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What is Economics?
Economics is basically divided into two main branches: Microeconomics and
Macroeconomics.
Microeconomics deals with the behaviour of individual economic units such as consumers,
workers, investors, owners of the land, business firms—in fact, any individual or entity that
plays a role in the functioning of our economy. Microeconomics explains how and why these
units make economic decisions.
On the other hand, Macroeconomics deals with aggregate economic quantities, such as the
level and growth rate of national output, interest rates, unemployment, and inflation. In
other words, Microeconomics deals with the demand and supply of an individual and a firm,
macroeconomics deals with the aggregate demand and supply of industries and the
economy.

Law of Demand:
Law defines the relationship between the demand and price of a product. The demand for a
product is inversely proportional to its price, when other factors like income, price of
substitutes, consumer taste and preferences, etc. remain the same. As the price of a good
increase, the quantity demanded decreases and vice versa. This is because consumers will
usually be willing to buy more if the price is lower. it is downward sloped as the price and
demand are inversely proportional.

Law of Supply:

It defines the relationship between the supply and price of a product. The supply of a
product is directly proportional to its price, other factors like income, the price of
substitutes, consumer taste and preferences remaining same. It is because, when the price
of a good increases, the suppliers would want to produce more to capture more profits. As
the price of a good decreases, the quantity supplied decreases and vice versa. It is upward
sloped as supply and price are directly proportional.

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Equilibrium
The point of intersection of demand curve and supply curve is called Equilibrium point.
Equilibrium is the point at which the price has reached the level where the quantity supplied
equals the quantity demanded.

Perfect substitutes:
These are the goods or commodities that consumers view as identical and has no
preference in consumption. This is where the utility of the product is identical, and the
consumer is indifferent if he/she must choose between the two.

Perfect complements:
Perfect complements are the goods that can be consumed only along with the other and
that can’t be consumed individually. For instance, the left shoe and the right shoe form
perfect complements as we can’t use one without the other.

Opportunity cost:
The value or benefit that a person forgoes to pursue the current opportunity (or) the value
of the best alternative opportunity an individual would have pursued had it not been the
one he/she is working on is called as Opportunity cost.

Sunk Cost:
The amount of money that has already been spent and that cannot be recovered in the
future is called as Sunk cost. The cost spent in R&D by a pharmaceutical company to develop
a new drug but failed to do can be said to sunk cost as it cannot be recovered (as we are not
selling the drugs)

Price Ceiling and Price floor:

Price ceiling is the price at which a good or service is capped and thus can’t be sold beyond.
On the other hand, the price floor is the minimum purchase cost for a good or service. These
prices are set by the government based on the situation prevailing in the economy.

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Fixed Costs:
These are the costs incurred by a company irrespective of the number of products
produced. The company will have to pay the building rent, salaries to its employees, interest
payments etc. irrespective of the output and hence these are fixed costs.

Variable Costs:
Costs that vary depending on the number of products produced (output) by the company
are called as Variable costs. The manufacturing costs of a shoe-making company would vary
based on its production units and hence these are variable costs.
Total cost is sum of fixed and variable costs. The Average cost is the total cost per number of
units produced.

Utility:
Utility refers to the total satisfaction the consumer experiences by consuming a good or
service. Marginal utility is the added satisfaction that a consumer gets from consuming one
more unit of a good or service. The law of diminishing marginal utility states, as
consumption increases, the marginal utility derived from each additional unit of good
declines.

Elasticity:
The percentage change in demand for one percent change in price is called as price
elasticity of demand. The percentage change in quantity demanded for one percent change
in income is called as income elasticity of demand.

Economies of scale:
It is the cost advantage that firms enjoy due to their scale of operation. The production
becomes efficient and costs less, as the fixed costs can be spread over a larger amount of
goods when companies scale up production. In this case, average cost decreases as we scale
up the production.

Diseconomies of scale:
After a point of increase in output, the firm can no longer enjoy the cost benefits and it
rather costs more to increase the production of single unit (this occurs due to multiple
factors). This is called as Diseconomies of scale. In this case average cost increases as we
scale up the production.

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Here in the graph, the company is enjoying Economies of scale until point Q1, after which
scaling up production can only result in the increased average costs leading to diseconomies
of scale.

Economies of Scope:
It is the situation where the joint output of a single firm is greater than the output that can
be achieved by two different firms when each firm produces a single product. This usually
happens when a company acquires another, wherein now they will be able to leverage
individual synergies and produce better output jointly, than they would have when isolated.
These advantages can result from the joint use of inputs, production facilities, joint
marketing programs, common administration etc.

Learning Curve:
A learning curve is graphical representation of the relationship between how proficient an
individual is at a task and how it changes with the amount of experience he/she has.
Similarly, the firm learns over time as its cumulative output increases.

Tariff:
It is the tax imposed by the government of a country on the goods and services that are
imported from another country. More tariffs discourage consumption of foreign goods as
the prices increases and consumers will be forced to consume domestic goods.

Quota:
The quota is a type of trade restriction wherein the government imposes a limit on the
quantity of goods or the value of a good that can be imported from another country.

What is Gross Domestic Product (GDP)?

• The total market value of all final goods and services produced in the country within
a given period.
• GDP is very important economic indicator; it gives information about the economy
how it is performing and provides government with important information about
areas that needs to be looked after or areas that need Government Assistance and is
a key guide for the various fiscal and monetary policy undertaken by the
government.

Methods to Measure GDP: There are three methods to measure the GDP which are as
follows:

1) Expenditure Method: This is the most popular method of the three and widely used. It
calculates the expenditure done by all different actors like domestic consumers, private
firms, Government, the sum of all gives us GDP.
Y= C + I + G + NX
C: Domestic Consumption on goods and services
I: Private Investment on capital goods
G: Government Expenditure
NX: Net Exports = Exports of Goods and Services – Imports of Goods and Services

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2) Income Method: The national income is calculated using the income method by summing
the pretax income earned by people and businesses in the economy. In a given accounting
year, it includes income from workers, rent of buildings and land, interest on capital, profits,
and so on. The income method depicts the distribution of national income among various
earning categories in the economy.

3) Value Added Method: The product approach, also known as the value-added method, is
based on the net value added to the product at each stage of manufacturing. The economy
is frequently separated into distinct industry sectors in the product technique, such as
fishing, agriculture, and transportation.
The total production of the enterprises in the economy is added to calculate the national
income. The approach displays the contribution of each sector to national income,
indicating
the relative importance of different sectors.

What is Gross National Product (GNP)?

Gross Domestic Product calculates the market value of total produced Goods and Services
within the country, whereas Gross National Product value is total value of all product and
services produced in a year at the means of production owned by citizens of the country.

GNP = GDP +Net Income

Net Income: Income Earned by Citizens from Foreign Investments – Income Earned by
foreigners via own domestically owned means of production.

Inflation: Inflation is the gradual loss of a currency's buying value over time. The increase
in the average price level of a basket of selected goods and services in an economy over
time can be used to calculate a quantitative estimate of the rate at which buying power
declines.

Consumer Price Index (CPI): The Consumer price index (CPI) measures the cost of buying
a fixed basket of goods and services representative of the purchases of the urban consumer.

Wholesale Price Index (WPI): Like CPI it is also measure of cost of given basket of goods,
however, the goods price that they track is at wholesaler level and not at retail level, it is
more sensitive as compared to CPI.

Unemployment Rate: Fraction of work force that is out of work and looking for a job or
expecting a recall from layoff is the unemployment rate.

Inflation vs Unemployment: The relation between Inflation and Unemployment is

inversely related meaning Higher the Inflation lower is the unemployment which is generally
observed under normal conditions and vice versa, this relation was first studied by Mr.
A.W.Phillips, it is also known as Phillips Curve. This relation creates a policy tradeoff as
ideally the government and the central bank would want both to be low to ensure long term
stability, however there is tradeoff.

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Fiscal Policy: The policy decisions taken by the government taken to influence the behaviour
of the economy by changing Taxes, Government Transfers and Government Expenditure all
fall under the term of Fiscal Policy.

Monetary Policy: As the Fiscal Policy decisions is taken by Government whereas the
Monetary Policy decisions are taken by the Central bank of the country. The Central bank
does by controlling the money supply in the market by varying it they vary the interest rates
and promotes or creates resistance for business to take loans and make investments in the
economy.

REPO Rate: The repo rate is the rate at which a country's central bank (in India, the Reserve
Bank of India) loans money to commercial banks in the event of a cash shortage. Monetary
authorities use the repo rate to limit inflation.

Reverse REPO Rate: The reverse repo rate is the rate at which a country's central bank (in
this case, the Reserve Bank of India) borrows money from domestic commercial banks. It is
a monetary policy tool that can be used to control a country's money supply.

Statutory Liquidity Ratio: Minimum %of the total deposits that the bank is supposed to
keep in the form of gold, cash and other forms of approved securities. The current SLR rate
is 18%, the RBI has the power to increase this rate up to 40%. By varying this RBI can vary
the money supply in the economy.

Cash Reserve Ratio (CRR): Minimum % of the total deposits that the bank is supposed to
keep in form of cash with RBI. The lower the CRR, the more money bank will have to lend.
RBI varies the CRR to vary the liquidity level in the banking system. Currently the
CRR is 4%

Marginal Standing Facility: In an emergency, when inter-bank liquidity is fully depleted,

banks can borrow from the Reserve Bank of India using the marginal standing facility (MSF).

Government Budget: There are three types of scenarios possible in case of Government
Budget which are as follows:

1) Deficit Budget: When the budget spending planned is more than what the Government
will earn in revenues it is called the budget is in deficit and to finance that the Government
has to go for deficit financing. This scenario is mostly there as Government has many areas
to spend but have limited resources hence budget deficit.

