What is marketing? Explain various functions of marketing.

Q. What is marketing? Explain various functions of marketing. 

Ans. MEANING OF MARKETING: Marketing is a comprehensive term and it includes all resources and set of activities necessary to direct and facilitate the flow of goods and services from the producer to the consumer. Marketing is providing the right goods and services to the right people, at the right place, at the right time and at the right price with the right communication and promotion.

The concept of market gives us the concept of marketing. Marketing is a broader concept which includes all human activities in relation to the market. It includes product planning and development, buying and assembling, pricing and discounting, distribution and selling, branding and packaging, standardization and grading, transportation and warehousing, promotion and advertising, financing and risk bearing, analysis of market in terms of its present and potential customers.

In the words of Philip Kotler, “Marketing is a social process by which individuals and groups obtain what they need and want through creating and exchanging goods with others.”

According to Richard Buskrick, “Marketing is an integrated system of action that creates value in goods through the creation of form, place, time and ownership utilities.”

FUNCTIONS OF MARKETING: Marketing is the performance of business activities that direct the flow of goods and services from producer to consumer. These activities are called marketing functions. 

According to Clark and Clark, “A marketing function is a major specialised activity performed in marketing.”

According to Converse, Huegy and Mitchell, “A marketing function is an act, operation or service performed in the process of distributing goods and services.”

A brief explanation of marketing functions is as follows: 

(A) RESEARCH FUNCTIONS: The success of marketing depends upon the fact that how much we are able to understand the needs of our customers and to produce accordingly. The research functions are: 

1. Marketing Research: Marketing research is the systematic search for and analysis of facts related to a marketing problem. It has become one of the most important functions of marketing in modern times. Marketing research is the intelligence service of the organisation. It helps in analysing the buyer’s behaviour, relative popularity of product, effectiveness of advertising media, pricing policies, packaging and grading policies, distribution structure, strength and weaknesses of the competitors etc. 

The major task of marketing research is to provide the marketing manager with timely and accurate information about the change in nature of consumer’s demand, changing position of supply, prices prevailing in the market, attitude of consumers towards price of the product, sales incentive/promotion schemes, availability of substitutes, potentialities for increasing the sales, market trends, etc.

Nowadays marketing research is not only fact finding and information gathering activity but it is a problem solving and action recommending function of marketing.

2. Product Planning and Development: Product planning and development are two important functions of marketing. Product planning is a process in which the type, form and design of the product is determined on the basis of informations obtained with the help of marketing research. It is the starting point of every marketing programme. It is a pre production activity through which a marketeer try to fill the gap in the market demand and generate revenue out of it. Successful marketing depends on the efficient manufacturing of the product, matching with the interest of consumer, his assumptions and choices etc. 

Product development begins with the conception of idea to its successful commercialisation. The product must be so designed and developed that it meets the requirements of consumers. Product development involves decisions regarding colour, shape, style, size, quality and other features in order to arrive at a want satisfying product, which will give maximum satisfaction to the consumer and optimum profit to the manufacturer.

Product planning and development involves a number of decisions, such as, what to produce or buy, how to have its packaging, how to fix its price and how to sell it. 

This function of marketing includes new inventions, changes in product, elimination of product, determining the level of production and many other decisions regarding products of the company. Thus, product planning and development is an important function of marketing. The main objective of this function is to provide want satisfying products to the consumers which increases their welfare and standard of living. 

(B) EXCHANGE FUNCTIONS: In marketing, exchange means transfer of ownership. It involves two separate functions i.e. buying and selling. Both buying and selling are complementary to each other and not the contradictory. It is also known as merchandising functions, this include the activities which are conducted for creating the demand and making the products available in the market.

1. Buying and Assembling: Buying is the most important function of marketing, because it is carried out by all marketeers: the manufacturers, the wholesalers, the retailers etc. A manufacturer has to buy raw materials for production; a wholesaler has to buy products to sell them to the retailers; a retailer has to buy products to be sold them to the consumers.

The success of a marketer depends on his efficiency to buy the products of customer’s choice at competitive prices. Buying as a marketing function involves many activities such as:

(i) Determination of requirements 

(ii) Finding the sources of supply,

(iii) Placing the order and

(iv) Receiving the products.

Assembling is also an important function of marketing along with buying. Assembling has two different meanings. Firstly, assembling means creation and maintenence of stock of products, purchased from different sources at a common point. This is generally done by middlemen. This gives a chance to the buyer to select the products of his choice. Secondly, raw materials accessories and spare parts are purchased and assembled in order to produced finished goods and services.

2. Selling: For many persons selling means marketing, because selling is an indispensable part of marketing. The purpose of all marketing activities is to sell the products of the firm. Selling enables the firm to achieve its objectives by satisfying the needs of the customers. Nowadays, selling has become a very complicated function of marketing. A marketer has to develop such a marketing strategy that help him to sell his products.

Under selling, a marketer has to perform several functions such as:

(i) Determining the potential customers,

(ii) Persuading them to buy the products,

(iii) Creating demand for the products,

(iv) Selection of channel for distribution, and 

(v) Market research, advertisement, salesmanship and other sales promotional activities are widely used to create demand and increasing the sales.

(C) PHYSICAL DISTRIBUTION FUNCTIONS: These functions are related with creation of place and time utilities. Physical transfer of goods from the manufacturer to consumer take place by the means of transportation and storage. Followings are the physical distribution functions of marketing:

1. Transportation: Transportation is the physical means of carrying products from one place to another. It plays an important role in marketing. Business and transport are like twin brothers. With the development of one, another also develops. Transport helps in assembling and dispersing the products. It links together the manufacturers and the consumers who are located at different places. By carrying the products to such places where they are needed, it creates place utility. Transport also helps in widening the market area. 

Marketing system requires an economical and effective transport systems. There are different means of transportation, such as: (i) Road Transport, (ii) Rail Transport, (iii) Air transport, (iv) Water Transport and (v) Pipeline. The firm can use any mode of transport depending upon their requirements. Large scale production, specialisation, emergence of national and international markets increases the importance of transportation as a marketing function. Now, most of the companies uses their own means of transportation which ensure safe and timely delivery and also act as mode of advertisement. Take the example of Coca Cola, Pepsi, LG, Nirma, Bisleri, Pizza Hut, etc.

2. Storage and Warehousing: Storage is another function of marketing and it involves the holding of products in proper condition from the time they are produced until they are demanded by the consumers. When production is seasonal but consumption is perennial or when production is continuous but consumption is seasonal, storage becomes necessary. Moreover, the goods produced in advance have to be stored by the manufacturers till their demand arises. Nowadays storage function has been performed at different levels by manufacturers, wholesalers, retailers and professional warehouse-keepers.

Warehousing is also an important function of marketing. Warehousing is an act of storing goods that will be sold or distributed later. Warehouse is a place where the products can be stored safely. Warehousing is a necessary business activity to carry on production and distribution on a large scale. Warehouses help the marketeers to make the supply of the product elastic, which result in price stabilisation. Moreover, storage and warehousing create both time and place utilities. 

