NCERT Solutions Class 12 Business Studies Chapter 5 Organising

NCERT Solutions Class 12 Business Studies Chapter 5 Organising

NCERT Solutions Class 12 Business Studies Chapter 5 Organising: National Council of Educational Research and Training (NCERT) Class 12 Business Studies Chapter 5 Solutions – Organising.





Business Studies


Chapter Name


Exercise Solutions

Very short answer type:

(1) Identify the network o social relationships which arises spontaneously due to interaction at work?

Ans: The network of social relationship that arises spontaneously due to interaction at work is organisational structure (informal).

(2) What does the term “Span of management” refer to?

Ans: Span of management is the number of subordinate under a superior.

(3) State any two circumstances under which the functional structure will prove to be an appropriate choice.

Ans: Functional structure is an appropriate choice for circumstances like – training of employees, operations requiring high degree of specialisation.

(4) Draw a diagram depicting a functional structure.


class 12 business students – Organising

(5) Company has its registered office in Delhi, Manufacturing unit at Gurgaon and marketing and sales department at Faridabad. The company manufactures the consumer product. Which type of organisational structure should it adopt to achieve its target?

Ans: The type of organizational structure adopted by the company is functional organisation structure.

Short answer type:

(1) What are the steps in the process of organising?

Ans: The steps in the process of organising are – (i) Identification and division of work – the work I divided into manageable activities so that duplication can be avoided.

(ii) Departmentalisation – Activities of similar nature are grouped together and this grouping process is called departmentalization.

(iii) Assignment of duties – Once departments are formed, each of these are placed under the charge of an individual and jobs are allotted to the members of each department according to the skills and competence.

(iv) Establishing reporting relationships: People in the organisation must know who he/she to take orders from and to whom he is accountable.

(2) Discuss the elements of delegation.

Ans: The elements of delegation are as follows:

(i) Authority: It refers to the right of an individual to commend his subordinates and to take actions within the scope of his/her position. It also refers to the right to take decisions inherent in a managerial position.

(ii) Responsibility: It is the obligation of a subordinate to properly perform the assigned duty. It arises from a superior subordinate relationship.

(iii) Accountability: It implies being answerable for the final outcome. Once authority has been delegated and responsibility is accepted, one cannot deny accountability.

(3) How does informal organisation support the formal organisation?

Ans: Informal organisation support the formal organisation in the following ways:

(i) Prescribed lines of communication are not followed, thus, informal organisation leads to faster spread of information & feedback.

(ii) It helps to fulfill the social needs of the members and allows than to find likeminded people, and enhances job satisfaction.

(iii) It contributes towards fulfillment of organisational objectives by compensating for inadequancies in formal organisation.

(4) Can a large sized organisation be totally centralised of decentralised? Give your opinion.

Ans: No, I do not think that an organisation can be totally centralized or decentralised because complete centralization would imply concentration of all decision making functions at the open of management hierarchy, on the other hand, complete decentralisation would imply the delegation of all decision making functions to the lower level of the hierarchy and this would obviate the need for higher managerial positions. An organisation can never be completely centralised or decentralised or decentralised and there is a need for a balance between these co-existing forces.

(5) Decentralisation is extending delegation to the longest level. Comment.

Ans: Those organisations in which the authority is shared with lower level is known as decentralised organisation. It refers to delegation of authority throughout all the levels of organisation and decision making authority is shared with lower levels and is consequently placed nearest to the point of action decentralisation diminishes the amount of direct supervision exercised by a superior over the activities of a subordinate because they are given the freedom to act and decide —- within the limits set by the superior.

(6) Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?

Ans: The type of organisational structure recommended for her for expanding her business is divisional organisational structure. The reason for such  suggestion are as follows:

(i) Divisional structure is suitable for enterprises which have more than one categories of product to offer.

(ii) Divisional structure promotes product specialisation and helps in the development of varied skills in a divisional head.

(iii) It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.

(iv) In a divisional structure, the organisation structure comprises of separate business units or divisions which has a divisional manager responsible for its performance.

(7) The production manager asked the foreman to achieve a target production of 200 units/day, but he doesn’t give him the authority to requisition tools and materials from the stores department. Can the production manager blame the foreman if he is not able to achieve the desire target? Give reasons.

Ans: The production manager cannot blame the foreman if he is not able to achieve the desired target because in order to achieve the target he needs proper amount of authority to carry out his tasks. The importance of authority are as follows:

(i) Authority determines the superior subordinate relationship wherein the superior communicates his decision to the subordinate, expecting compliance from him and the subordinate executes the decision as per the guidelines of the superior.

(ii) Authority relationships helps to maintain order in the organisation by giving the managers the right to exact obedience and give direction to the workforce under them.

Long answer type:

(1) Why delegation is considered essential for effective organising? 

Ans: Delegation is essential for effective organising because of the following reason:-

(i) Effective management: By empowering the employees, the managers are able to function more efficiently as they get more time to concentrate on important matters.