2) Surplus Budget: It is when the planned spending is less than the revenues, that is the
surplus budget situation.

3) Balanced Budget: It is when the spending of Government is equal to the revenues of the
Government then that budget is called Balanced Budget
.Budget of India is presented every year on 1st February by the Finance Minister, it gives the
areas government will do the spending and how much will it support, what will be the tax
structure if there are changes if any, it gives idea about the fiscal policy taken up by Govt.

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Aggregate Demand:
• The total demand at a price level of the finished goods and services produced in the
economy is the aggregate demand. It consists of all the demand like consumer
demand, Private firm demand, Government Demand, exports and imports.
• Over long-term Aggregate Demand and GDP becomes equal.
• The Aggregate Demand Curve shows the combination of the price level and level of
output at which the goods and money markets are simultaneously in equilibrium.

Aggregate Supply:

• Aggregate Supply curve describes, for each given price level the quantity of output
firms is willing to supply.
• It is upward sloping because firms are willing to supply more output at higher prices.
• When there is external changes like change in oil prices the Supply Curve shifts left
or right depending on the change in Oil Price, if it increases the supply curve will shift
left and vice versa.

Figure-(a) shows the aggregate supply curve which is in normal case and Figure-(b) shows
the aggregate supply curve which is vertical which is long run supply curve, the GDP is at the
potential output.

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The intersection of the Aggregate Demand Curve and Aggregate Supply curve will determine
the equilibrium point it will give the Price Level and the Real GDP value at which Economy
currently is at (when at equilibrium).

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What is Consulting?

Consulting is the business of offering advice and expertise to an organization with the object
of helping them improve its business performance in terms of its overall profitability,
operations, and management structure. The demand for consultants by businesses or other
organizations has resulted in the emergence of consulting as one central domain and a
sought-after career option.
Management consultants help businesses improve their performance and grow by solving
problems and finding new and better ways of doing things. If you're interested in how a
business works – its strategy, structure, management, and operations – a career in
management consultancy might be for you. You will be able to:

▪ Rapidly Gain Exposure to Industries: You'll gain experience by working on projects in

various industries and with different clients and seeing how your decisions affect them.

▪ Help Make Big-Picture Decisions: You'll help guide your clients in making significant
decisions that will affect their business.

▪ Continuously learn: You'll be working on projects that require you to learn and adapt to
new trends in the industry continuously.

▪ Work in a team environment: You'll have the chance to collaborate with people in your
organization and clients with similar interests and expertise.

Consultants are hired for a variety of reasons. There are three fundamental reasons why
people seek professional advice:

1. They need help to figure it out or get to the state they want on their own.
2. They have a rough concept of where they want to go, but they want to get there as
soon as possible.
3. They want to save time and effort by using a tried-and-true method. Giving guidance
is only one aspect of consulting.

It entails a hierarchy of goals:

• Giving information to a customer.
• Dealing with a client's issues.
• Obtaining a diagnosis, which may necessitate redefining the issue.
• Making suggestions based on the findings.
• Assisting with the implementation of solutions that have been recommended.
• Creating buy-in and commitment to corrective action.
• Assisting clients in their learning.

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What’s in it for you?

Continous
Client facing Steep learning
growth
roles curve
opportunities

Building Exposure to
professional Variety in work different
network industries

Skills needed to be a consultant.

• Ability to multitask.
• Ability to work in teams.
• Willingness to work long hours.
• Travel enthusiast.
• Great Academics.

What is Strategy in Consulting?

A strategy is any manager’s action to attain a pre-established organizational goal. It focuses
on creating a unique value proposition that helps the organization attain a strategic
position. It emerges from three distinct sources:
• Serving few needs of many customers
• Serving broad needs of a few customers
• Serving broad needs of many customers in a narrow market

Core Strategy Tools

SWOT Analysis
A structured planning method is used to evaluate the strengths, weaknesses,
opportunities, and threats involved in a project or in a business venture.

▪ Strengths: Characteristics of the business or project that give it an advantage over others.

▪ Weaknesses: Characteristics that place the business or project at a setback relative to

other companies.

▪ Opportunities: Elements that the business or project could exploit to its advantage.

▪ Threats: Environmental elements that could cause trouble for the

business or project.

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PESTLE Analysis

PESTLE Analysis is used for analyzing the environment in which a business operates.

• Political: Determines the extent to which a government influence the economy of

any industry.
• Economic: Factors in the economy that affect the organization.
• Social: Factors scrutinizing the social environment of the market and gauging
determinants like cultural trends, demographics, and others.
• Technological: Factors pertain to innovations in technology that may
affect the operations of the industry and the market.
• Legal: Laws affecting the business environment.
• Environmental: Factors include all those that influence or are determined by the
surrounding environment.

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BCG Matrix
A matrix developed by Boston Consulting Group in the early 1960s is used to plan market
strategies. The growth rate is determined by reference to market research, or it can be
estimated. "Competitive position" includes an assessment of the firm's overall market
penetration and profitability compared to the other players in that market. Products are
then positioned in the four cells, as shown in the figure.

• Cash Cows: Large Market Share in a mature industry. It requires little investment.
• Star: Larger Market Share in a growing industry. It may require investment to
maintain a lead.
• Question Marks: Small Market Share in a growing market requires
focus and resources.
• Dog: Small Market Share in a Mature industry. Little prospect for gain.

McKinsey 7s

The McKinsey 7S Framework is an excellent tool to help you find and fix internal
organizational problems. McKinsey 7S Framework is a strategic planning tool designed to
help an organization understand if it is set up in a way that allows it to achieve its objectives.
Before the advent of the 7S Model, managers tended to focus on structure and strategy
when they thought about organisational design. They thought about who was responsible
for what, who reported to whom, how many layers of management there should be, and
how to beat the competition.
It is used for:
• Organizational change
• Mergers and acquisitions
• Implementation of a new strategy
• Understanding the weaknesses (blind spots) of an organization

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MECE (Mutually Exclusive, Collectively Exhaustive)

MECE is a system of problem-solving that help solves complex problems. It can help
streamline activities and focus on critical data that determine success. Used by management
consulting firms to describe a way of organizing information. The MECE principle suggests
that to understand and fix any large problem, you need to understand your options by
sorting them into categories: Mutually Exclusive – Items can only fit into one category at a
time and Collectively Exhaustive – All items can fit into one of the categories.

Porter's 5 forces

Porter's is a valuable tool in helping understand both the power of current competitive
position and the planned position.

Porter's five forces are:

1. Competition in the industry
2. Potential of new entrants into the industry
3. Power of suppliers
4. Power of customers
5. The threat of substitute products

Key takeaways from Porter's

• Porter's Five Forces is a framework for analysing a company's competitive

environment.
• The number and power of a company's competitive rivals, potential new market
entrants, suppliers, customers, and substitute products influence a company's
profitability.
• Five Forces analysis can guide business strategy to increase competitive advantage.

Bain's elements of value

Product and service value is delivered in four ways: functional, emotional, life-changing, and
social impact. Generally, the more elements offered, the stronger the client loyalty and the
company's long-term revenue development.

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Which tool or framework to use?

A business framework can be used to analyse and guide decisions for your client and your
own business. For example, the 3C Model can help you develop a competitive strategy for
your client or can be applied to develop a social media marketing plan for your brand. There
is no one best framework, and often you use multiple frameworks in your client's work.
Frameworks save you time by providing a starting point for information gathering and
analysis but remember that the most powerful framework you have is your expertise and
common sense. These tools are timesavers, but your business insight will ultimately deliver
value to your client.

About Consulate club

The consulate club is a student-driven initiative with a core community of passionate

management students with diverse experience who work to offer the students a platform to
develop an interest and inclination towards the fields of strategy and consulting at IIM
Trichy.

What do we offer?

• Conduct workshops on how to approach case study competitions

• Provide industry exposure through guest lectures
• Provide industry updates to keep the community up to date with recent happenings
• We conduct competitions throughout the academic year to help you hone skills like
thinking strategically, research, data analysis, and presentation.

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Finance
Finance is the heart and soul of any enterprise, and financial management helps
determine what, when, and where to expend. Not only that, it helps
thebusiness manage its financial assets and generate more income. It also involves
keeping in check the financial health and status of the business, helping to determine
business strategy and direction, as well as contributing to the objectives of the
organization.

Finance professionals are accountable for carrying out this financial managementof
the organization, i.e., knowing from where to source it, and deciding how to spend it to
get the maximum returns at the lowest possible risk. They seek to find ways to ensure
the flow of capital, increasing profitability and decreasing expenses.

Basic Concepts in Finance

1. Financial Statements
Financial statements are a collection of documents and reports of the transactions of an
organization. It helps determine an organization's financial health, profitability, and
performance. It is useful as it helps:
• To determine the ability of a business to generate cash and the sources
and uses of that cash.
• To determine whether a business can pay back its debts.
• To track financial results on a trend line to spot any looming
profitability issues.To derive financial ratios from the statements that
can indicate the condition ofthe business.
• To investigate the details of certain business transactions, as outlined in
the disclosures that accompany the statements.
There are 3 major financial statements:
➢ Balance Sheet:
The balance sheet summarizes a company's liabilities, assets, and equity at a given
point of time. It summarizes the financial position of a company. It is based on:

Assets = Liabilities + Shareholders’ Equity

Assets are of the following types:

• Fixed assets - Assets that are purchased for the long term and cannot be easily
converted into cash. It includes building, land, machinery etc.
• Current assets - Assets that can be quickly converted into cash. It
includesmoney market instruments, debtors etc.