Marketing managers are taking special interest in the storage and warehousing function, because a slight lapse in storage may destroy the commodity and may cause heavy loss to the company. Owing to this reason the large size companies maintain their warehouses near the markets and keep their goods property stored. Many companies are using this strategy, for example, Hindustan Lever Ltd., Bata, Godrej, etc. 

The importance of storage and Warehousing can be judge from the following facts:

(i) Storage of some products increase their value and price. For example: rice, tobacco, liquor, etc. if storage for long time, will get more.

(ii) Some produces like tea, coffee, seeds require curing and processing before they are ready for sale. Hence, in this case storage is necessary.

(iii) Agriculture products are produced seasonally like: wheat, rice, grams, etc. but they are required for consumption throughout the year. Hence, storage is necessary for buffer stock.

(iv) Storage and Warehousing also helps in price stabilization, elasticity of supply, grading, packaging, risk minimising and financing.

3. Standardisation and Grading: Standardisation means setting standard of quality. It assures quality and promote uniformity of products. It also widens the market of the product. Standardisation assures the customers that the goods are pure and uniform in quality and performance. Generally, there are four bases for determining standards:

(i) Quality,

(ii) Quantity,

(iii) Measurement and

(iv) Size. 

It facilitates purchase and sale of products, because in case of Standardization/standard products, goods are purchased by their brand name. Industrial products are given brand names by their manufacturers to convey to the users that their products confirm to certain well deined standards. In actual practice various standard form are used by the marketers for their products such as (i) ISO, (ii) ISI, (iii) AG mark, (iv) Quality Mark, etc.

Grading means separating the products according to established standards. Each grade has uniformity in all attributes. The products are so grouped in accordance with predetermined standards, therefore, grading follows standardisation. Granding starts where standardisation ends. Both are closely related activities. Buying and selling becomes easier. Grading is very common in spices, food grains, fruits, milk products, petroleum products and other agricultural products, according to their size, quality, colour, taste, strength, juice contents, etc. Both buyers and sellers are benefited by standardisation and grading function of marketing.

(D) FACILITATING FUNCTIONS: Facilitating functions make the marketing process more esay and systematic. Facilitating functions are supporting activities to the marketing process. These are:

1. Branding: Agricultural products and mining products need grading whereas manufacturered products need branding. 

The main aim of branding is to identify the products of the company from similar products of the competitors. It enables the consumers to differentiate the product of similar types and to make their choice of products among the various brands. The brand ensures the quality and standard of the product. It helps the company in creating an image for its product in the market. 

Now, branding has become an important marketing function because a good brand name ensures success in the market. Branding helps in the distribution of products in a wider market. Hence, branding is an essential part of marketing. There are many popular brands. For example, LG, BPL, Tata, Bata, Nirma, Godrej, Lakme, etc. 

2. Packaging: Packaging is concerned with formulating container or wrapper for the product. Its main objectives is to provide convenience in handling, ensure freshness and quality and to prevent adulteration. It also helps in distinguishing the product of the company from that of competitors.

With the evolution in packaging materials and packaging technology in designing the package, the packaging has become an important function of modern marketing. Packaging plays an important role in buying decisions by the consumers. Consumers like good package products. Manier times, products are demanded because of their good looks and useful packages. Packaging acts as a multi-purpose arrangement such as:

(i) it gives protection to the product,

(ii) it acts as a silent salesman,

(iii) it facilitates more sales,

(iv) it ensures quality,

(v) it helps in advertising,

(vi) it increases the standard of living,

(vii) it ensures price stabilization and

(viii) handling convenience.

All these factors prove that packaging is an inseparable part of modern marketing. Infact, packaging boosts the sales, majority of products we consume in our daily life comes in packaging.

3. Pricing: Determining the price of a profuct is an important function of marketing. A sound pricing policy is an important factor for selling the products to the customers. The price policy of a firm should be such that it attracts all type of customers. Price policy of the company directly affects the profit element and successful functioning of the company.

Nowadays, marketers have to decide so many prices, for example:

(i) Wholesale price,

(ii) Retail price,

(iii) Unit price,

(iv) Prices for foreign markets or international pricing, and

(v) Resale price maintenence policy.

Price of the is now used as a competitive weapon by the marketers. In a close substitute product market, fixation of proper price is must. Any wrong decision in pricing the product may cause heavy loss of demand for the product. In determining the price of the products, several factors are to be kept in mind such as:

(i) Cost of the product,

(ii) Services offered,

(iii) Profit margin desired,

(iv) Competitor’s price,

(v) Government policy,

(vi) Marketing policies,

(vii) Marketing objectives,

(viii) Demand for the product, etc.

Pricing function includes pricing, discounts, allowances and terms of credit.

4. Financing: Finance is the life and blood of all economic activities. It is very difficult to carry on marketing activities smoothly without the availability of adequate and cheap finance. Nowadays, most of the marketing departments arrange themselves, finances for marketing activities. A marketing department arranges finance in two ways:

(i) By accepting advances from the wholesalers for supply of goods, but it is only possible when there is a seller’s market.

(ii) By accepting fixed deposits in lieu of granting agencies/authorized dealership/franchisee to sell the company’s products. Huge amount is collected in this way.

5. Advertising: Modern age is the age of advertising. There is hardly any product or service which goes to the consumer without advertising. That is why, nowadays, advertising is considered as the main function of marketing. Generally, customers have no knowledge about the new products launched in the market. Therefore, it is possible that until the customer is not duly informed about the product, its quality, price and the place where from it can be purchased, etc., he will not buy the same. This information is supplied with the help of advertisement.

The responsibility of advertising lies with the advertising department but in many cases this responsibility is shared by the marketing department. He takes the decision about the advertising budget, message, media selection and looks after the advertising programme and sales promotion activities like distribution of free samples, gifts, sales literature, launching sales incentive schemes, arranging sales contests, displays, participation of company in fairs and exhibitions etc. In the modern times without advertising marketing is not possible. Hence, advertising have also become an important function of marketing.

6. Risk Bearing: Business world is full of risks. Unforeseen conditions and uncertainties give rise to risks. Marketing of goods involves number of risks. A marketer has to face risk due to:

(i) Change in demand,

(ii) Change in fashion,

(iii) Fall in price,

(iv) Competition,

(v) New inventions,

(vi) Change in habits and tastes of consumers,

(vii) Change in technology,

(viii) Losses from spoilage, depreciation and obsolescence,

(ix) Losses from fire, theft, accident,

(x) Losses from natural calamities, etc.

That is why, it is said that marketing is a risk-bearing activity.

It is very difficult to eliminate all the risks completely. Some of the risks can be avoided by taking precautionary measures, for example, risk of fire, theft, etc. There are certain risks which can be minimized through proper planning and forecasting. For instance, risk bearing due to change in demand, price, fashion, technology and tastes of the consumer can be minimised through proper marketing research. Competition risk can be avoided through business combinations. Marketing department of the company is responsible for managing the risks. Hence, risk bearing is also an important function of marketing.

