that under grids the
remarkable performance of companies likes Intel, GE, ABB and Canon. In the slow growth electrotechnical
business, ABB has doubled its revenues from $17 billion to $35 billion, largely by exploiting
new opportunities in emerging markets. For example, it has built up a 46,000 employee organization in
the Asia Pacific region, almost from scratch. But it has also reduced employment in North America and
Western Europe by 54,000 people. It is the hard squeeze in the north and the west that generated the
resources to support ABB's massive investments in the east and the south. Everyone knows about the
staggering ambition of the Ambanis, which has fuelled Reliance's evolution into the largest private
company in India. Reliance has built its spectacular rise on a similar ability to cook sweet and sour. What
people may not be equally familiar with is the relentless focus on cost reduction and productivity growth
that pervades the company. Reliance's employee cost is 4 per cent of revenues, against 15-20 per cent of
……………..Questions
1. Is Indian companies running a risk by not giving attention to cost cutting?
2. Discuss whether Indian Consumer goods industry is growing at the cost of future profitability.
3. Discuss capital and labour productivity in engineering context and pharmaceutical industries in
India.
4. Is textile industry in India performing better than its global competitors?
END OF SECTION B
Examination Paper Semester I: Managerial Economics
IIBM Institute of Business Management
Section C: Applied Theory (30 marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should form the part of your answer (Word limit 200 to 250 words).
1. Free trade promotes a mutually profitable regional division of labour, greatly enhances the
potential real national product of all nations and makes possible higher standards of living all
over the globe.” Critically explain and examine the statement.
2. What role does a decision tree play in business decision-making? Illustrate the choice between
two investment projects with the help of a decision tree assuming hypothetical conditions about
the states of nature, probability distribution, and corresponding pay-offs.
S-1-91110
END OF SECTION C

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        N.B.: 1)    Attempt any Four Questions
             2)    All questions carry equal marks.
NO. 1
COOKING LPG LTD
DETERMINATION OF WORKING CAPTIAL
Introduction
Cooking LPG Ltd, Gurgaon, is a private sector firm dealing in the bottling and supply of domestic LPG for household consumption since 1995. The firm has a network of distributors in the districts of Gurgaon and Faridabad. The bottling plant of the firm is located on National Highway – 8 (New Delhi – Jaipur), approx. 12 kms from Gurgaon.  The firm has been consistently performing we.”  and plans to expand its market to include the whole National Capital Region.
    The production process of the plant consists of receipt of the bulk LPG through tank trucks, storage in tanks, bottling operations and distribution to dealers.   During the bottling process, the cylinders are subjected to pressurized filling of LPG followed by quality control and safety checks such as weight, leakage and other defects.  The cylinders passing through this process are sealed and dispatched to dealers through trucks.  The supply and distribution section of the plant prepares the invoice which goes along with the truck to the distributor.
Statement of the Problem :
Mr. I. M. Smart, DGM(Finance) of the company, was analyzing the financial performance of the company during the current year.  The various profitability ratios and parameters of the company indicated a very satisfactory performance.  Still, Mr. Smart was not fully content-specially with the management of the working capital by the company.  He could recall that during the past year, in spite of stable demand pattern, they had to, time and again, resort to bank overdrafts due to non-availability of cash for making various payments.  He is aware that such aberrations in the finances have a cost and adversely affects the performance of the company.  However, he was unable to pinpoint the cause of the problem.
    He discussed the problem with Mr. U.R…….
•     10 per cent.  However, during other months the power consumption remains the same as the decrease owing to reduced production is offset by increased consumption on account of compressors /Acs.
•    Additional amount of Rs. 3 lakh is kept as cash balance to meet exigencies during winter.
•    No change in time schedules for any payables / receivables.
•    The storage of finished goods inventory is restricted to a maximum 5,000 cylinders due to statutory requirements. 