(ii) Employee development: Due to delegation, employees get more opportunities to utilise their talent & this gives rise to latent abilities in them.

(iii) Motivation of employees: Delegation provides a psychological benefit when a superior —- a subordinate with a task which builds a responsibility for work.

(iv) Faciliation of growth: Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading position in new venture.

(v) Basis of management heirarchy: Delegation of authority establishes superior subordinate relationship, which are the basis of heirarchy of management.

(2) What is a divisional structure? Discuss its advantages & limitations.

Ans: In a divisional structure, the organisations structure companies of separate business units or divisions where each unit has a divisional manager responsible for its performance.

The advantages of divisional structure are as follows:

(i), (ii), (iv) -> refer to answer of Q6 of short answer type question.

The disadvantages of divisional structure are as follows

(i) Conflict may arise among different divisions with reference to allocations of funds.

(ii) A particular division may seek to maximise its profits at the cost of other divisions.

(iii) It may lead to increase in cost since there may be a duplication of activities across products.

(3) Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised?

Ans: The need or importance of an organisation to be decentralised are as follows:

(i) Develops initiative among subordinates: Decentralisation helps to promote self-reliance & confidence amongst the subordinates. This happens because its lower managerial level are given freedom to take their own decisions.

(ii) Develops managerial talent for the future: Decentralisation gives a chance to prove the abilities of an individual and creates a reservoir of qualified manpower.

(iii) Quick decision making: In a decentralised organisation, decisions are taken at levels which are nearest to the points of action & there is no requirement to approval from many levels.

(iv) Relief to top management: Decentralisation diminishes the amount of —– supervision exercised by a superior over the activities of a subordinate as they are given the freedom to act and decide within the limits set by the superior.

(v) Better control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for —- results.

(4) Distinguish between centralization and decentralisation.

Ans: An organisation is centralised when decision-making authority is —– by higher management levels whereas it is decentralised when such authority is delegated.

Centralisation would imply concentration of all decision-making functions at the apex of the management heirarchy, whereas decentralisation would imply the delegation of all decision making functions to the lower level of the heirarchy.

(5) How is functional structure different from a divisional structure?

Ans: The difference between functional structure and divisional structure are as follows:

Basis Functional Structure Divisional structure
(i) Formation (i) Formation is based on functions (i) Formation is based on product lines and is supported by functions.
(ii) Specialisation (ii) Functional specialisation (ii) Product specilisation
(iii) Responsibility (iii) Difficult to fix on a department (iii) Easy to fix responsibility for performance.
(iv) Managerial Development (iv) It is difficult as each functional manager has to report to the top management (iv) It is easier because the autonomy as well as the chance to perform multiple functions helps in managerial development
(v) Cost (v) Functions are not duplicate & hence involves less cost (v) Duplication of resources in various departments and hence it is costly.

 (6) A company which manufactures a popular brand of toys, has been enjoying good market reputation. It has a functional organisation structure with separate departments for production, finance marketing etc. Lately to use its brand name and also to cash on to a new business opportunities it is thinking to diversity into manufacture of new range of electronic toys for which a new market is emerging. Which organisation structure should be adopted in this situation? Give concrete reasons with regard to benefits the company will derive from the steps it should take.

Ans: The organisation structure to be adopted in this situation by the company is divisional organisational structure.

The benefits or advantages that the company will derive from divisional structure are as follows (Refer to answer of Q6 of short answer type).

(7) A company manufacturing sewing machines set up in 1945 by the British promoters follows formal organisation culture in totality. It is facing lot of problems in delays in decision making. As the result it is not able to adapt to changing business environment. The workforce is not motivated since they cannot vent their grievances except through formal channels, which involve red tape. Employee turnover is high, its market share is also declining due to changed circumstances and business environment. You are to advise the company with regard to change it should bring about in its organisation structure to overcome the problems faced by it. Give reasons in term o benefits it will derive from the changes suggested by you.

Ans: The company should adapt informal organisational structure besides formal structure also, to overcome the present problems faced by it. The benefits derived from informal organisational structure are as follows:

Refer to answer of Q3 of short answer type questions.

(8) A company X Ltd manufacturing cosmetics which has enjoyed a Preeminent position in business, has grown in size. Its business was very good till 1991. But after that, ne liberalised environment has seen entry of many MNC’s in the sector. With the result the —- share of X Ltd has declined. The company had followed a very centralised business model with directors and divisional heads making even —— decisions. Before 1991 this business model had served the company very —- as consumers had no choice. But now the company is under pressure to reform. What organisation structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG.

Ans: The company must incorporate decentralisation in its organisation structure in order to retain its market share.

The changes suggested will benefit the firm in the following ways: Refer benefits of decentralisation from answer of Q3 (Long Answer)

Read: This Book Chapter No. 4 Question Answer

Updated: August 3, 2023 — 1:19 am

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