7. After Sales Services: Nowadays marketing functions do not end on sale. Rather, they continue even after sale as the marketer provides number of after sales services like home delivery, guarantee and warrantee, free repair services, financing facility, etc. These services improve the standard of marketing functions.

What do you mean by Human Resource Management? Describe its functions.

 Q. What do you mean by Human Resource Management? Describe its functions.

Ans. MEANING OF HUMAN RESOURCE MANAGEMENT: Human Resource Management is that branch of management which is concerned with the recruitment, selection, development and the optimum use of the employees. It ensures that every employee makes his maximum contribution to the achievement of business goals. 

For complete meaning refer:

https://english9192.blogspot.com/2025/05/Objectives-and-nature-of-human-resource-management-meaning-nature-objectives.html

FUNCTIONS OF HRM: HRM is concerned with managing resources to effectively and efficiently achieve objectives of the organisation. The major functions of human resource management are:

● (A) Managerial Functions: Human resource manager is supposed to perform basic managerial functions i.e. Planning, Organising, Staffing, Directing and Controlling in relation to his department. These functions are:

(1) Planning: Planning is the first and foremost function of every manager. It is the most essential function for the success of the organisation. Planning implies preparing a blueprint of future programs to achieve the organisation goal. A good plan is necessary for proper utilization of human and physical resources to achieve organisational objectives. 

   Human resource planning is one of the most important functions of HR manger. He has to constantly monitor human resource requirements according to the changing needs of the organisation, anticipate vacancies, anticipate demand and supply of work force for various job categories in the market, determine shortage and surplus of personnels, and develop plan to eliminate shortage of staff and separation plan of the surplus staff. He should determime human resource policies and programs. Besides, human resource planning, human resource research has also become a specialized function of HR department. Recruitment, selection, promotion, transfer, absenteeism, labour turnover etc. are subject of human resource research.

(2) Organising: Every organisation has three important constituents — Work which is to be done, Employees by whom it should be done, and Physical resources which are to be used to get it done. Organising therefore refers to establishing proper relationship among work, employees and physical resources. Need of Organising is felt to achieve desired goals. Process of organising involves the following stages– determination of activities, grouping of activities and assignment of these activities to individuals, delegation of authority and fixation of responsibility. HR department and other departments in the organisation have complex relationship. HR manger provides them proper consultancy services in respect of administration of the employees.

(3) Staffing: Success or failure of an organisation depends on the capability of the workforce working in the organisation. If an organisation lacks suitable and capable employees, it cannot achieve its goals. By way of staffing process, suitable and competent persons are employed at different levels of organisation’s structure. Staffing proces includes the following three aspects: 

(a) To forecast the need of human resources.

(b) To determine the qualifications of the persons to be selected.

(c) To recruit and select the employees and to impart training to them.

Thus, staffing function includes forecasting of human resource planning, recruitment of employees, selection, trainimg and development.

(4) Directing: To motivate and lead the employees in order to achieve the goals of the organisation is called directing. The main components of this process are: 

(a) To direct and command subordinates.

(b) To guide and educate the subordinates.

(c) To supervise the work of the subordinates so as to ensure that everything is going on as per the plan.

(d) To encourage the subordinates to achieve higher productivity.

In an organisation, HR manager performs the function of providing leadership, guiding, supervising and inspiring the workforce. Directing is essential to attain the goals of the organization and to secure the willing and effective co-operation of the employees. Under this function, besides securing the co-operation of the employees, good industrial and human relations are also established. HR manger should make proper coordination among managers of the different departments in the organisation.

(5) Controlling: Final function of a manager is controlling. Under this function, manager ensures whether the work is executed in accordance with the pre-determined plan, or not. Actual work being done is compared with pre-determined standards or work. Deviations are traced and remedial measures are taken. Controlling is an important activity in the field of human resource management whether or not HR policies, objectives and programs are being enforced strictly according to pre-determined plan. If not, shortcomings are looked into and corrective actions are taken to remove the same. This is what is implied under human resource controlling. HR management determines job standards for employees at different levels. Actual work done by them is compared with pre-determined standards. Shortcomings are enquired into and suggestions are given to remove them. Auditing of human resource development programs, analysis of employees turnover records, directing of morale survey, interviewing new employees on schedule date, and comparing organisation’s  human resource management programs with the programs of other organizations etc. are used as a means of controlling.

● (B) Operative Functions: These are also called service functions or staff functions. HR manger is required to have special knowledge of human relations. In this category, main functions of HR manger are:

(1) Procurement of Employees: It is the duty of HR manger to provide for adequate number of employees. It is on the basis of this that manpower forecasting is made and manpower planning is undertaken. Manpower planning is a process on the basis of which the quantity and quality of personnel required are determined and employees requisition prepared accordingly. Manager can proceed ahead to initiate the process of recruitment and selection. Recruitment refers to looking for the prospective employees for the organisation and to motivate them to apply for the vacant posts. It aims at increasing the selection ratio for each job. Selection is a negative process. Under this process, applications of the job-seekers are scrutinized, then the best among the suitable candidates are selected. 

Placement of newly selected employees in the organisation and giving them full information about the policies, programmes, objectives of the organisation and also about other employees etc. are the functions performed by the HR manager.

(2) Development of Personnel: After selection of the employees, there remains a special need for training and development so that they may perform their jobs in a better way. HR manager makes necessary arrangement for training and development of employees of all the departments. In this category of development, following functions are covered:

(a) Performance Appraisal: HR manager makes provisions for the performance appraisal of the employees. On its basis, he decides who deserves promotion, who needs training, who are to be transferred. He also takes decision regarding promotion of competent employees and punishment for incompetent one.

(b) Training: It is a short-term process. It concerns with adding to the knowledge and skill of non-managerial employees so as to enable them to perform specific functions efficiently. On the basis of work performance, it is found out so as to which employees need training. Accordingly, proper training programmes are conducted and the end-result of different training programmes are assessed.

(c) Development: It is a long-term process. Theoretical knowledge is imparted to the managers to enable them to achieve the objectives of the organisation. It includes fixation of work standards, comparing actual work with standard work, finding areas of managerial development, explaining development programmes, knowing the effect of different managerial development works, making provisions of educational facilities, holding of seminars and symposiums etc. All these help to develop human resources.

(3) Compensation Function: HR manager makes adequate provisions for adequate wages and salary for the workers and employees serving the organisation. It includes job evaluation, wage and salary survey, determination of wage rate, determination of mode of wage payment, incentive payment plans, bonus, benefits and services etc.

(4) Integration: Besides activities to work, the employees must also have willingness to work. Willingness to work is influenced by the extent to which interests of the management have been integrated with the interests of the employees. In case, the interests and objectives of the employees are not served, then the goals of the organisation cannot be achieved. Integration of interests of management and that of the employees is the main function of HR manager.