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Liabilities define what the company owes to other entities. It is usually taken upon to
fund the activities of the business. It is classified as a current liability if due withinthe next 12
months.
Shareholder’s equity represents the number of business holdings that weren't
purchased using debt (loans).
➢ Income statement/ Profit and loss statement:
Income Statement reports the revenue generated, expenses incurred and theprofits or
losses generated during a period of time. It is defined as:

Revenue – Expenses = Income

Revenue is the amount of money the is received by the company during aparticular
period. It is also known as "Topline".
Expenses are deductions from the income. It is done before assessing taxes. Income
is the net inflow of cash or other assets during any given accounting
period.
➢ Cashflow statement:
Cash flow statements map the cash inflows and outflows of the firm. It has three major
elements:
-Cash flow from operating activities: It includes cash created through day-to-day
operations of the company, primarily buying and selling goods & services.
-Cash flow from investing activities: It includes buying and selling of
investments such as property, plant, and equipment.
-Cash flow from financing activities: It includes the sale of stocks,
therepurchase of stocks, and the issuance of shares.

Shares
In simple words, Share is a unit of the company owned by you. Suppose the company X is
divided into 10000 shares. Thus, 1 share = 0.01% corporate ownership.
In the case of a Public limited company, the shares are registered and traded on the
stock exchange. In the case of Private limited shares are not traded freely. They can be
bought or sold between existing owners or a company Thus, the companies we see
being traded (bought/sold) on various exchanges such as the NSE and BSE are public
companies.
Shares of companies can be traded in two ways:
Primary Offer or Primary Market (IPO/FPO):
IPO or Initial Public Offer is a primary offer in which a company offers to sell its sharesto the
general public for the first time. FPO or Further Public Offer is a primary offer in which a
company offers for sale its shares to the general public after the first offer is made. In such
situations, the shares are already being traded. New shares are issued to the market.

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Secondary Market
Different offerings to the public: In a primary offer, the company sells the shares of a
company to the general public through IPO or FPO. Once the IPO is done and the stockis
listed, they are traded in the secondary market.
The main difference between the two is that in the primary market, an investor gets
securities directly from the company through IPOs, while in the secondary market, one
purchases securities from other investors willing to sell the same. Equity shares, bonds,
preference shares, treasury bills, debentures, etc. are some of the key productsavailable
in a secondary market. SEBI is the regulator of the same.

SENSEX
Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the
Bombay Stock Exchange (BSE) in India. Sensex comprises 30 of the largest and most
actively traded stocks on the BSE, providing an accurate gauge of India's economy. The
index's composition is reviewed in June and December each year. Initially compiled in
1986, the Sensex is the oldest stock index in India. Analysts and investors use the
Sensex to observe the overall growth, development of particular industries, and booms
and busts of the Indian economy.
NIFTY
The NIFTY 50 index is the National Stock Exchange of India's benchmark broad-based
stock market index for the Indian equity market. The full form of NIFTY is National Stock
Exchange Fifty. It represents the weighted average of 50 Indian company stocks in 12
sectorsand is one of the two main stock indices used in India. Nifty is owned and managed
by India Index services and Products (IISL), which is a wholly-owned subsidiary of the
NSE Strategic Investment Corporation Limited.
SEBI
Securities and Exchange Board of India (SEBI) is a statutory regulatory body entrusted
with the responsibility of regulating the Indian capital markets. It monitors and
regulates the securities market and protects the interests of investors by enforcing certain
rules and regulations. The objective of SEBI is to ensure that the Indian capital market
works systematically and provides investors with a transparent environment for their
investment.

Important Rates
Repo Rate (6.25% as of 26 January 2023):
Repo rate is the rate at which the central bank of a country (reserve bank of India in the case
of India) lends money to commercial banks in the event of any shortfall of funds. Repo
ratescan be used by monetary authorities to control inflation.

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Reverse Repo Rate (3.35% as of 26 January 2023):
Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in
the case of India) borrows money from commercial banks within the country. It is a
monetarypolicy instrument that can be used to control the money supply in the country.

Cash Reserve Ratio (4.50% as of 26 January 2023):

Cash Reserve Ratio (CRR) is the share of a commercial bank’s total deposit that is mandated
by the central bank of a country (RBI in case of India) to be maintained withthe latter in the
form of liquid cash.

Statutory Liquidity Ratio (18% as of 26 January 2023):

The ratio of liquid assets to net demand and time liabilities (NDTL) that is mandated by the
central bank of a country (RBI in case of India) to be maintained with thelatter is called
statutory liquidity ratio (SLR).

Call Rate
Call money rate is the rate at which short term funds are borrowed and lent in the
money market. The duration of the call money loan is 1 day to 14 days. Banks resort to
these types ofloans to fill the asset-liability mismatch, comply with the statutory CRR and
SLR requirements, and meet the sudden demand of funds.

Non-Performing Assets
A non-performing asset (NPA) is a loan or advance for which the principal or interest
paymentremained overdue for a period of 90 days. Banks are required to classify NPAs
further into Substandard, Doubtful, and Loss assets.
Substandard assets
Substandard assets are the assets that have remained NPA for a period less than or
equal to12 months.
Doubtful assets
If an asset has stayed in the substandard category for a period of 12 months, it is
categorized as a questionable asset.
Loss assets
As per RBI, “Loss asset is considered uncollectible and of such little value that its
continuance as a bankable asset is not warranted, although there may be some salvage or
recovery value.”

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CIBIL Score
The Credit Information Bureau (India) Ltd, popularly known as CIBIL is a Reserve Bank of
India(RBI) authorized credit agency. It offers CIBIL scores and CIBIL reports for individuals. A
CIBIL score is generated by the bureau after considering an individual's detailed credit
information.The agency also offers credit report services to the banks and other NBFC
(Non-banking financial companies). A CIBIL score is a three-digit number between 300-
900, 300 being the lowest, that represents an individual's credit worthiness. A higher
CIBIL score suggests good credit history and responsible repayment behaviour. CIBIL
scores are calculated on the basis of at least 6 months of historical financial data of an
individual.
Security Analysis and Portfolio Management
WACC
In long term capital structure:
Wd*Kd*(1-t) + We*Ke + Wp*Kp
where:
Wd - Weight of debt Kd - Cost of debt
We - Weight of Equity Ke - Cost of Equity
Wp - Weight of Preferred Shares Kp - Cost of preferred Debt

Cost of equity – CAPM – Rf + Beta*(Rm-Rf)

The Capital Asset Pricing Model (CAPM)

A model that describes the relationship betweenthe expected return and the risk of
investing in security. It shows that the expected return onsecurity (equity) is equal to the
risk-free return plus a risk premium, which is based on the beta of that security.

ERi = Rf + βi(ERm−Rf)
where,
ERi = Expected return of investment Rf = risk – free rate
βi =beta of the investment (ERm−Rf) market risk premium

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 The risk-free rate is the return that can be earned by investing in risk-free security, e.g.,
U.S.Treasury bonds.
The market risk premium is the difference between the expected return on a market
portfolio and the risk-free rate. The market risk premium is equal to the slope of the security
market line (SML), a graphical representation of the capital asset pricing model (CAPM).
The beta (β) of an investment security is a measurement of its volatility of returns relative to
either benchmark or broader market index. It is used as a measure of risk and is an
integralpart of the Capital Asset Pricing Model (CAPM). A company with a higher beta has
greater riskand also greater expected returns. The beta of the overall market portfolio is
one. The beta coefficient can be interpreted as follows:
β = 1 exactly as volatile as the market β > 1 more volatile than the market
β < 1 > 0 less volatile than the market β = 0 uncorrelated to the market
β < 0 negatively correlated to the market
β < 0 negatively correlated to the market
Levered beta, also known as equity beta or stock beta, is the volatility of returns for a
stock, taking into account the impact of the company’s leverage in its capital structure. It
comparesthe volatility (risk) of a levered company to the risk of the market.
Asset beta, or unlevered beta, on the other hand, only shows the risk of an unlevered
company relative to the market. It includes business risk but does not include leverage
risk.Security MarketLine (SML) is a visual representation of the capital asset pricing model
(CAPM).SML is a theoretical representation of the expected returns of assets based on
systematic, non-diversifiable risk. It specifies a linear relationship between the risk
premium of a security and its beta with the market portfolio.
➢ Risk-free rate (Rf) – Rate on government securities, which of Indian 10-year bonds is ~7.8%.
➢ Beta – A measure of systematic risk, shows the variability with respect to the Benchmark

Cost of debt (after-tax) = interest rate

Weighted Marginal Cost of Capital

The marginal cost of capital is the weighted average cost of the last dollar of new capital
raised bya company. It is the composite rate of return required by shareholders and
debt-holders for financing new investments of the company. It is different from the
average cost of capital which isbased on the cost of equity and debt already issued.

Portfolio Management
• Risk – Portfolio risk is the possibility that an investment portfolio may not achieve its
objectives
• Systematic risk – The risk which can’t be diversified. investors are
compensated for it by gettinga higher return

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 • Unsystematic risk – The risk that is company/industry-specific, can be diversified
and investorsshould theoretically not be compensated for this.
• portfolio return - It is the sum of the weighted average of the return on investment
of individual stocks in a portfolio:
•
Wa Ra + Wb Rb +...+ WnRn

where,

Wa - Weight of stock A
Ra - Return on Investment of stock A Wb - Weight of stock B
Rb - Return on Investment of stock B Wn - Weight of stock N
Rn - Return on Investment of stock N
Portfolio Theory (Harry Markowitz Model)– shows that an investor can create a
portfolio ofmultiple assets that will increase the returns on a certain level of risk. Similarly,
given the desired level of expected return, an investor can create a very low risk portfolio.
Capital Market Line/Capital Allocation Line – It represents different combinations of
Risk-free assets and portfolios of risky assets which provide a maximum return for any
given levelof risk. All investors, based on their risk & return preferences, would lie
somewhere on theCML.
Security Market Line – graphical version of CAPM, depicting the relationship between
betaand required rate of return (positive). At 0 beta, the rate is the risk-free rate
Financial Management:
Goal – The goal of Financial Management is to maximize shareholder wealth (dividends,
share price). This goal is superior to the maximization of firm profit (ignores risk). The
assumption is that the shares are traded in an efficient market where the effect of decisions
are reflected in share prices.
Finance – This means the sourcing of funds. The souring can be from the public, private or
corporate entities.