NO. 2
M/S HI-TECH ELECTRONICS
M/s. Hi – tech Electronics, a consumer electronics outlet, was opened two years ago in Dwarka, New Delhi. Hard work and personal attention shown by the proprietor, Mr. Sony, has brought success.  However, because of insufficient funds to finance credit sales, the outlet accepted only cash and bank credit cards.  Mr. Sony is now considering a new policy of offering installment sales on terms of 25 per cent down payment and 25 per cent per month for three months as well as continuing to accept cash and bank……
– off basis.  The proprietor feels that the new policy will lead to bad debts of 1 per cent.
(a)    As a financial consultant, advise the proprietor whether he should go for the extension of credit facilities.
(b)    Also prepare cash budget for one year of operation of the firm, ignoring interest.  The minimum desired cash balance & Rs. 30,000, which is also the amount the firm has on January 1.  Borrowings are possible which are made at the beginning of a month and repaid at the end when cash is available.




















NO.3
SMOOTHDRIVE TYRE LTD
Smoothdrive Tyre Ltd manufacturers tyres under the brand name “Super Tread’ for the domestic car market.  It is presently using 7 machines acquired 3 years ago at a cost of Rs. 15 lakh each having a useful life of 7 years, with no salvage value.
    After extensive research and development, Smoothdrive Tyre Ltd has recently developed a new tyre, the ‘Hyper Tread’ and must decide whether to make the investments necessary to produce and market the Hyper Tread.  ……
debt will be a tax-deductible expenses.
    As a finance analyst, prepare a report for submission to the CFO and the Board of Directors, explaining to them the feasibility of the new investment.
No. 4
COMPUTATION OF COST OF CAPITAL OF PALCO LTD
In October 2003, Neha Kapoor, a recent MBA graduate and newly appointed assistant to the Financial Controller of Palco Ltd, was given a list of six new investment projects proposed for the following year.  It was her job to analyse these projects and to present her findings before the Board of Directors at its annual …..
of these sources of funds to determine its cost of capital.  In discussion with the current Financial Controller, the point was raised that while this served as an appropriate calculation for external funds, it did not take into account the cost of internally generated funds.  The Financial Controller agreed that there should be some cost associated with retained earnings and need to be incorporated in the calculations but didn’t have any clue as to what should be the cost.
    Palco Ltd is subjected to the corporate tax rate of 40 per cent.
    From the facts outlined above, what report would Neha submit to the Board of Directors of palco Ltd ? 







NO. 5
ARQ LTD
ARQ Ltd is an Indian company based in Greater Noida, which manufactures packaging materials for food items.  The company maintains a present fleet of five fiat cars and two Contessa Classic cars for its chairman, general manager and five senior managers.  The book value of the seven cars is Rs. 20,00,000 and …..
the PC, mobioe phone and so on.
    The company’s effective tax rate is 40 per cent and its cost of capital is 15 per cent.
Analyse the financial viability of the two options.  Which option would you recommend ?  Why ?

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Case I
PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT INTELLECTUAL PROPERTY PROTECTION

Locked doors and a security system protect your equipment, inventory and payroll. But what protects your business’s most valuable possessions? IP laws can protect your trade secrets, trademarks and product design, provided you take the proper steps. Chicago attorney Kara E.F. Cenar of Welsh and Katz, an IP firm, contends that businesses should start thinking about these issues earlier than most do. “Small businesses tend to delay securing IP protection because of the expense,” Cenar says. “They tend not to see the value of IP until a competitor infringes.” But a business that hasn’t applied for copyrights or patents and actively defended tem will likely have trouble making its case in court.

One reason many business owners don’t protect their intellectual property is that they don’t recognize the value of the intangibles they own. Cenar advises business owners to take their business plans to an experienced IP attorney and discuss how to deal with these issues. Spending money upfront for legal help can save a great deal later by giving you strong copyright or trademark rights, which can deter competitors from infringing and avoid litigation later.