(5) Maintenance functions: Another important function of HR manager is to maintain the employees in the organisation. HR manager is required to obtain the best employees and having obtained them, it must look after them in such a way that they would like to stay in the organisation and accomplish their work in the best possible manner.

(6) Separation Functions: If the primary function of HR manager is to procure the services of human resources, its final function is to separate them. The latter function is opposite to the former or primary function. It include the following:

(a) Retirement 

(b) lay-off

(c) Termination

(d) Discharge

(e) Suspension.

(7) Career Planning and Development: HR manager plans to one’s career and implementation of careers plan by means of education, training, jobs search and acquisition of work experiences. It includes internal and external mobility.

(8) Organisation Development: OD is an organisation’s well planned effort, managed from the top, with a goal of increasing organisational performance through planned interventions. It helps to change attitudes, values, organisation structures and managerial practices in an effort to improve organisational performance. 

So, the main functions of HR manager is to develop a human resources philosophy in the entire organisation. He also influences personnel policies by providing the necessary inputs to the top management. He also plans and design new HR methods. He also inspires the line managers who are primarily responsible for the implementation of HR methods provided to them by the HR department.

What is Primary data? Difference between primary and secondary data. Methods of collecting primary data.

 Q. What do you mean by Primary Data? Differentiate between primary data and secondary data. What are the different methods of collecting primary data? 

Ans. MEANING OF PRIMARY DATA: Data collected by the investigator for his own purpose, for the first time, from beginning to end, is called primary data. It is collected from the source of origin. In the words of Wessel, “Data originally collected in the process of investigation are known as primary data”.

MEANING OF SECONDARY DATA: According to Wessel, “Data collected by other persons are called secondary data”. These data are, therefore, called second-hand data.

DIFFERENTIATE BETWEEN PRIMARY DATA AND SECONDARY DATA: The following are the points of difference between primary and secondary data.

(1) Difference in Originality: Primary data are original because these are collected by the investigator from the source of their origin. On the other hand, secondary data are already in existence and, therefore, are not original. Primary data are used as raw material while secondary data are finished products.

(2) Difference in the Suitability of Objectives: Primary data are always related to a specific objective of the investigator. These data, therefore, do not need any adjustment for the concerned study. On the other hand, secondary data have already been collected for some other purpose. Therefore, this data need to be adjusted to suit the objective of study in hand.

(3) Difference in Cost of Collection: Primary data are costlier in terms of time, money and efforts involved than the secondary data. This is because primary data are collected for the first time from the source of origin. Secondary data are simply collected from the published or unpublished reports. Accordingly, these are much less expensive. 

It may be noted that there are no fundamental differences between primary data and secondary data. Data are data, whether primary or secondary. These are classified as primary or secondary just on the basis of their collection: first-hand or second-hand. Thus, a particular set of data when collected by the investigator for a specific purpose from the source of origin would be primary data. And the same set of data, when used by some other investigator for his own purpose would be known as secondary data. 

METHODS OF COLLECTING PRIMARY DATA:

The primary data may be collected by using any of the following methods:

(1) Direct Personal Investigation: In this method, data are collected personally by the investigator himself. There is a face-to-face contact with the persons from whom the information is to be obtained. Data are collected by asking questions relating to the enquiry to the informants. Suppose, if an investigator wants to collect data about the involvement in politics of the students of Kurukshetra University, Kurukshetra, he would go to the campus and contact each student and obtain the required information.

▶ Suitability: This method is suitable particularly when:

(1) the field of investigation is limited.

(2) a greater degree of originality of the data is required.

(3) information is to be kept secret; and

(4) investigation needs lot of expertise, care and devotion. 

▶ Merits: 

(1) Originality: Data have a high degree of originality according to this method.

(2) Accuracy: Data are fairly accurate when personally collected.

(3) Reliable: Because the information is collected by the investigator himself, reliability of the data is not doubted.

(4) Other information: When in direct contact with the informants, the investigator may obtain any other related information as well.

(5) Uniformity: There is a fair degree of uniformity in the data collected by the investigator himself from the informants. Comparison becomes easy because of uniformity of data.

(6) Flexible: This method is fairly flexible because the investigator can always make necessary adjustments in his set of questions.

▶ Demerits:

(1) Not Proper for Wide Areas: Direct personal investigation becomes very difficult when the area of the study is very wide.

(2) Personal Bias: This method is highly prone to the personal bias of the investigator. As a result, the data may lose their credibility.

(3) Costly: This method is very expensive in terms of the time, money and efforts evolved.

(4) Wrong Conclusions: In this method, area of investigation is generally small. The results are, therefore, less representative. This may lead to wrong conclusions.

(2) Indirect Oral Investigation: In this method, the investigator obtains the information not from those persons for whom the information is needed. Information is collected orally from other persons who are expected to posses the necessary information. These other persons are known as witnesses. Indirect oral Investigation is usually adopted in those cases where information through direct sources is not possible or less reliable. For example, if a case of murder is to be investigated, it would be quite impossible to know the facts by contacting the persons directly who are involved in it. In such case, information is to be obtained from third persons such as friends, neighbours, witnesses, etc. 

▶ Suitability: This method is suitable particularly when:

(1) the field of investigation is large.

(2) it is not possible to have direct contact with the concerned informants.

(3) the concerned informants are not capable of giving information because of their ignorance.

(4) Enquiry committees and commissions appointed by the Government generally adopted this method.

▶ Merits: 

(1) Wider Area: This method can be applied even when the field of investigation is very wide. 

(2) Less costly: This is relatively a less costly method.

(3) Expert opinion: Using this method an investigator can seek opinion of the experts and thereby make his information more reliable.

(4) Free from Bias: This method is relatively free from the personal bias of the investigator.

(5) Simple: This is relatively a simple method of data collection.

▶ Demerits:

(1) Less Accurate: The data collected by this method are relatively less accurate. This is because the information is obtained from persons other than the concerned informants.

(2) Biased: There is possibility of personal bias of the witness giving information.

(3) Wrong Conclusions: This method may lead to doubtful conclusions due to ignorance and carelessness of the witness.

(3) Information from Local Sources or Correspondents: In this method, the investigator appoints local agents or correspondents in different places to collect information. These correspondents collect the information in their own way and send the same to the central office where the data are processed. Newspapers agencies generally adopt this method. This method is generally adopted by various government departments where regular information is to be collected from a wide area. For example, in the construction of wholesale price indices, regular information is obtained from correspondents appointed in different areas.

▶Suitability: This method is suitable particularly when:

(1) accuracy of the data is only modestly needed.

(2) regular and continuous informations are needed.

(3) the area of investigation is large.

(4) the information is to be used by journals, magazines, radio, TV, etc. 

▶ Merits: 

(1) Economical: This method is quite economical in terms of time, money and efforts involved.

(2) Wider Coverage: Investigator can cover wider cover. 

(3) Continuity: The correspondents keep on supplying almost regular information.

(4) Suitable for Special Purpose: This method is particularly advantageous for some special purpose investigations, e.g., price quotations from different grain markets for the construction of Index Number of Agricultural Prices.