Role of Finance Manager – The role of a finance manager is to make investment decisions
(Capital budgeting, WC management), financing decisions (capital/debt), and dividend
decisions (reinvest/distribute). Financial management is useful in almost every aspect of
thebusiness since all decisions have financial implications.

Economic Value/Capitalized Value – It is the present value of future cash flows discountedat
an appropriate discount rate.

Treasury Management – Treasury management means managing the liquidity & foreign
exchange requirements and risks.

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Time Value of Money - It simply means that money's worth increases over time. It is based
on the fact that money can earn interest if invested today, hence it will be worth more than
receiving the same amount of money tomorrow.

Capital Budgeting – investments in fixed assets etc, i.e., where returns are expected over
multiple periods. Based on incremental after-tax CFs, not accounting profits (due to
ignoranceof TVM, discrepancies in accounting treatment of depreciation, valuation etc).
Sunk costs are ignored and opportunity costs (including cannibalization) are included.
Financial CFs (debt, equity, interest etc) are ignored raising funds results in an
immediate cash outflow for the project, thus, there is no net cash inflow. The cost of
interest and dividends is reflected in the WACC.

Capital Budgeting Evaluation Techniques - The different capital budgeting evaluation

techniques are - Payback Period (Cumulative cash inflow/cash outflow), Discounted
Payback Period, Net Present Value, Internal Rate of Return, Modified Internal Rate of
Return (takes care of the problem of IRR method of assumption of reinvestment at IRR
by assuming it at a discount rate by finding future values of all cash flows up to a
terminal year and discounting that value), Profitability Index (Total PV of all cash
inflows/total PV of all cash outflows, i.e., in away better than NPV for capital rationing as it
standardizes profitability for comparability).

Dividend Policy – Investors are expected to prefer current cash dividends to future capital
gains (arising from reinvestment). According to Walter, if ROI on reinvestment > cost of
equity capital, firms should retain entire profits and distribute entire profits if not.

Net Present Value (NPV) is the value of all future cash flows (positive and negative) over
the entire life of an investment discounted to the present.

NPV analysis is a form of intrinsic valuation and is used extensively across finance and
accounting for determining the value of a business, investment security, capital project,
newventure, cost reduction program, and anything that involves cash flow.
NPV=∑𝒕=𝟏(𝟏 + 𝒊)𝒕𝑹t
where,
R t =Net cash inflow-outflows during a given period
i=Discount rate of return that could be earned from alternative investmentst=Number of
periods

The net present value indicates that the projected income generated by the project or
investment is in the current dollar - it exceeds the expected costs, and in current dollars.
It isthought that investing in good NPV will be profitable, and investing in bad NPV will result
in total losses.

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 Discount rate is the rate of return used to discount future cash flows back to their present
value.

A hurdle rate is the minimum required rate of return or target rate that investors are
expecting to receive on an investment.

The Internal Rate of Return (IRR) is the discount rate that makes the net present value
(NPV) of a project zero. The higher an internal rate of return, the more desirable an
investment is to undertake. IRR is uniform for investments of varying types and, as such,
IRRcan be used to rank multiple prospective investments or projects on a relatively even
basis.

Most IRR analyses will be done in conjunction with a view of a company’s weightedaverage
cost of capital (WACC) and net present value calculations.

The net present value rule is that the company managers and investors should only invest
in projects or engage in transactions that have a positive net present value (NPV).

ACTIVITY RATIO FORMULA INTERPRETATION

Inventory Turnover COGS/Avg. Inventory

ReceivablesTurnover Revenue/AvgReceivables
Activity ratios are used to evaluate
operational capabilities of the
firm. How quickly can inventory be
sold, cash collected and paid are
some of the points that can be
evaluated.
PayablesTurnover Purchase/Avg. trade payables

PayablesTurnover Purchase/Avg. trade payables

Fixed assets Turnover Revenue/Avg. Fixed assets

Working Capital Revenue/Avg. Working Capital

Turnover

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 LIQUIDITY RATIO FORMULA INTERPRETATION

Current Ratios Current Assets/Current

Liability Used to evaluate the short-
term liquidity position of the
Quick Ratio Liabilities country. If it is low then short-
term assets are notable to meet
(Current Assets- short-term obligations.
If it is very high, then
Cash Ratio Inventories)/Current
there are unnecessary
Liabilities Cash and
investments.
Cash equivalents

PROFITABILITY RATIO FORMULA INTERPRETATION

Gross Profit
Margin Assess the profitability of
Gross Profit/Revenue
the company. For stable
Operating Profit Margin Operating Income/Revenue company, constant ratios
over years is most preferred.

Net Profit Margin Net Profit/Revenue

SOLVENCY RATIO FORMULA INTERPRETATION

Evaluates the long-term liquidity of the

Debt to Equity Ratio Total Debt/Total Shareholders’
firm. Generally, these ratios are used to
Funds
assess the financial health ofthe
country.
Average Total
Financial Leverage Ratios Assets/Average Total
Equity

Interest Coverage Ratio

EBIT/Net Interests

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An NPV profile is a graph that maps the relationship between a company's cost pf capital
and the project's NPV.
The IRR rule states that if the internal rate of return on a project or investment is greaterthan
the minimum required rate of return, typically the cost of capital, then the project or
investment can be pursued.
The payback period refers to the amount of time it takes to recover the cost of an
investment.

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MARKETING
Marketing refers to the process of identifying a need of the customers, creating a product
accordingly and satisfying the need better than the competitors. It involves building strong
customer relationships to gain returns from customers in future.
It starts by identifying a gap in the market and works its way from here to building a product
or a service that meets the gap. The importance of marketing is that it makes the customers
aware of a company’s products or services, engages them, and influences their buying
decision.
SELLING
Selling is the process of convincing a prospective customer to buy your product or service. In
the sales process, a salesperson sells whatever products the production department has
produced. The sales method is aggressive, and customers’ genuine needs and satisfaction is
taken for granted.
SELLING VS MARKETING
Marketing is a holistic process that starts with identifying needs and continues till after-sales
services. Whereas, selling is just a small part of marketing.

MARKETING MIX
The four Ps classification for developing an effective marketing strategy was first
introduced in 1960 by marketing professor and author E. Jerome McCarthy.
Marketing Mix is a set of marketing tools or tactics, used to promote a product or service in
the market and sell it. The components of the marketing mix consist of 4Ps Product, Price,
Place, and Promotion.

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1. Product
A product is a commodity built to satisfy the need of an individual or a group. The product
can be intangible or tangible, in the form of services or goods. It should create an impact in
the mind of the customers, which is exclusive and different from the competitor’s product.
A product has a certain life cycle that includes the growth phase, the maturity phase, and
the sales decline phase. It is important for marketers to reinvent their products to stimulate
more demand once it reaches the sales decline phase.

2. Price
Price is the most critical element of a marketing plan because it dictates a company’s
survival and profit. Adjusting the price of the product, even a little bit has a big impact on
the entire marketing strategy as well as greatly affecting the sales and demand of the
product in the market. Things to keep on mind while determining the cost of the product
are, the competitor’s price, list price, customer location, discount, terms of sale, etc.

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3. Place
Decisions such as where will you sell your product come under place. This is the location/s
where the product or service can be accessed and where it is used. For a restaurant,
location is everything. For a streaming service, it is the user's home or the location where
they buy computer devices and services.
4. Promotion
It is a marketing communication process that helps the company to publicize the product
and its features to the public. It is the most expensive and essential components of the
marketing mix, that helps to grab the attention of the customers and influence them to buy
the product. Most of the marketers use promotion tactics to promote their product and
reach out to the public or the target audience. The promotion might include direct
marketing, advertising, personal branding, sales promotion, etc.

7Ps
Apart from the 4- Product, Price, Place or Promotion, there are 3 other newly developed Ps
which make the 7Ps explained below-
5. People
The company’s employees are important in marketing because they are the ones who
deliver the service to clients. It is important to hire and train the right people to deliver
superior service to the clients.

6. Process
We should always make sure that the business process is well structured and verified
regularly to avoid mistakes and minimize costs.

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7. Physical Evidence
Physical evidence provides tangible cues of the quality of experience that a company is
offering. It can be particularly useful when a customer has not bought from the organisation
before and needs some reassurance, or is expected to pay for a service before it is
delivered. It might include testimonials from previous customers, reviews, proof of success
like certificates, pictures etc.

MARKETING CONCEPTS

1. Production concept-

The idea of the production concept – “Consumers will favour available and highly
affordable products.” This concept is one of the oldest Marketing management
orientations that guide sellers.
The focus is on producing large amounts of a product with this marketing concept. It
also focuses on the product being readily available to the customer at a low cost.

2. Product Concept-

The product concept holds that consumers will favour products that offer the most
quality, performance, and innovative features.
In this concept, the emphasis is on updating and improving the quality of the
product. These actions, along with providing features that are useful and appeal
strongly to customers, allow for the product to be offered at a higher price.

3. Selling Concept-

The selling concept holds the idea- “consumers will not buy enough of the firm’s
products unless it undertakes a large-scale selling and promotion effort.” Here the
management focuses on creating sales transactions rather than on building long-
term, profitable customer relationships.
It relies on aggressive selling and works only in the short run as the customer might
try the product once due to being convinced but not multiple times unless the
product is worthy.