Once you’ve figured out what’s worth protecting, you have to decide how to protect it. That isn’t always obvious. Traditionally, patents prohibit others from copying new devices and processes, while copyrights do the same for creative endeavors such as books, music and software. In many cases, though, the categories overlap. Likewise, trademark law now extends to such distinctive elements as a product’s color and shape. Trade dress laws concerns how the product is packaged and advertised. You might be able to choose what kind of protection to seek.
For instance, one of Welsh & Katz’s clients is Ty Inc., maker of plush toys. Before launching the Beanie Baby line, Cenar explains, the owners brought in business and marketing plans to discuss IP issues. The plan was for a limited number of toys in a variety of styles, and no advertising except word-of-mouth. Getting a patent on a plush toy might have been impossible and would have taken several years, too long for easily copied toys. Trademark and trade dress protection wouldn’t help much, because the company planned a variety of styles. But copyrights are available for sculptural art, and they’re inexpensive and easy to obtain. The company chose to register copyrights and defend them vigorously. Cenar’s firm has fended off numerous knockoffs.

That’s the next step: monitoring the market-place for knockoffs and trademark infringement, and taking increasingly firm steps to enforce your rights. Efforts typically begin with a letter of warning and could end with a court-ordered cease-and-desist order or even an award of damages. “If you don’t take the time to enforce [your trademark], it becomes a very weak mark,” Cenar says. But a strong mark deters infringement, wins lawsuits and gets people to settle early.” Sleep on your rights, and you’’’ lose them. Be proactive, and you’ll protect them – and save money in the long run.
An inventor with a newly invented technology comes to you for advice on the following matters:

Questions:

1.    In running this new venture, I need to invest al available resources in producing the products and attracting customers. How important is it for me to divert money from those efforts to protect my intellectual property?

2.    I have sufficient resources to obtain intellectual property protection, but how effective is that protection without a large stock of resources to invest in going after those that infringe on my rights? If I do not have the resources to defend a patent, is it worth obtaining one in the first place?

3.    Are there circumstances when it is better for me not to be an innovator but rather produce “knock-offs” of other innovations?

Case II

Provide advice to an entrepreneur about firing employees

Firing an employee is a messy business. Just the thought of having to recruit, train and manage a new sales soul is enough to keep some sales managers from following through with the task. But holding on to a salesperson who’s not performing or who’s disruptive to the team is guaranteed to exacerbate matters down the road. But how do you know when it’s time to say “you’ve gotta go”? It’s simple, according to Tricia Timkin: “Lack of production, lack of production, lack of production,” says the president of Padigent, a Carol Stream, Illinois, human resources consulting firm for emerging companies.

Dave Anderson, president of Dave Anderson’s Learn to Lead, concurs that performance is one criterion for firing. Anderson, whose Los Altos, California, company offers sales, management and leadership consulting, thinks reps who are “dishonest, selfish or disrespectful” should face the axe.

You may fear firing a rep will cause a morale dip in the troops. After all, someone’s buddy is getting shown the door. But making a tough choice can bolster the spirits of your sales squad. Says Tamkin: “Firing can positively affect morale [because] it sends a message that the company will take strong measures to ensure the success of the organization. Poor performers lower the morale of the team, and they continually break momentum and diminish the credibility of the sales manager.”

Before firing, however, steps must be taken to legally protect your business. It’s crucial that the employee has been warned in advance in writing. Coaching sessions with failing sales people will help protect you when it comes time to separate. Tamkin advises that documentation must be developed in advance of the firing, and that when it comes time for the employee to go, the manger should conduct an exit interview. Though firing will never be a savory part of a manager’s job description, it’s short – term pain for long – term gain. “Managers have to realize that when they keep the wrong person,” Anderson says, “there’s more damage to the company than just lack of production.”

Here are some firing guidelines from William Skip Miller’s ProActive Sales Management (AMACOM):
1.    Never in your office: if it’s your office, you can’t leave if the employee wants to stay and talk.
2.    Short and Sweet: As you walk in the door, say, “The reason I’m here is to tell this is your last day of employment with this company.” Just get it out.
3.    Never on a Friday: If fired on a Friday, the employee can’t start the process of feeling good. All he or she can do is stew about it over the weekend.
4.    Outside help: If the employee says he or she has consulted an attorney or other legal counsel, stop the conversation immediately and consult your HR department or attorney, whoever helped you draft your company policy.
5.    No hanging around: Personal effects can be retrieved, but have the person leave the building.