▶ Demerits:

(1) Less Originality: In this method, there is less originality. Investigation depends more on estimation rather than actual enumeration.

(2) Lack of Uniformity: There is lack of uniformity of data. This is because data is collected by a number of correspondents.

(3) Personal Bias: This method suffers from personal bias of the correspondents.

(4) Less accurate: The data collected by this method are not very accurate.

(5) Delay in Collection: Generally, there is delay in the collection of information through this method.

(4) Mailed Questionnaire Method: In this method, a list of questions (known as questionnaire) related to the survey is prepared and sent to the informants by post. The questionnaire contains questions and provides space for answers. A covering letter is addressed to the informant explaining the object of survey and making a request to fill up the questionnaire and send it back to within a specified time. It is also assured that the information would be kept secret. The informants write the answers against the questions and return the completed questionnaire to the investigator.

▶ Suitability: This method is most suited when:

(1) the area of study is very wide and

(2) when the informants are educated.

▶ Merits: 

(1) Economical: This method is economical in terms of time, money and efforts involved.

(2) Originality: This method is original and, therefore, fairly reliable. This is because the information is supplied by the concerned persons themselves.

(3) Wider area: This method can cover wider area.

▶ Demerits: 

(1) Lack of interest: Generally, the informants do not take in interest in questionnaires and fail to return the questionnaires. Those who return, often send incomplete answers.

(2) Lack of flexibility: This method lacks flexibility in the sense that when questions are not properly replied, these cannot be changed to obtain the required information.

(3) Limited Use: This method has limited use in that questionnaires are answered only by the educated informants. Thus, this method cannot be used when the informants are uneducated.

(4) Biased: If the informants are biased, the informations will also be biased.

(5) Less Accuracy: The conclusions based on such investigation have only limited accuracy. This is because some questions may be difficult and accurate answers may not be possible.

(5) Schedules Filled through Enumerators: In this method, a questionnaire is prepared as per the purpose of enquiry. The enumerator himself approaches the informants with the questionnaire. The questionnaires which are filled by the enumerators themselves by putting questions are called schedules. Thus, under this method, the enumerator himself fills the schedules after making enquiries from the informants. Enumerators are those persons who help the investigators in collecting the data. The enumerators are given training to fill the schedules and put the questions intelligently in the interest of accuracy of information.

▶ Suitability: This method is mostly used when:

(1) field of investigation is large.

(2) the investigation needs specialised and skilled investigators.

(3) the investigators are well versed in the local language and cultural norms of the informants.

▶ Merits:

(1) Wide Coverage: This method is capable of wider coverage in terms of area involved. Even illiterates will also provide information.

(2) Accuracy: There is a fair degree of accuracy in the results. This is because investigations are done by specialized enumerators.

(3) Personal Contact: Unlike in the case of mailing questionnaires, there is personal contact with the informants in this method. Accordingly accurate and right answers are obtained.

(4) Impartiality: This method is impartial. This is because the enumerators themselves do not need the required information; so they are impartial to the nature of information they obtain.

(5) Complete: Schedules have the merits of completeness, because these are filled in by the enumerators themselves.

▶ Demerits 

(1) Expensive: This is a very expensive method of investigation because of the involvement of trained investigators.

(2) Difficulties regarding Enumerators: Competent enumerators may not be available. Accuracy of the information accordingly suffers.

(3) Time Consuming: Enumerators may need specialised training for particular investigators. The process of investigation thus becomes time consuming.

(4) Not suitable for Private Investigation: Since this method is very expensive, it is generally not suitable for private investigations. This method is generally used by the Government institutions.

(5) Inaccurate Data: If the enumerators are biased, the data will not be accurate.

Monetary policy: Meaning and instruments.

 Q. What is meant by Monetary Policy? Explain the main instruments of monetary policy. 

Ans. Meaning of Monetary Policy: Monetary policy refers to that policy through which central bank of the country (Reserve Bank in India) controls (i) the supply of money, (ii) availability of money, and (iii) the cost of money in order to attain a set of objectives focusing on growth and stability of the economy.

It is an economic policy that manages the size and growth rate of the money supply in the economy. It is primarily concerned with the management of interest rate and the total supply in money in circulation and is generally carried out by central bank.

In the words of G.K. Shaw, “By monetary policy, we mean any conscious action undertaken by the monetary authorities to change the quantity, availability or cost (rate of interest) of money.”

Main instruments of Monetary Policy: 

Monetary policy instruments to credit control is often categorised as Quantitative and Qualitative. Quantitative instruments are applied as non-discriminatory credit policy of the central bank: all sectors of economy are uniformly treated while monetary policy is being pursued. Qualitative instruments are applied as discriminatory credit policy of the government: different sections are treated differently depending on the prevailing situation in the country. Qualitative credit control is also called selective credit control.

I. Quantitative Instruments: Following are the instruments for quantitative credit control:

(1) Bank Rate: Bank rate is an important instrument of credit control. Bank rate is that minimum rate of interest at which central bank of a country is willing to discount the first grade securities of other banks or lends on approved securities. Rise in Bank rate raises the rate of interest and fall in bank rate lowers rate of interest. When bank rate is raised, there is contraction of credit, fall in aggregate demand and hence fall in prices. On the contrary, to check deflation in the country, bank rate is lowered.

(2) Open Market Operations: When the central bank of a country buys or sells securities in the open market is called Open Market Operations. If the credit is to be contracted, the central bank begins to sell securities in the open market. On the contrary, if the central bank wants to expand credit, it begins to buy securities in the open market. In the event of inflation, central bank sells securities in the open market. As a result of it, credit is contracted, aggregate demand goes down and prices tend to fall. On the contrary during depression, the central bank buys securities as a result of which credit expands, aggregate demand increases and prices tend to rise.

(3) Change in Minimum Reserve Ratio: Commercial banks are required to keep a given percentage of their total deposits as cash reserve with the central bank. If the central bank wants to contract credit, it raises the cash reserve ratio. As a result, banks have to keep a larger percentage of their deposits in terms of cash with the central bank. It reduces their cash reserves. Lower cash reserves reduces credit creation capacity of the commercial banks. On the other hand, when the central bank wants to expand credit, it lowers the cash reserve ratio. This leaves the banks with larger cash reserves to create credit.

(4) Change in Liquidity Ratio: Every bank is required to keep a given proportion of its total assets in the form of liquid (or near liquid) assets. It is called liquidity ratio. When the central bank is to contract credit, it raises liquidity ratio. On the contrary, when the central bank is to expand credit, it lowers the liquidity ratio.