4. Marketing Concept

The marketing concept holds- “achieving organizational goals depends on knowing

the needs and wants of target markets and delivering the desired satisfactions better
than competitors do.”
Here marketing management takes a “customer first” approach. Under the
marketing concept, customer focus and value are the routes to achieving sales and
profits.

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 5. Societal Marketing Concept

The societal marketing concept holds that “marketing strategy should deliver value
to customers in a way that maintains or improves both the consumer’s and society’s
well-being.”

It calls for sustainable marketing socially and environmentally responsible marketing

that meets consumers’ and businesses’ present needs while also preserving or
enhancing future generations’ ability to meet their needs.

STP
Segmentation
The process of defining and dividing a large homogeneous market into clearly definable
parts with similar needs, or desired features. The point of segmentation is to break a mass
market into submarkets of customers who have common needs. Segmentation might be
done on the basis of geography, demographics, behaviour, etc.
Targeting
Once you have divided your audience into different segments, you’ll assess those segments.
This is necessary in order to determine which segment would be the most profitable to
target based on the size of the segment, how willing this segment would be to purchase
your product, and how well you’ll be able to reach this segment of the audience with
marketing channels available to you.
Positioning
Positioning refers to setting your product in the mind of customers. It involves creating
bespoke messaging designed for the segment you’ve chosen to target. This messaging
should set your product or service apart from your competitors and push your targeted
segment to purchase. Once you’ve determined the target segment, you can create just the
right mixture of marketing activities to turn them into customers.

ADVERTISING
Advertising is a marketing tactic involving paying for space to promote a product, service, or
cause. The actual promotional messages are called advertisements, or ads for short. The

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goal of advertising is to reach people most likely to be willing to pay for a company’s
products or services and entice them to buy.
The goal of advertising for a small business may be to build brand awareness, improve your
image, boost engagement, generate leads, or convert potential leads into sales.

TYPES OF ADVERTISING

1. ATL-
Above the Line (ATL) advertising is where mass media is used to promote brands, create
awareness and reach out to the target consumers. These include conventional media as we
know it, television and radio advertising, print, and the Internet. It is communication
targeted to a wide audience and is not specific to individual consumers.
2. BTL-
Below the line advertising is more one to one and involves the distribution of pamphlets,
handbills, stickers, promotions, brochures placed at the point of sale, on the roads through
banners, placards, product demos, and direct marketing, such as utilizing email and social
media, and sponsorship of events.
3. TTL-
Through the Line Marketing, or TTL approach combines ATL and BTL Marketing to raise
brand awareness, target specific potential customers, and convert these into measurable
and quantifiable sales.

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SWOT ANALYSIS

SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. SWOT Analysis
is one of the most commonly used tools to assess a company's internal and external
environments and is part of a company's strategic planning process.
In addition, a SWOT analysis can be done for a product, place, industry, or person. A SWOT
analysis helps with strategic planning and decision making, as it introduces opportunities to
the company as a forward-looking bridge to generating strategic alternatives.

REFERENCES

• https://www.marketingweekly.in/online-compendium
• thebalancemoney.com/advertising-2947182
• https://byjus.com/commerce/what-is-the-difference-between-selling-and-
marketing/#:~:text=In%20simple%20words%2C%20selling%20transforms,service's%
20price%2C%20promotion%20and%20distribution.
• https://study.com/academy/lesson/what-is-a-marketing-concept-definition-
examples.html
• https://rockcontent.com/blog/marketing-concept/
• https://www.iedunote.com/marketing-concepts
• https://www.wrike.com/marketing-guide/faq/what-is-stp-in-marketing/
• https://blog.oxfordcollegeofmarketing.com/2020/10/08/understanding-the-7ps-of-
the-marketing-mix/
• https://mailchimp.com/marketing-glossary/marketing-mix-7ps/

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Analytics
Analytics is the Systematic process of extracting and communicating insights from patterns
available in data through statistical methods and data modeling techniques. It is the process
of converting raw data into business insights to make well-informed decisions.

Types of data analytics

Source: DJuices

1. Measures of central tendency

Mean, Median and Mode :

The mean is the average of all the values in the dataset.

The median is the middle value in a dataset. For an odd number of values, median is the
middle value of the series i.e. (n+1)/2 while for even numbers of values the median is
calculated by taking the average of [(n)/2]th and [(n/2)+1]th terms.
The mode is the most frequently occurring value in the dataset. A dataset may have more
than one mode, or no mode at all.
For example, consider the following dataset: 2, 3, 3, 5, 7, 7
The mean of this dataset is 4, the median is 3, and the mode is 3 and 7.

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Standard deviation (S.D.) :
Standard deviation is a measure of the spread of a dataset. It is calculated by taking the
square root of the variance of the dataset. The variance is calculated by taking the average
of the squared differences of the values in the dataset from the mean of the dataset.

Where:
x is each individual value in the set
μ is the mean of the values
n is the number of values in the set
For example, if you have a dataset with values {1, 2, 3, 4, 5}, the mean of the dataset is 3.
The variance would be calculated as follows:

(1 - 3)^2 + (2 - 3)^2 + (3 - 3)^2 + (4 - 3)^2 + (5 - 3)^2 = 2 + 1 + 0 + 1 + 2 = 6

The standard deviation is then the square root of the variance, which in this case would be
the square root of 6, or approximately 2.45.
Standard deviation tells about the spread i.e. distribution of data w.r.t. mean. Less S.D.
means less spread i.e. dataset values are relatively close to the mean value.

Variance:
Variance is a measure of how much a set of numbers is spread out from the mean, or
average. It is calculated by taking the sum of the squares of the differences between each
number in the set and the mean, and then dividing that sum by the number of items in the
set.

where, x is each individual value in the set

μ is the mean of the values
n is the number of values in the set

Covariance:
Covariance is a measure of how two variables are related to each other. It is calculated by
multiplying the difference between the value of each variable by the corresponding value of
the other variable, and then averaging these products over all pairs of values in the two
variables.

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Positive covariance indicates that the two variables are positively related, meaning that as
one variable increases, the other also tends to increase.

Negative covariance indicates that the two variables are negatively related, meaning that as
one variable increases, the other tends to decrease. Covariance is a useful tool for
understanding the relationship between two variables and is an important concept in
statistical analysis.

Where:
X and Y are the two variables being analyzed
X̄ and Ȳ are the means of the two variables
n is the number of items in the sample

Correlation:

Correlation is a statistical measure of the relationship between two variables. It is a measure

of the strength and direction of the relationship and can be either positive or negative.
Positive correlation means that as one variable increases, the other variable also tends to
increase. Negative correlation means that as one variable increases, the other variable tends
to decrease. The strength of the correlation is measured by the correlation coefficient,
which can range from -1 (perfect negative correlation) to +1 (perfect positive correlation). A
correlation coefficient of 0 indicates that there is no relationship between the two variables.

Correlation is preferred over covariance because it does not get affected by the change in
scale.
Random variables:

A random variable is a variable that can take on different values randomly, depending on
the outcome of some probability distribution. There are two types of random variables:
discrete random variables and continuous random variables.
Discrete random variables take on a finite or countably infinite number of distinct values.
Examples of discrete random variables include the number of heads that result from flipping
a coin, the number of students in a classroom, and the number of cars in a parking lot.
Continuous random variables can take on any value within a certain range. Examples of
continuous random variables include height, weight, and temperature.

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Probability

Marginal probability:

In probability theory and statistics, the marginal probability of a subset of a collection of

events is the probability of the events in the subset occurring, without regard to the
probability of any other events in the collection occurring. It is calculated by summing the
probabilities of all possible outcomes in the subset. For example, suppose you have a
collection of events A, and B and you want to find the marginal probability of event B. The
marginal probability of event B is given by:
P(B) = P(B| A) * P(A) + P(B | Ac) * P(Ac)
where P(B | A) is the probability of event B occurring given that event A has occurred, and
P(Ac) is the probability of event A not occurring.

Joint probability:

The joint probability of two events is the probability that both events will occur. It is
calculated by multiplying the probabilities of individual events by one another when events
are independent.
For example, suppose you have two independent events, A and B, with probabilities P(A)
and P(B), respectively. The joint probability of A and B occurring is given by:
P(A ∩ B) = P(A) * P(B)

Conditional Probability:
The conditional probability of an event is the probability of the event occurring, given that
one or more other events have already occurred. It is calculated by taking the probability of
the event occurring in combination with the other events and dividing it by the probability
of the other events occurring. For example, suppose you have two events A and B, with
probabilities P(A) and P(B), respectively. The conditional probability of event A occurring
given that event B has already occurred is given by:

P(A | B) = P(A ∩ B) / P(B)

where P(A ∩ B) is the joint probability of events A and B occurring,
P(B) is the probability of event B occurring.
It is a useful concept in situations where the occurrence of one event affects the probability
of another event occurring.

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 Bayes Theorem:
The Bayes Theorem is a statistical and probability-based mathematical paradigm that tells
about the probability of an event, based on the prior knowledge of conditions that might be
related to the event.
Bayes' Theorem has made significant progress in history. During World War II, the theorem
was employed to crack the famed Nazi Enigma encryption. The translations taken from the
Enigma encryption machine used to crack the German message code were assessed using
Bayes Theorem by Alan Turing, a British mathematician. Turing and his team deciphered the
German Enigma code by using probability models to break down the nearly unlimited
number of possible translations of the messages that were most likely to be translated.

Types of distributions

Uniform distribution
Uniform Distribution refers to a type of probability distribution in which
all outcomes are equally likely. For example, rolling a fair die or tossing a
fair coin. In each scenario, the probability of an outcome is equally likely,
as in the case of a fair die, the probability is 1/6, and in the case of a fair
coin, the probability is 1/2.
Exponential distribution

The exponential distribution is a continuous probability

distribution used to model the time elapsed before a given
event occurs.
The exponential distribution is frequently used to provide
probabilistic answers to questions such as:
● How much time will elapse before an earthquake occurs in
a given region?
● How long do we need to wait until a customer enters our
shop?
● How long will it take before a call center receives the next
phone call?
All these questions concern the time we must wait before a given event occurs.