Advice to an entrepreneur:
An entrepreneur, whose business has stopped growing, has read the above article and comes to you for advice:

1.    Gee, these managers discussed in the article are a bit rough. Even if one particular person is not producing as expected, doesn’t this person still deserve to be treated with respect?

2.    It appears that the automatic assumption is that the employee is at fault for not performing and therefore should be fired. But shouldn’t the responsibility fall on me as the manager and the system that I have introduced? Maybe the person is performing as well as the situation allows?

3.    How am I to build team spirit within my small company when I single out one person for lack of production and fire him or her?

Case III

Provide advice to an entrepreneur about small business investment companies

It started out as a straightforward consulting project for Mahendra Vora and research partner Sundar Kadaya. They were analyzing software trends and perusing market research studies to assess the size of various software markets. But after spending 40 hours looking for information that should have taken 10 minutes to access, the pair concluded that more advanced tools were needed to search the internet and databases of public information. Within months, they launched Intelliseek Inc., providing software to capture, track and analyze information for use in strategic planning, market research, product development and brand marketing. Vora, 39, was no stranger to start-ups. By the time he co-founded Intelliseek in 1997, he already had three business launches under his belt. He sold all three to Fortune 500 firms, providing capital for Intelliseek. His initial investment of a few million dollars supported operations the first couple of years and through two major product launches.

By 1999, the Cincinnati Company was laying the groundwork for its first round of venture capital.Vora had had two years to contemplate his dream investor. Foremost, size did matter: The venture capitalist should have the wherewithal for ongoing financing, but not be so large that it shunned all but elaborate business models. Finding an investor with a broad network of investing partners also was important to the $10million company. “If you become wildly successful and plan to raise $50 million someday, then [the investor] should have access to the big investors. The network is also important because it can [introduce] you to customers,” says Vora, whose clients include CBS, Ford Motor Co. and Nokia. Finally, Vora was looking for operational experience. “A lot of VCs are phenomenal in advising you about what to do, but they’ve never done it themselves,” he observes. Vora ultimately found his venture match in Cincinnati-based River Cities Capital Funds, a small business investment company. While River Cities was not large, it was well-connected and managed by industry veterans with extensive professional experience.

Starting Small
Licensed and regulated by the SBA, SBICs are generally organized and operated like any other venture capital fund. But unlike traditional funds, SBICs use their own capital and long-term loans to small companies. On the whole, SBICs tend to be more risk-tolerant than banks or traditional venture capitalists….Inteliseek’s SBIC banker removed barriers to reaching larger, mainstream investors. Led by river cities capital funds, the initial $6 million investment included capital from the venture arm of Nokia; later investors included Ford Motor Co. and General Atlantic Partners LLC. “once you get a VC like River Cities, it is much easier to get access to bigger VCs,” says Vora. “They can go to VCs and say ‘One of our companies is doing so well, we’re going to put in more money, and you guys should come in’.”
Down But Not Out
SBICs invested roughly $2.8 billion in about 2,100 companies in the 12-month period ending September 30, 2002 down from $4.6 billion invested in 2,254 companies in the same period one year earlier. Like mainstream investors, they have had to adjust to deteriorating economic conditions.  “Valuations have come down on deals, and due diligence periods have increased,” says Patrick Hamner, vice resident of Capital Southwest Corp., a Dallas-based SBIC. “People are being far more discriminating in how they invest their capital.”
“The bar has been raised even more for small businesses trying to get capital,” he continues. “As opposed to the overall venture industry, which has had a very marked decline in financing activity, SBICs are down but still active.”
Nor has quality been an overriding concern, even as SBICs engage in riskier deals than their mainstream counterparts. “Part of what has happened with the bursting of the bubble is that the ideas being proposed are based on more substantive models,” says Edwin Robinson, managing director of River Cities Capital Funds. “A lot of the excess is being wrung out the system.” While the venture shakeup has impacted conventional the way some SBICs operate. “During the bubble years, there was probably more of an inclination to overfund,” says NASBICs Mercer. “I don’t mean in  the sense that money might not be justified, but to make the unconditional investment. I suspect that what you’re seeing now is a lot more investing on a milestone basis.” For instance, a company that requires $3 million over three years is likely to receive $1 million upfront, getting the rest after meeting revenue and growth targets. Fewer venture dollars, coupled with the banking industry’s reticence to lend to small businesses, has contributed to an overall capital shortage, adds Mercer. “Banks that had been out a little bit further on the risk curve than they probably normally do,” he says. “The banks’ own proclivity and the regulators kind of forced a pullback, so there has been a tremendous pullback in bank credit availability even for small businesses that have had long time banking relationships.”