II. Qualitative (or Selective) Policy Instruments:

(1) Change in Margin Requirements of Loans: When the central bank feels that the traders are stock piling (collects/hoards) certain commodities as a result of which their prices are rising, then it controls the availability of credit for these goods by changing margin requirement. It means that the margin between the value of the goods pledged as security and the amount of loan is increased. Supposing a person pledges goods worth ₹100 as security with a bank and gets a loan amounting to ₹80. In this example, margin requirement is ₹20, or say 20 per cent. If the margin requirement is raised, then the borrower will have to pledge goods of greater in order to secure loan of a given amount. This way credit is contracted. Supposing, margin requirement is raised to ₹60 only against the security of goods worth ₹100 only. Obviously, if the margin requirement is lowered, there will be expansion of credit. 

(2) Rationing (allocating, distributing) of credit: Central bank is the lender to the last resort to commercial banks. Hence, if it so chooses, it can introduce rationing of credit in order to control credit. Rationing of credit may have any of the four variants:

(i) The central bank can decline loan to a specified category of commercial banks.

(ii) The central bank can reduce the quantum of loans for all the banks.

(iii) Central bank can fix credit quota for different banks.

(iv) Central bank can determine the limit of credit granted to industry and trade. As a result of credit rationing banks become cautious in advancing loans; accordingly flow of credit is restricted.

(3) Direct Action: Sometimes, the central bank may initiate direct action against the commercial banks defying its directives. The central bank may impose strict restrictions on the functioning of defaulting banks including denial of loans.

Quantitative and Qualitative credit control are not ‘either-or’ forms of credit control. These are complementary to each other. Both quantitative as well as quantitative policy instruments may be simultaneously pursued with a view to achieving the objectives of monetary policy.

Define Organisational Behaviour and its elements. Discuss the role of Taylor in the development of Scientific Management Approach.

Q. Define Organisational Behaviour and its elements. Discuss the role of Taylor in the development of Scientific Management Approach.

Ans. Meaning of Organisational Behaviour: Organisational Behaviour consists of two words ‘organisation + behaviour’. Organisation means a unit in which two or more people work jointly for the attainment of an objective. On the other hand, behaviour means the actions and reactions of an individual or a group towards their activities. For example, an individual or a group is extremely happy on getting some important assignment. This is his behaviour. In this way, organisational behaviour means the behaviour of people while working in the organisation.

It refers to the study of human behaviour in the organisation so that the organisational effectiveness is improved.

Definition of Organisational Behaviour:

1. According to Davis and Newstram, “Organisational Behaviour is the study and application of knowledge about how people act within organisations.”

Thus, Organisational Behaviour is a term used to explain the actions and reactions of individuals and groups to the stimuli surrounding them as they interact with one another while doing their jobs.

Elements: OB is the study of an individual, group and environmental characteristics. Apart from it, people work in an organisation structure and while working they make use of some techniques also. In this way, OB consists of a sum total of five components, e.g. individual, group, organisation structure and environment.

(1) Individual: Individuals help in the formation of organisation. Therefore, an individual is the most important component of OB. It is a special characteristic of an individual that each individual differs in their behaviour under OB, individuals behaving in almost a similar manner are placed in one category. Then studies are conducted for each category with their own specialities in behaviour. Each category helps in the discovery of techniques regarding explanation, prediction and control in respect of OB.

(2) Group: Organisation means that unit where more than two people work in a group. Therefore, human group has a special significance in the organisational behaviour. Each individual behaves differently as an individual and collectively. Under OB, efforts are made to study that when people happen to be in a group, how do they behave so that the conduct of the people in groups can be controlled.

(3) Job and Technology: Job means the total work allotted to individuals at the place of work. Job itself affects the behaviour of the people. Therefore, it is important to focus attention on the job. It is, however, important to see whether the job allotted to an individual or a group is liked by them or not. The behaviour of people is also influenced by their interaction while handling the job. Therefore, special attention has to be focused on the allotment of job. Similarly, behaviour is also influenced by the technique and equipment used for the completion of the job. The behaviour of the people remains positive if they are provided technique and equipment of their choice, otherwise, the effect is the reverse. Thus, we find that job and technique happen to be important parts of OB.

(4) Organisation Design: Organisation design does influence the work relationship of the people. Under this the power and responsibility is also distributed among the people. Moreover, the reporting technique, recording technique, rules, work procedure are also determined. They happen to be different in every type of organisation design. Organisation design is created keeping in view the nature of the job. Under OB, it is always kept in mind as to what type of organisation design will be suitable in a particular situation. The control on the behaviour of the employees is easier when the organisation design happens to be effective.

(5) Environment: No organisation is established in a vacuum. It is very much a part of the society where it is established. Different parts of society, e.g., family, government, social organisation together create environment. The behaviour of the people is affected by these factors. It is the function of OB to study the effect of these factors of the environment on the behaviour of the people.

Role of Taylor in the development of Scientific Management Approach: F.W. Taylor is the father of scientific management. In his company, he conducted a number of experiments and came to conclusion that the amount of work a labourer was doing was far less as compared to what he was supposed to be doing. He gave number of suggestions to solve this problem and, in doing so, he gave scientific outlook to management.

● Meaning of Scientific Management: The literary meaning of scientific management is performing the work of management in a scientific manner. In other words, discarding the traditional approaches to management and adopting newer and more scientific approaches in their place is called scientific management.

Scientific Management refers to that management which thinks that by scientifically analysing work, it would be possible to find one best way to do it.

● Principles of Scientific Management: The Scientific Management Approach propounded by F.W. Taylor is based upon the following five principles:

(1) Principle of Use of Science for the Rule of Thumb: According to this principle, all the activities bring performed in an organisation should be analysed in detail with the aim of developing a technique of accomplishing the maximum possible work in an efficient manner and at the minimum possible cost. This principle says that we should not get stuck in a set routine and continue with the old techniques of doing work, rather we should be constantly experimenting to develop new techniques which make the work much simpler and easier.

(2) Principle of Scientific Selection and Training of Workers: According to this principle, the selection and raining of workers should be done in a scientific manner. Scientific appointment means appointing only those people to do a particular work who possess the necessary capabilities to do it. However, only scientific selection of workers is not adequate in itself, the workers should also be imparted the necessary training from time to time. Proper training of workers increases their efficiency and hence benefits both the workers as well as the organisation.

(3) Principle of Cooperation between Labour and Management: As per this principle, such an atmosphere should be created in the organisation that labour (the major factors of production) and management consider each other other indispensable. Labour should understand that it cannot proceed in its work without the existence of Management, and Management should understand that it has no identity without the existence of Labour. If such an atmosphere prevails in an organisation, then both the parties would aim for the achievement of the same goal (i.e. the maximum and good quality production) and hence both of them will be successful in achieving the goals. Taylor has referred to such a situation as a ‘Mental Revolution’.

(4) Principle of Maximum Output: As per this principle, both the labour as well as management should make full efforts to produce the maximum output. They should spare no efforts for the maximum utilisation of the factors of production available in the organisation. This will have a direct impact on the profits of the organisation and the organisation will earn the maximum possible profits. Higher profits will results in higher wages for the workers and thus make them more dedicated towards the organisation.