Poisson Distribution
A Poisson distribution helps to predict the probability of certain events when the average
number of times an event has occurred in a given time interval is known.

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Normal Distribution
The normal distribution is a symmetrical bell-shaped distribution,
which suggests the profile of a bell. Although the values in a
normal distribution can range from negative infinity to positive
infinity, most values of the continuous variable will cluster
around the mean, while extremely large or minimal values will
occur towards the tail.

Bernoulli Distribution
The Bernoulli distribution is a discrete distribution having two
possible outcomes labeled by n = 0 and n = 1 in which n = 1
("success") occurs with probability P and n = 0 ("failure") occurs
with probability q = 1 - p, where 0 < p < 1.

Binomial Distribution
The binomial distribution gives the discrete probability
distribution of obtaining exactly n successes out of N trials
(where the result of each trial is true with probability p and
false with probability q = 1 - p).

Types of graphs

Scatter plot
It is a graphical representation of
the relationship between two sets
of variables. The dependent
variable is plotted on Y-axis and the
independent variable on X-axis. The
relationship observed from scatter
plot could be:

Machine learning
Machine learning is a field of artificial intelligence that focuses on the development of
algorithms that can learn from and make predictions on data. These algorithms are able to
learn without being explicitly programmed, and can improve their performance over time as
they are exposed to more data. There are several types of machine learning, including
supervised learning, unsupervised learning, and reinforcement learning. Machine learning

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 has many practical applications, including image and speech recognition, natural language
processing, fraud detection, and recommendation systems. It is an active and growing area
of research, with many exciting developments in the field.
Supervised learning
Supervised learning is a type of machine learning where an algorithm is trained on a labeled
dataset, where the correct output for each example is provided. The goal of supervised
learning is to build a model that can make predictions on new, unseen examples based on
the patterns learned from the training data.
There are two main types of supervised learning: classification and regression. In
classification, the goal is to predict a discrete label for a given input, such as predicting
whether an email is spam or not spam. In regression, the goal is to predict a continuous
value for a given input, such as predicting the price of a house based on its size and location.
Supervised learning algorithms are trained by minimizing the difference between their
predictions and the correct labels in the training data. Common techniques for supervised
learning include decision trees, support vector machines, and neural networks.

Regression analysis
1. Linear Regression
The technique is used to predict the outcome of a dependent variable (Y) by establishing a
linear relationship between a dependent variable and independent variables (X). Example:
Predicting house prices based on historic house sales data.
2. Logistic Regression
Supervised learning technique used to predict categorical variables based on historical data
Example: Is the Money Transaction fraudulent? Yes/No

Classification Analysis
Classification is a type of supervised learning in which an algorithm is trained to predict a
discrete label for a given input. The goal of classification is to learn a model that can take in
a new, unseen example and predict the correct label for that example based on the patterns
learned from the training data.
For example, a classification model might be trained to predict whether an email is spam or
not spam, based on the words used in the email. The model would be trained on a labeled
dataset of emails, where the correct label (spam or not spam) is provided for each email.
The model would then learn patterns in the data that are indicative of spam emails, and
would use these patterns to make predictions on new, unseen emails.
Classification is an important approach to machine learning, and has many practical
applications, such as image and speech recognition, natural language processing, and fraud
detection.

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Unsupervised learning
Unsupervised learning is a type of machine learning where an algorithm is not provided with
labeled training examples, and must instead find patterns and relationships in the data on
its own. The goal of unsupervised learning is to discover structure in the data, rather than to
make predictions based on labeled examples.
There are two main types of unsupervised learning: clustering and dimensionality reduction.
In clustering, the goal is to group together similar examples, without knowing in advance
what the groups should be. In dimensionality reduction, the goal is to reduce the number of
features in the data, while preserving as much of the information as possible.
Unsupervised learning algorithms are trained using only the input data, and do not require
any labeled examples. Common techniques for unsupervised learning include k-means
clustering and principal component analysis.
Unsupervised learning is an important approach to machine learning, and has many
practical applications, such as anomaly detection, data compression, and density estimation.

Clustering
Clustering is a type of unsupervised learning in which an algorithm groups similar examples
together, without being told in advance what the groups should be. The goal of clustering is
to discover the inherent structure in the data, and group together examples that are similar
to each other.
For example, a clustering algorithm might be used to group together customers with similar
purchasing habits, or to group together documents with similar content. The algorithm
would analyze the data and identify patterns and relationships that indicate which examples
are similar to each other, and would group these examples together into clusters.
There are many algorithms that can be used for clustering, including k-means, hierarchical
clustering, and density-based clustering. The choice of algorithm depends on the
characteristics of the data and the desired properties of the clusters.
Clustering is an important approach to unsupervised learning, and has many practical
applications, such as image and text segmentation, customer segmentation, and density
estimation.

Dimensionality reduction
Dimensionality reduction is a type of unsupervised learning in which an algorithm reduces
the number of features in a dataset, while preserving as much of the information as
possible. The goal of dimensionality reduction is to simplify the data by reducing the
number of features, while losing as little information as possible.

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For example, imagine a dataset with 1000 features for each example. This dataset might be
very complex, and it might be difficult to analyze or visualize. A dimensionality reduction
algorithm could be used to reduce the number of features to a more manageable number,
such as 10, while preserving as much of the information as possible.

Reinforcement learning
Reinforcement learning is a type of machine learning where an algorithm learns by
interacting with its environment and receiving rewards or punishments for certain actions.
The goal of reinforcement learning is to learn a policy that will maximize the cumulative
reward over time.
In reinforcement learning, an agent interacts with an environment, and at each time step,
the agent chooses an action based on its current state. The environment then transitions to
a new state and provides the agent with a reward or penalty based on the action taken. The
agent's goal is to learn a policy that will choose actions that will maximize the cumulative
reward over time.
Reinforcement learning algorithms are trained using a method called temporal difference
learning, in which the algorithm estimates the value of each state and action, and updates
these estimates based on the rewards and penalties received. Common techniques for
reinforcement learning include Q-learning and SARSA.
Reinforcement learning has many practical applications, such as controlling autonomous
vehicles, playing games, and optimizing supply chain logistics. It is an active and growing
area of research, with many new and exciting developments in the field.

Other relevant topics for preparation:

(The given list is indicative and not exhaustive)

1. Skewness vs Kurtosis
2. Hypothesis testing
3. Central Limit theorem
4. Type 1 vs Type 2 error
5. Critical region and critical regions
6. Level of significance
7. P-value
8. Why is p-value 5%
9. Relevance of F-test and R square test
10. Chi-square
11. Confidence interval
12. PERT and CPM (basic terminology)

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Interview Kit by IIM Tiruchirappalli |Page | 49
Dave Ulrich’s Key HR Roles

1. HR Business Partner/ Strategic Partner: Among other things, the HR business partner
gives feedback to internal customers about the quality of their experience, identifies
top talents within the organization, helps fill job vacancies, shares HR goals with
employees to ensure they are implemented across the organization, and helps
promote overall productivity and harmony in the workplace.

2. Change Agent: The HR Change Agent organizes training opportunities so employees

can learn the new skills necessary for changing business goals or job roles or changes
job descriptions to reflect those altered roles. Essentially, the change agent helps
adapt the organization for its next stage of growth or evolution.

3. Administration Expert: On one end of the spectrum, the administration expert

follows changes in legislation, regulation, occupational health and safety rules, and
other types of labor or trade law and helps the organization adapt to stay compliant
with those laws. On the other end of the spectrum, the administration expert is
responsible for organizing personal employee information and ensuring it is up to
date. Using an HRIS (HR Information System), the administration expert is crucial in
helping an organization adopt modern, paperless policies for storing information,
securing personnel files, sharing files within the organization, and more.

4. Employee Advocate/Employee Champion: The employee advocate uses surveys to

measure employee satisfaction, spot shortcomings in company culture, and ensure
that managers are fair and equitable to all employees. The employee advocate also
leads initiatives to improve morale and employee experience, helps the change
agent with offering training and professional development opportunities, and
ensures that existing employees have opportunities to apply for new jobs or
promotions within the organization.

HR FUNCTIONS

Learning & Development

• Helps organizations execute their business strategy by aligning its people's learning,
training, and development with business priorities. L&D roles will depend on the
type and size organization.
• Identifies the skill gap in an organization and devises strategies to narrow the skill
gap. The function develops a training strategy for the whole business.

Rewards and Recognition

• Performance and reward professionals help establish salary levels and allowances
and manage pay relativities. They also create incentive and recognition schemes or
evaluate benefits.
• An HR person in this role must numerate and know the legal and regulatory
landscape. A company’s organizational strategy can also be linked with rewards.

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Employee Engagement.
• An HR in this role is usually expected to develop surveys, run workshops, and focus
group discussions (FGDs) to gauge the mood of the employees. It is for building
connections between employees and their organization. A business can only be
successful on a sustainable basis if its people understand and buy into its objectives.

Organization Development
• Managing the process of change. They may involve re-organization and the creation
of more effective and customer-focused processes. Understand what successful
change will look like and the risks and challenges ahead.
• Delivering programs that impact the organization’s culture or develop its people.
• Diagnose issues using relevant data. They consider the whole organization and look
at how involving people can achieve sustained business performance.

Employee Relations
• Maintain and develop effective working relationships across the organization.
• Motivating and engaging the workforce. Employees perform better when they
understand the organization’s goals and they’ll be more motivated to deliver if
there’s an opportunity to feed their views upward.
• Contribute to building a culture of trust, a prerequisite for any healthy organization.
One needs to speak the language of the business and understand how people
management can drive performance. Strong values are also important.
• Managing the organization’s relationship with its trade unions and workplace
conflict. Fostering fairness and equal opportunity is of great importance.