The SBIC program, meanwhile, is attracting mainstream investors having difficulty raising capital for venture-backed investments. The increased interest bodes well for the small firms that SBICs target: companies with a net worth of less than $18 million and average after-tax earning of less than $6 million for the past two years.

Advice to an entrepreneur
An entrepreneur, who is an owner manager of a small business and looking to raise $4,00,000, has read the above article and comes to you for advice:
1.    What are the advantages of going to an SBIC over and above a business angle or venture capitalist?
2.    What are the disadvantages and how can they be minimized?

Case IV

Provide advice to an entrepreneur about being more innovative

When Neil Franklin began offering round-the-clock telephone customer service in 1998, customers loved it. The offering fit the strategic direction Franklin had in mind for Dataworkforce, his Dallas-based telecommunications – engineer staffing agency, so he invested in a phone system to route after hours calls to his 10 employees’ home and mobile phones. Today, Franklin, 38, has nearly 50 employees and continues to explore ways to improve Dataworkforce’s service. Twenty-four-hour phone service has stayed, but other trials have not. One failure was developing individual Web sites for each customer. “We took it too far and spent $30,000 then abandoned it,” Franklin recalls. A try at globally extending the brand by advertising in major world cities was also dropped. “It worked pretty well,” Franklin says, “until you added up the cost.”
Franklin’s efforts are similar to an approach called “portfolios of initiatives” strategy. The idea, according to Lowell Bryan, a principal in McKinney & Co., the NYC consulting firm that developed it, is to always have a number of efforts underway to offer new products and services, attack new markets or otherwise implement strategies, and to actively manage these experiments so you don’t miss an opportunity or over commit to an unproven idea.

The portfolio of initiatives approach addresses a weakness of conventional business plans-that they make assumptions about uncertain future developments, such as market and technological trends, customer responses, sales and competitor reactions. Bryan compares the portfolio of initiatives strategy to the ship convoys used in World War II to get supplies across oceans. By assembling groups of military and transport vessels and sending them in a mutually supportive group, planners could rely on at least some reaching their destination. In the same way, entrepreneurs with a portfolio of initiatives can expect some of them to pan out.

Making a Plan
Three steps define the portfolio of initiatives approach. First, you search for initiatives in which you have or can readily acquire a familiarity advantage – meaning you know more than competitors about a business. You can gain familiarity advantage using low-cost pilot programs and experiments, or by partnering with more knowledgeable allies. Avoid business in which you can’t acquire a familiarity advantage, Bryan says.
After you identify familiarity-advantaged initiatives, began investing in them using a disciplined, dynamic management approach. Pay attention to how initiatives relate to each other. They should be diverse enough that the failure of one wont endanger the others, but should also all fit into your overall strategic direction. Investments, represented by product development efforts, pilot programs, market tests and the like, should start small and increase only as they prove themselves. Avoid over investing before initiatives have proved themselves. The third step is to pull the plug on initiatives that aren’t working out, and step up investment in others. A portfolio of initiatives will work in any size company. Franklin pursues 20 to 30 at any time, knowing 90 percent wont pan out, “The main idea is to keep those initiatives running,” he says. “If you don’t, you’re slowing down.”