(5) Principle of Equal Division of Responsibility: According to this principle, the work of the organisation and the related responsibilities should be clearly divided among the two main groups in the organisation (Management and Labour). Each group should be assigned work which it can accomplish more efficiently. For example, Management should be the one to.decide the time required to do a particular work, while the responsibility for actually doing the work should be with the labour. In this way, if the time required for doing the work is not properly determined, the manager would be accountable, and if the work has not been properly performed the labourer would be responsible. Hence, on proper implementation of this principle, the credit for doing work efficiently would be divided among both the groups and in case of any defaults, the responsibility would also be shared by both the groups.

● Techniques of Scientific Management: Taylor has devised the following techniques for actually implementing the principles of scientific management:

(1) Scientific Study of Work: Scientific management requires deep analysis of all the activities being performed in the organisation with the aim of producing the maximum possible output with the minimum possible efforts. In simple words, it may be said that Taylor was strictly opposed to incompetence and wanted to remove incompetence with whatever possible means. In his efforts to do so, he conducted a number of experiments and proved that (i) if the various parts of the process of production are reduced to the minimum, (ii) while working, unnecessary movements of the body are eliminated, (ii) the time required for doing every work is determined and (iv) recognising that human beings are not inanimate objects and hence are likely to feel fatigued, proper arrangements for their resting are made, then incompetence will be totally eliminated from the organisation. On this basis, he has divided work study into the following four parts: 

(i) Method Study,

(ii) Motion Study.

(iii) Time Study, and

(iv) Fatigue Study.

(2) Scientific Task Planning: Scientific task planning implies analysing all the different aspects of the work before actually commencing upon it, such as what is to be done? how is it to be done? where is it to be done? and when is it to be done? Taylor has advised the managers of industrial organisations to establish a separate Planning Department for this purpose.

(3) Scientific Selection and Training of Workers: First, it is determined that for a particular work, persons possessing what qualities and capabilities are required. Next, through conducting various examinations, capable persons are selected. Scientific selection is selecting the right person for the right position without any bias. According to the traditional techniques of management, this was usually done by the Foreman, however Taylor has advised the establishment of a Personnel Department for this purpose. After selecting suitable persons, they should be imparted proper training before deploying them on the job. Scientific management requires that training should be imparted only through modern techniques as it increases the efficiency of the workers.

(4) Standardisation: Standardisation means setting standards for different factors, after due deliberation. For example, the amount of work to be done by a worker in a day may be standardised. In other words, the worker is expected to do the standard amount of work everyday. In the same manner, standards may also be set for raw materials, machines and tools, techniques, conditions of work, etc.

Standardisation of Work?

It refers to the process of setting standards for various business activities.

(5) Differential Wage System: Taylor has advised the adoption of differential wage systems in order to motivate the employees. According to this system, wages are paid on the basis of work done and not on the basis of time spent in doing the work. In this system two different wage rates are used: one is the high wage rate and the other the low wage rate. Those workers who are able to produce the standard number of units within a fixed duration are paid as per the high wage rate, and those workers who are not able to produce the standard number of units within the same time are paid as per the lower wage rate.

Differential Wage System?

It refers to that technique of scientific management which differentiate between efficient and inefficient workers.

(6) Specialisation or Functional Foremanship: F.W. Taylor has propounded the functional organisation. This form of organisation is totally based on the principle of specialisation and makes full utilisation of the expertise of various experts. In a functional organisation, work is divided into many small parts and each part is assigned to an expert. In this manner, all the benefits of specialisation are availed of.

Functional Foremanship?

It refers to that technique of scientific management which makes possible the full utilisation of the principle of specialisations.

(7) Mental Revolution: Mental Revolution calls for a change in the mindset of both the managers and the workers. According to Taylor, a revolution in mindset of both the managers and the workers is required as it will promote feelings of cooperation, and will be beneficial for both the parties. Normally, it is seen that a conflict between the managers and the workers results in division of profits, with both the parties demanding a larger share of profit. This is the main reason that a mental revolution is required. According to Taylor, instead of fighting over division of profits, both the parties should make efforts for increasing the profits. Such a situation will results in an increase in production, and such a high increase in profits will make any talk of division of profits meaningless.

Mental Revolution?

It refers to the change in the attitude of management and workers towards one another from competition to cooperation.

What is MNC? Discuss the beneficial and harmful effects of MNCs on Indian economy.

 Q. What is MNC? Discuss the beneficial and harmful effects of MNCs on Indian economy.

Ans. Meaning of Multinational Enterprise/Corporation

Multinational corporation is that corporation whose sphere of activity is spread over more than one country. These corporations are known by several names e.g. Transnational Corporation, International Corporation or Global Corporation. Various MNCs are working in our country like Hindustan Unilever, Johnson and Johnson, Philips, Colgate, Coca-Cola, Pepsi, LG, Nestle, Samsung, Hyundai,Cadbury, Vodafone etc.

In the words of President of I.B.M. a world famous corporation, “Multinational Corporation is one that (i) operates in many countries, (ii) carries out research, development, marketing and manufacturing in many countries, (iii) has a multinational management, (iv) has a multinational stock ownership.”

The United Nations defines MNCs as, “Enterprises whose area of working – factories, mines, sales, offices and the like are in two or more countries.”

The Encyclopedia of Management (2005) put multinational companies as business concern with operation in more than one country.

In short, multinational corporation is a big firm, whose headquarter is located in one country but whose trading and manufacturing activities are spread over many other countries.

Beneficial effects of MNCs on Indian economy: 

(1) Availability of Capital: Multinational corporations help to solve the problem of capital faced by underdeveloped countries. Underdeveloped countries suffer from lack of capital. Consequently, their rate of economic growth is low. By making investment in underdeveloped countries, MNCs help them to achieve the objective of higher economic growth.

(2) Availability of Modern Techniques and Management: MNCs provide modern technology and managerial services to enterprises established by them. As a result, the productivity of those enterprises increases and resources are optimally utilised. It is through the medium of multinational corporations that technology has been transferred from developed countries to developing countries. MNCs are providing managerial, administrative and technical skills to developing countries. In many areas MNCs are providing complex and modern technology.

(3) Availability of Marketing Services: Multinational corporations make available marketing services especially related to export marketing, advertising, market research, storage facilities, transport, packaging, branding, etc. All these services are efficiently performed by multinational corporations.

(4) Availability of Foreign Exchange: Multinational corporations bring their capital in foreign currency. It increases the inflow of foreign currency in domestic country. This increases the availability of foreign exchange with the domestic country. It helps the country to make payment of essential imports.

(5) Increase in Employment: Countries, wherein multinational corporations (MNCs) establish their subsidiaries, get employment opportunities. By increasing investment, these subsidiaries set up new enterprises. Consequently, employment increases.

(6) Increase in Knowledge: MNCs impart training to local employees in respect of modern management, marketing, finance, export, etc. In this way, their ability and skill to organise and conduct their activities on modern lines enhances.