Talent Management
• Fulfilling the short and long-term requirements of your organization’s strategy in a
dynamic labor market.
• One may have to plan for changing demographics, the supply, and demand for labor,
staff turnover, and scarce skills.
• Identifying and attracting the key people who create a competitive advantage for the
organization.
• Developing networks that make it easier to attract talented individuals cost-
effectively over the longer term.
• Identifying talent across the organization and integrating that with succession
planning and performance management.

HR Operations
• Decrease HR’s dependency on IT and make it self-sufficient
• Carry out projects which may involve end-to-end implementation of a Human
Capital Management (HCM) ERP software for the organization.
• Coordinate, collaborate and support organizational affairs.

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ORGANIZATIONAL BEHAVIOUR

1) LEADERSHIP

Trait Theories Behavioural Theories

Leaders are defined by some inborn traits Leaders are defined by some behavioural
that they possess traits that they possess
Leadership can’t be learned; it is innate. Leadership can be learned.

Contingency theories
• These theories take into account different environmental conditions while explaining
leadership.
• There are three main contingency theories-
1. Fiedler’s model
2. Hersey and Blanchard’s Situational Leadership Theory
3. Goal Path theory

Fiedler’s Model
• It states that for effective leadership, one must change to a leader who fits the situation
or change the situational variables to fit the current leader.

• It assumes three Situational Factors-

1. Leader-member relations: degree of confidence and trust in the leader.
2. Task structure: degree of structure in the jobs.
3. Position power: leader’s ability to hire, fire, and reward.

• Applications
1. To assess the effectiveness of an individual in a particular role and look at the
reasons for one’s effectiveness or ineffectiveness.
2. to predict whether a person who has worked well in one position in an
organization will be equally effective in another position having different
situational variables compared to the existing position based on the contingencies
that make one’s style effective.
3. To implement changes in the roles and responsibilities that management might
need to make to bring effectiveness to the role of the person leading the same.

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 Hersey and Blanchard’s Situational Leadership Theory
• A model that focuses on follower “readiness”
• Followers can accept or reject the leader
• Effectiveness depends on the followers’ response to
the leader’s actions
• “Readiness” is the extent to which people have the
ability and willingness to accomplish a specific task.

• Applications: The manager’s leadership technique

will vary from person to person depending on
their ability to follow orders and the willingness to
follow them.
1. If a person is not able to follow orders or willing to follow, it means that the
person not only lacks the skill to do the task but has an attitude problem. Thus,
the leader might give precise instructions of how it is to be done and by when.
The leader might have to micro-manage the person.
2. If the person is unable to follow the task but is willing to do it, there is no attitude
problem in the person. The leader should display high task orientation because, in
that case, the person will learn how to do the job in a structured manner.
3. If the person can do the job but is not willing to, it is essential for the leader to
understand why he is not willing to do it. He or she might get very supportive,
understand the problems, and try solving them.
4. If the person is both able to follow and willing to follow, then he or she will do the
task anyway and thus not much leadership behaviour is needed.

Path-Goal Theory
The theory states the following points:
• Leaders provide followers with information, support, and resources to help them
achieve their goals
• Leaders help clarify the “path” to the worker’s goals and provide the necessary direction.
• Four types of leaders:
1. Directive: focuses on the work to be done
2. Supportive: focuses on the well-being of the worker
3. Participative: consults with employees in decision making
4. Achievement-Oriented: sets challenging goals

• APPLICATION-
Subordinates get motivated when they think they are capable of performing their work and
believe that their efforts will result in a cera particularome and that the payoffs for doing
their job are worthwhile. In particular, leaders should be doing the following three tasks:
Clarify the path so the subordinates know which way to go. This motivates the group
members by clarifying the path to personal rewards that result from attaining work goals.

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1. Remove roadblocks that are stopping employees from reaching their goals. Leaders
provide followers with the elements they think subordinates need to achieve their
goals.
2. The third step is increasing the rewards along the route. Your judgment about the
desirability of reward to the member is crucial.

2) MOTIVATION

Maslow’s Hierarchy of Needs

• Maslow stated that people are
motivated to achieve specific needs
and that some needs take
precedence over others.
• Our most basic need is physical
survival, which will be the first thing
that motivates our behaviour. Once
that level is fulfilled, the next level
up is what motivates us, and so on.
• APPLICATION: Identity which level
of the pyramid the needs of an
employee are and reward them accordingly.

THEORY X and THEORY Y

• The assumption in theory X is that people work as little as possible. They lack ambition,
dislike responsibility, and prefer to be led. These people resist change and are often
gullible and not very bright. They are motivated by law-and-order needs.
• The set of assumptions of theory Y is that people are not passive or resistant to change by
nature.
They are self-directed to meet their
objectives and will be committed to
them. They are motivated by higher-
order needs.
• APPLICATION: McGregor's ideas
suggest that there are two
fundamental approaches to
managing people. Many managers
tend towards theory x and generally
get poor results. Enlightened
managers use theory y, which
produces better performance and
results, and allows people to grow
and develop.

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HERZBERG’S TWO-FACTOR THEORY:

The Two-factor theory states that certain factors in the workplace cause job satisfaction,
while a separate set of factors cause dissatisfaction.
• Motivators (e.g., challenging work,
recognition, responsibility) that give
positive satisfaction, arising from intrinsic
conditions of the job, such as recognition,
achievement, or personal growth.
• Hygiene factors (e.g., status, job security,
salary, fringe benefits, work conditions)
that do not give positive satisfaction,
though dissatisfaction results from their
absence. These are extrinsic to the work
itself and include aspects such as company
policies, supervisory practices, or wages/salary.
• An employee feels dissatisfied when hygiene factors are not present in an organization.
The employee feels satisfied when the motivators are present in an organization.
• APPLICATION:
1. Ensure hygiene factors are sufficient, so employees don't become demotivated.
2. Ensure work is rewarding and challenging to motivate employees to work harder.
o Continually develop employees to keep motivation high.
3. Reward and recognize high-achieving employees.
4. If possible, rotate employee roles to keep Job interest high.
5. Ensure employees have training resources to develop themselves continually.

McClelland’s Need Theory

• David McClelland identified three learned or acquired needs (manifest needs); they were:
1. Need for Achievement
2. Need for Power
3. Need for Affiliation

APPLICATION:
1. self-motivated achievement
2. Non-monetary incentives (employee recognition).
3. Create a fulfilling work setting

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 GOAL PATH THEORY

• Goal setting involves establishing specific, measurable, achievable, realistic, and time-
targeted (S.M.A.R.T.) goals
• It ensures that participants in a group with a common goal are aware of what is expected
from them without ambiguity.
• Setting goals helps people work towards their own objectives—most commonly with
financial or career-based goals.

ADAM’S THEORY OF INEQUITY

• Inequity is a situation in which a person perceives they are receiving less than they are
giving, or giving less than they are receiving.
• The belief is that people value fair treatment, which causes them to be motivated to
maintain the fairness in the relationships of their co-workers and the organization. The
structure of equity in the workplace is based on the ratio of inputs to outcomes
• APPLICATION: According to equity theory, an employee's perception of the fairness of his
work's input and outcome influences his motivation.

EXPECTANCY THEORY:

• The Expectancy Theory of Motivation explains the behavioural process of why individuals
choose one behavioural option over another. It also explains how they make decisions to
achieve the end they value.
• Vroom introduces three variables within the expectancy theory which are valence (V),
expectancy (E) and instrumentality (I). The three elements are important behind choosing
one element over another because they are clearly defined: effort- performance
expectancy (E>P expectancy), performance-outcome expectancy (P>O expectancy).
• Three components of Expectancy theory: Expectancy, Instrumentality, and Valence
•
1. Expectancy: Effort → Performance (E→P)
2. Instrumentality: Performance → Outcome (P→O)
3. Valence- V(R) - Valence: the value the individual places on the rewards based on
their needs, goals, values and Sources of Motivation

• APPLICATION: Before designing a Rewards system, it is essential to take into consideration

if the employee holds value for the reward.

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GROUP AND DECISION MAKING

Group - Tuckman group development model

These are the different stages in group formation.

Decision making – Traps and biases

In Decision making, there could be certain biases involved. The important traps are
mentioned as follows
• Anchoring Trap -- A leader of a group may unintentionally anchor a group's thinking
by presenting their opinion or analysis first in a decision-making process. Price
negotiations are always affected by the first number mentioned
• Confirming evidence Trap -- The confirming evidence trap refers to seeking out
biased advice or information that supports a particular option, and discounting any
opposing information
• Status Quo Trap -- the tendency to maintain things as they are, even when that
may be significantly less than optimal
• Sunk cost Trap -- a tendency for people to irrationally follow through on an activity
that is not meeting their expectations

OTHER IMPORTANT FRAMEWORKS

VRIO
The VRIO framework is an internal analysis that helps businesses identify the advantages
and resources that give them a competitive edge

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VUCA - describes the situation of constant, unpredictable change that is now the norm in
certain industries and areas of the business world.

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MILES AND SNOW
Miles and snow strategy is there to help companies look at their existing operations and
define their current strategy, cost leadership and plan for future positioning

Things like SWOT and PESTEL are general and could be used for HR concepts as well.

EMPLOYEE LIFE CYCLE

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Hofstede’s Framework

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Operations Management
Operations Management (OM) deals with designing and managing products, processes,
services, and supply chains. It deals with designing, operating, and improving the systems
that create and deliver the firm’s primary products and services. The scope of OM includes
strategic, tactical, and operational levels. Examples of strategic challenges include deciding
the size and location of industrial facilities, the organisation of service or
telecommunications networks, and the design of technological supply chains.