Advice to an entrepreneur
An entrepreneur, who wants his firm to be more innovative, has read the above article and come to you for advice:

1.    This whole idea of experimentation seems to make sense, but all those little failures can add up, and if there enough of them, then this could lead to one big failure-the business going down the drain. How can I best get the advantages of experimentation in terms of innovation while also reduction the costs so that I don’t run the risk of losing my business?
2.    My employees, buyers, and suppliers like working for my company because we have a lot of wins. I am not sure how they will take it when our company begins to have a lot more failures (even if those failures are small)- it is a psychological thing. How can I handle this trade-off?
3.    Even if everyone else accepts it, I am not sure how I will cope. When projects fail it hits me pretty hard emotionally. Is it just that I am not cut out for this type of approach?

Case V

PROVIDE ADVICE TO AN ENTREPRENEUR ABOUT NONTRADITIONAL FINANCING

When Lissa D’Aquanni created a gourmet chocolate business in her Albany, New York, basement in 1998, she had not only a passion for candy-making, but also a knack for spurring citizen involvement. The former nonprofit executive had worked for women’s advocacy groups, most recently promoting breast cancer awareness. If there was one thing she knew, it was how to rally community support.

Her ability to leverage local resources would be invaluable as she made her business a fixture of her Albany neighborhood. And in no area were those skills as critical as in financing last year, D’Aquanni wanted to move her business, the chocolate Gecko, to an abandoned building three blocks away, she needed $25,000.” Volunteers also helped renovate the building, cutting project costs form an estimated $3,00,000.

Check out D’Aquanni’s unorthodox and creative financing plan: An economic development group, the Albany Local Development Corp., loaned her $95,000 to buy the building. D’Aquanni obtained a $1,00,000 government guaranteed loan from a local credit union to renovate the structure. Façade improvements were funded through a matching grant program to encourage commercial development in Albany. A local community development financial institution used a state program to fund energy-efficient upgrades, including new windows, light fixtures, furnaces and siding. Says D’Aquanni, “ There were lots of different pieces of the puzzle to identify and figure out how to access.”

Conventional financing wasn’t an option. “I was looking at a business that did about $44,000 in sales doing a $260,000 project, and the traditional funders were apprehensive,” explains D’Aquanni, 37. They urged her to rent a storefront rather than buy the rundown building. Undeterred, D’Aquanni met with a neighborhood group to develop her expansion plan. It wasn’t the first time the community had helped out. In 1999, the cashstrapped chocolatier needed molds and a temperer for the Christmas rush. Recalling a strategy she had seen in a magazine, she sold discounted gift certificates to raise capital. D’Aquanni offered customers $25 in free chocolates for every $100 in gift certificates purchase. “A lot of folks mailed them as gifts to friends, family and co-workers,” D’Aquanni says. “ And most of those people ordered chocolates. My customer base expanded.”

Indeed, many entrepreneurs successfully launch a business only to encounter funding hardships as they attempt to grow. The ability to think outside the box, experts say, is critical for firms short on funding. “There are pockets of money out there, whether it be municipalities, counties, chambers of commerce,” says Bill Brigham, Director of the Small Business Development Center in Albany. “Those are the loan programs that no one seems to have information about. A lot of these programs will not require the collateral and cash that is typical of traditional [loans]. They may be a little more lenient as far as credit history goes. That’s one of the key roles we can play-what entrepreneur is going to think [he or she] can qualify for HUD money?

Advice to an entrepreneur

An entrepreneur, who is looking to expand but has limited access to traditional financing, has read the above article and comes to you for advice:

1.    I want to find a little pot of gold like Lissa D’Aquanni. Where should I look?
2.    I like the gift certificate idea to raise money and build my business. What other types of products do you think that approach will work for?
3.    Over the years I have paid a lot of taxes. Should I feel guilty for accessing government – subsidized monies to build my business, or should I feel justified?