(7) Increase in Exports: The multinational corporations utilise cheap domestic labour and their huge capital resources to convert raw materials into finished products. The managerial skill, availability of capital, modern technology and other sources of MNCs result in proper utilisation of resources. Because of better technology, the quality of products is better and these products find easy entry in foreign markets. It leads to increase in exports of the country.

(8) Increase in Competition: Entry of MNCs promotes competition in the domestic economy. Increased competition results in lower prices, which is beneficial for consumers e.g., entry of LG, Samsung, Sony, etc. in electronics has promoted competition in India. It has resulted in decrease in prices of electronic goods.

(9) Increase in Industrialisation: Multinational corporations make important contribution in the industrialisation of developing countries. They provide managerial skills, technical know-how and adequate funds required for starting a new industry. Many industries are set up in India by the MNCs, e.g. Phillips, Glaxo, Colgate, Hindustan Uni lever, Proctor and Gamble, Nestle, BPL, Ceat, MRF, etc.

Harmful effects of MNCs on Indian economy:

(1) Outflow of Funds from Host Country: Host country is one where multinational corporations set up their subsidiaries. The main objective of these MNCs is to earn maximum profit. To achieve this objective they invest their capital in underdeveloped countries. Such an investment proves very profitable. Big chunk of profits earned in underdeveloped countries goes to the headquarters of MNCs. Moreover, MNCs take large amount of foreign exchange out of country by way of dividend, royalty, management fees, etc. Because of the operations of MNCs in India, large amount of foreign exchange has gone out of the country. So, in the long run balance of payments becomes unfavourable.

(2) Harmful for Indigenous Producers: MNCs prove harmful to indigenous producers. By making use of improved technology in their production system, these corporations fix lower price of their products and thus compete out indigenous producers. Once the indigenous industry is completely destroyed by this competition, MNCs take full control over the market. By virtue of their competitive strength, they throw out indigenous producers from highly profitable, progressive and developed sectors. It is difficult for local industries to stay in the market for long in the face of huge capital resources, high technology, competent management possessed by these corporations.

(3) Unbalanced Regional Development: Foreign investors set up industries in developed cities and towns whiere infrastructural facilities are easily available and not in backward areas. This leads to further development of already developed areas and the backward areas remain untouched. Thus, regional disparities increase.

(4) Less use of Modern Technology: MNCs do not make much use of modern technology in underdeveloped countries. These corporations use new equipments and technologies only if the same are helpful in reducing the costs and raising their profits. But they take no interest in developing technology for underdeveloped countries because without spending anything on the improved technology, they succeed in raising their profits.

(5) Tax Evasion: Government of the host country imposes corporation tax on the income of companies and corporations, with a view to increase its revenue. In order to avoid corporation tax, MNCs reduce the amount of their profit by adopting transfer pricing methods. According to this method, MNCs buy intermediate goods from their subsidiaries abroad at high price and thus reduce their local profits. Similarly MNCs export their products to their subsidiaries abroad at lower prices, so as to under-value the exports to show lower local profits. Thus, MNCs over-invoice the imports and under-invoice the exports, so as to show less profits. That way through manipulation of bills MNCs evade tax.

(6) Lack in Morality and Ethics: Some MNCs indulge in unethical and corrupt practices for their self-interest They do not hesitate to offer bribe to highly placed officials and politicians of other countries to allow them to enter into such transactions which only serve their own interest.

(7) Political Interference: MNCs prove detrimental to the economic and political freedom of the host countries. These interfere in the politics of the country. These corporations make all efforts to bring that political party to power in the host country which is favourably inclined to them.

(8) Encourage Demonstration Effect: The MNCs incur heavy expenditure on advertisement and publicity. It results in wasteful expenditure whose burden is ultimately born by Indian consumer. MNCs produce products for upper class of consumers like cold drinks, ice-creams, cosmetics, washing machine, cars, high priced shoes etc. This creates demonstration effect. People of underdeveloped countries are crazy about the products of MNCs. It also leads to diversion of resources toward production of non-essential goods.

(9) Competition with Small-Scale Industries: Various MNCs are allowed production in the area where small-scale industries were doing well e.g. potato chips, wafers, biscuits, jam, cosmetics, etc. Because of heavy advertisement and brand image of MNCs, our small-scale industries fail to compete with MNCs e.g. entry of Uncle Chips has resulted in failure of many SSI units (small-scale units) who were producing potato chips. Similarly, entry of Hindustan Unilever Ltd. in consumer goods industry has badly affected many small-scale units producing consumer goods.

(10) Production of Prohibited Goods: The main objective of the multinational corporations is to earn profits. In order to get more profits they indulge in the production of even those goods which are harmful for the consumers. Many of the medicines and other products, the production of which has been prohibited in foreign countries are being manufactured and sold in India by multinational corporations. As such the multinationals earn profits even at the cost of the health of consumers.

(11) Problem of Brain Drain: MNCs recruit qualified and skilled engineers, technicians, experts in India and after sometime, these Indian experts are posted abroad in the foreign subsidiaries of MNCs. So that way, MNCs are draining Indian talent and expertise to the other countries.

(12) Non-Essential Products: MNCs are producing such products as can be produced with the help of local technology such as lipstick, toothpaste, cosmetics, ice-cream, biscuits, colas, processed foods, etc. Most of the MNCs are producing consumer goods which are not essential for the economic development of a nation. The main aim of these corporations is to earn profit. These corporations take no interest in the production of capital goods, wage goods and development of scarce resources of the country.

(13) Multiple Collaborations: It means more than one technology agreements for the import of same or similar technology. If a particular technology has already been imported and now the country is importing same or similar technology through another collaboration with foreign country, then it is known as multiple collaboration. This results in repetitive payments for the import of similar technology. The problem of multiple collaboration is common in developing countries. It puts extra burden on foreign exchange reserves.

(14) Unsuitable Technology: The technology brought by MNCs was unsuitable for India. MNCs brought capital intensive technology which does not suit India as our economy is capital scarce and labour abundant economy. Keeping in view, the unemployment problem and scarcity of capital, labour intensive technology is suitable for India, but MNCs use capital intensive technology.

(15) Less Bargaining Capacity of Indian Entrepreneurs: Foreign collaboration agreements are largely in favour of foreign collaborators. Due to less bargaining power of the Indian side, foreign collaboration agreements are largely in favour of foreign collaborators and not in favour of Indians.

(16) Growth of Monopoly Powers: MNCs join hands with big industrial houses in India which lead to growth of monopolies.

(17) Harmful for Consumers: MNCs are harmful to consumers because of following:

(i) Excessive advertisements, thus charging high price from consumers.

(ii) Adopting unfair trade practices like deceptive advertisement.

(18) Purchase of Raw Material and Intermediate Goods from Foreign Subsidiaries: MNCs often purchase raw materials and intermediate goods from the foreign subsidiaries.This results in losses to Indian industries supplying raw materials and intermediate goods. 

In short, the multinationals have both the merits as well as demerits. The government should take special policy measures to avoid the demerits. It will be more appropriate if such multinationals are encouraged which guarantee the export of their production and utilise appropriate technology.