Functions of Operations Management

Important Concepts
Flow Unit: Unit of work flowing through the process boundaries.
Processes: Any activity or group of activities that takes one or more inputs, transforms and
adds value to them, and provides one or more outputs for its customers.
Throughput: The average output per unit time (a rate)
Lead time: The time needed to process a part through a facility.
Cycle-time/flow-time: The total time required to complete a transformation from one
status to another. Total cycle time is composed of many elements, often broken into active
(running or operating) time and idle (queue or wait) time.
Bottleneck: Bottleneck is the resource/activity with the highest process utilisation or a
process with the lowest throughput in the system.
Little’s law: A stable process is “one in which, in the long run, the average inflow rate is
equal to average outflow rate”. Little’s law states that, for a stable process,

Average Inventory(I) = Flow rate (R) * Average Flow time (T)

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Inventory Management

What is Inventory?
An organisation’s inventory is a collection of unsold physical products with a monetary value
stored in various forms. At the same time, they are being packed, processed, transformed,
used, or sold at a later date.
Why to keep inventory?
• To meet the demand during the replenishment period: The lead time for procurement
of materials depends upon many factors like the location of the source, demand-supply
condition, etc. So, inventory is maintained to meet the demand during the procurement
(replenishment) period.
• To prevent loss of orders (sales): In this competitive scenario, one has to meet the
delivery schedules at 100 per cent service level, which means they cannot afford to miss
the delivery schedule, which may result in loss of sales. To avoid this the organisations,
they have to maintain inventory.
• To stabilize production: The demand for an item fluctuates because of several factors,
e.g., seasonality, production schedule etc. The inventory is kept to take care of this
fluctuation so that production is smooth.
• To take advantage of price discounts: Usually, the manufacturers offer discounts for
bulk buying. The materials are bought in bulk even though they are not required
immediately to gain this price advantage. Thus, inventory is maintained to gain economy
in purchasing
What is inventory control?
Inventory control is a planned approach to determining what to order, when to order and
how much to order, and how much to stock so that costs associated with buying and storing
are optimal without interrupting production and sales.
Inventory control deals with two problems:
(i) When should an order be placed? (Order level), and
(ii) How much should be ordered? (Order quantity)

What are various technologies for inventory control?

Inventory is maintained in any organization, depending on the type of business. The control
can be for order quality and order frequency. Various techniques used are:
1. ABC Analysis (Always Better Control)
2. VED Analysis (Vital, Essential, Desirable)
3. FSN Analysis (Fast moving, Slow moving, Non-moving)

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What is EOQ, and how is it calculated?
A type of fixed-order-quantity model that
determines the amount of an item to be
purchased or manufactured at one time. It is
an inventory-control technique that
minimizes the total ordering and holding
costs.
The quantity to order at a given time must
be determined by balancing two factors:
(1) The cost of possessing or carrying
materials and
(2) The cost of acquiring or ordering
materials.

Supply Chain

Supply Chain refers to the activities involved in delivering products or services to the
customer. A supply chain is a multi-firm approach, and it covers everything from production
to product development to the information systems needed to direct these undertakings. It
includes all the logistics management activities noted above, as well as manufacturing
operations, and it drives the coordination of processes and activities with and across
marketing, sales, product design, finance, and information technology.

The activities involved in the Supply Chain are: -

• Inbound Logistics: The logistics associated with the initial movement of the raw material
to the manufacturing unit and subsequent movement within the unit
• Outbound Logistics: The logistics associated with the movement of the finished goods
from the end of the manufacturing production line to the end-user
• Marketing and Sales: Gather customer requirements and then fulfil them through an
exchange process.
• Service: The activities associated with the delivery of the product e.g., in-store staff and
post-sales service, fulfilling warranty, etc
• Support Areas: Finance, Human Resource Management, Legal, Control, and Quality
departments which are indirectly involved in the production of the product
• Procurement: Purchase raw materials or services that are transformed into or used to
reach the final product.

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Key Terms Used in Supply Chain

• Logistics: It is the science of obtaining, producing and distributing material and

products in the proper place and the appropriate quantity
• Make to Order – Has to be closer to the market and shipping to the customer by
faster mode of transportation; this is a responsive supply chain (Reduction in time)
• Make to Stock - Easy to forecast, will have high volume and low margin products;
this is an efficient supply chain (Reduction in cost)
• Pull-based – the process of manufacturing and supplying is driven by actual
customer demand
• Push based - the logistics are driven by long-term projections of customer demand
• Just in time – JIT inventory system is a management strategy that directly aligns raw
material orders from suppliers with production schedules. It is also known as Toyota
Production System (TPS). This minimizes the inventory and increases efficiency.
• Vendor management Inventory – The responsibility of the supplier to know the
demand, manage the shelf space, and keep the product in stock according to the
demand. It is started by P&G; this helps OEMs to focus on their core strengths.
• Procurement: Process of purchasing material and products from a given vendor for
various applications in an enterprise.
• Reverse Logistics: The process of planning, implementing, and controlling the
efficient, cost-effective flow of product back upstream for the purposes of source
reduction/conservation, recycling, substitution, and disposal
• Bull-Whip Effect: The Bullwhip Effect occurs as orders are relayed from retailers to
distributors, to wholesalers, and manufacturers, with fluctuations, increasing at each
step in the sequence. i.e., the variability in demand is magnified as one moves from
the customer to the producer in the supply chain.
• Supply Chain-Upstream & Downstream: Upstream in SC indicates the supplier side,
while downstream in SC shows goods movement to the customer side.

SIX SIGMA OVERVIEW

What is Six Sigma philosophy?

Six Sigma is a structured and disciplined process designed to deliver perfect products and
services consistently. It aims to improve the bottom line by finding and eliminating the
causes of mistakes and defects in business processes. Sigma (σ) is a statistical term that
refers to the standard deviation of a process about its mean. The purpose of six sigma is to
reduce variation. It was introduced by engineer Bill Smith while working at Motorola in

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1980. Jack Welch made it central to his business strategy at General Electric in 1995. A six-
sigma process is one in which 99.9999998027% of all opportunities to produce some
features of a part are statistically expected to be free of defects. In simple terms, Six Sigma
quality performance means 3.4 defects per million opportunities (accounting for a 1.5sigma
shift in the mean advocated by Motorola).

Lean v/s six sigma?

Six Sigma focuses on reducing process variation and enhancing process control, while lean—
known initially as lean manufacturing and now broadly accepted as lean enterprise— drives
out waste (non-value-added activities) through value stream mapping and promotes work
standardisation. Six Sigma practitioners should be well-versed in both lean and Six Sigma
methodologies. Most practitioners advocate implementing lean first to remove wastes and
standardize processes, then implement Six Sigma to reduce variability and make the process
efficient. Effectiveness before efficiency.

What is the Six Sigma Methodology?

DMAIC (Define, Measure, Analyse, Improve, Control) refers to a data-driven quality strategy
for improving processes. This methodology is used to enhance an existing business process.
The DMAIC model is very similar to the PDCA (Plan, Do Check, Act) and PDSA (Plan, Do,
Study, Act)
• Define the problem, improvement activity, the opportunity for improving the
project’s goals, and customer (internal and external) requirements.
• Measure process performance.
• Analyse the process to determine e root causes of variation and poor
performance(defects).
• Improve process performance by addressing and eliminating the root causes.
• Control the improved process and future process performance
DMADV − It refers to a data-driven quality strategy for designing products &processes. This
methodology is used to create new product designs or process designs in such a way that
results in a more predictable, mature and defect-free performance.

Steps in Six Sigma project identification

1. Determine the assurance unit (what is to be measured)
2. Determine the measuring method (how it will be measured)
3. Determine the relative importance of quality characteristics (is these key tour
processes?)
4. Arrive at a consensus on defects and flaws (does everyone agree on good and bad
quality?)
5. Expose latent defects (look at the process over time)
6. Observe quality statistically (use process behaviour charting)
7. Distinguish between “quality of design” and “quality of conformance.”

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Six Sigma Metrics
• Defects per unit (DPU)
• Defects per million opportunities (DPMO)
• Rolled throughput yield (RTY)
• Cycle time
• Cost of poor quality (COPQ).

Sigma Levels
A sigma level is the quality level of the process— There are two types of sigma level
calculations: sigma level with Motorola 1.5 sigma shift and without the shift. Six Sigma
Quality level without shift is 2 parts per billion (ppb) and with 1.5 sigma shift is 3.4 DPPM.

Lean Tools
The following link is a collection of 25 essential lean tools. Each tool is distilled into a simple
description of what it is and how it helps. (http://www.leanproduction.com/top-25-lean-
tools.html).

Sample Questions
1. Explain supply chain management?
2. What are the five factors of production?
3. What is Lean manufacturing, Toyota way, Six Sigma, and Kaizen?
4. Given that you have no background in this field, why are you interested in it?
5. What is the latest news you came across in the Supply Chain domain?
6. What is Throughput time?
7. Where can Six Sigma be applied?
8. What is the consequence of the Bull Whip effect?
9. Why do firms need to hold inventory?
10. What are the various sectors of Operations?
11. What is the difference between the Six Sigma DMAIC and DMADV methodologies?
12. What is the definition of DPMO or DPPM?
13. Name some Lean Manufacturing Tools
14. What is 5S?
15. How does applying JIT help an organisation?
16. What is the difference between logistics and Supply Chain Management?
17. . What are Processes?
18. What Are the Functions of Operations Management?
19. What are KPIs?
20. What is Total Productive Maintenance?

Interview Kit by IIM Tiruchirappalli |Page | 67

Interview Kit by IIM Tiruchirappalli |Page | 68
All theBest!!

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