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MEANING OF HUMAN RESOUCE PLANNINGThe Terms of Manpower Planning and Human Resources Planning are eithersynonymous. In the past, the term manpower planning was widely used. At present, the

emphasis on human resource planning which i9s more broad based and comprehensive.HRP is also called as personnel planning or employment planning.

HRP is concerned with planning for future manpower requirements of an organization. HRPinvolves estimating the size and composition of the future workforce. In other words, HRPrefers to the estimation of the number and type of people needed during the ensuringperiod. HRP is the process of forecasting an organizations future demand for, and supply ofright of people in right number at the right place and at right time. It involves estimatingmanpower needs and formulating plans to meet these needs. Human resource planning is astrategy for a. procurement, b. development, c. allocation, d. utilization of an organizations

human resources.a. Forecasting the manpower requirements of the enterprise for the future period as per theexpansion and development programmes.

b. Acquiring the required manpower from different internal and external sources availablefor recruitment and selection.

c. Developing the manpower through education, training and manpower developmentprogrammes with a view to providing the right type of manpower required.

d. Maintaining stable manpower through attractive wages, monetary incentives, attractivewelfare and other facilities and scientific personnel policies.

HRP is the sub-system in the total organizational planning. It facilitates the realisation of thecompanies objectives by providing right type and right number of personnel to theorganization. HRP covers the following: i. Manpower, forecasting and allocation, ii. Manpower utilization and, iii. Human Resource Development. HRP is beneficial to theenterprise and also to the employees working in an organization. It facilitates theachievement of organizational as well as individual objectives of employees.

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FEATURES OF HUMAN RESOURCE PLANNINGThe definitions noted above suggest the following features of Human Resource Planning:

1. Integral part of corporate planning:

HR planning is an integral part of corporate planning. Without a corporate plan, there can beno manpower plan. The basic objective of HRP is to make optimum utilization of humanresources available.

2. Aims of optimum utilisation of human resources:

The basic purpose of human resource planning is to make optimum utilisation of current andfuture human resources available with or within and organisation.

3. Facilitates determination of future manpower needs:

HRP involves determination of future manpower needs of an organisation in the light oforganisational planning. Determination of manpower needs in advance facilitatesmanagement to take up necessary decisions and follow-up actions. Manpower planning isforward looking or future- oriented. It involves forecasts of future manpower needs andtimely provisions to meet such needs.

4. On-going/continuous process:

Human resource planning is a regular and continuous process as demand for and supply ofhuman resource undergoes frequent changes along with the expansion or modernization ofproduction and other activities.

5. Includes quantitative and qualitative aspect:

Human resource planning has two aspects quantitative and qualitative. The quantitativeaspect implies the right number of employees in an organization at any time. The qualityaspect relates to right type of people (education, skills, talents, leadership, qualities and soon) required in the organization at present and in future.

6. Facilitates equilibrium between demand and supply of manpower:

HRP is a two-phased process. It involves collection about the demand for and supply ofhuman resource, so as to secure equilibrium the two. A manpower plan includes two sub-plans: i. a manpower demand plan, and ii. A manpower supply plan.

7. Facilitates manpower development:

Manpower development is not possible without manpower planning. Employees needtraining to keep their knowledge and skills updated. In addition, career guidance anffacilities of self development should be given to employees. This is possible through HRP.For this, long term and short term human resource plans are prepared.

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IMPORTANCE OF HUMAN RESOURCE PLANNINGHuman resource planning plays an important role at different levels, i.e., national level,industry level and enterprises level. Its need is universally accepted. HRP is not a matter of

choice but absolutely necessary in the case of modern organisations for orderly functioningand progress through expansion and diversification. Advantages of HRP justify its needs.HRP facilitates full utilisation of resource and ensures orderly and efficient functioning of thewhole business enterprises. It avoids surplus or shortage of human resource in anorganisation. Human resource planning also plays an important role in the human resourcedevelopment in an organisation. It acts as an aid to manpower development programmes.The management gets best contribution from its employees due to human resourceplanning. It also motivates the exiting employees. HRP ensures maximum utilization ofavailable manpower in the organisation. Human resource planning is also useful dor makingthe training programmes more effective/purposeful.

1. Meeting manpower needs:

Every organisation needs adequate and properly qualified staff for the conduct of regularbusiness activities. HRP is useful for meeting the growing and changing human resourceneeds of an organization.

2. Replacement of manpower:

The existing manpower in an organisation is affected due to various reasons such asretirement and removal of employees and labour turnover. HRP measures the shortfall in

the manpower requirement and suggest suitable arrangements for the recruitment andselection of new staff.

3. Meeting growing manpower needs:

The expansion or modernisation programme may be undertaken by the enterprise.Manpower planning is useful for estimating and meeting additional manpower requirementdue to expansion and growth needs.

4. Meeting challenges of technological environment:

When new technology is introduced, there may be need of additional manpower or theremay be a problem of surplus manpower. HRP is useful for dealing with both the situationsand this indicates its importance.

5. Coping with charge:

HRP enables an enterprise to cope with changes in competitive forces, markets, products,and technology and government regulations. Such changes generate changes in job contact,skill, number and type of personnel s.

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6. Increasing investment in HR:

Human assets, in contract with physical assets, can increase in value. An employee whopicks up skills and abilities becomes a valuable resource because an organisation makesinvestment in its manpower either through direct training or job assignments.

7. Adjusting manpower requirements:

A situation may develop in an organisation when there will be surplus staff in onedepartment and shortage of staff in some other department. Transfers and promotions aremade for meeting such situations.

8. Recruitment and selection of employees:

HRP suggests the type of manpower required in an organisation. This facilitates recruitmentand selection of suitable personnel for jobs in the organisation. Introduction of appropriate

selection tests is also possible as per the manpower requirements.

9. Placement of manpower:

HRP facilitates placement of newly selected persons in different departments as per thequalifications and also as per the need of different departments. This ensures optimumutilisation of available manpower.

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FUNDAMENTAL ANALYSISIn order to make safe, secured and profitable investment in securities, fundamental analysisis useful. It is more scientific as compared to technical analysis. Fundamental analysis is

time-honoured, value-oriented and result-oriented approach based on a careful assignmentof the fundamentals of the economy, the industry and the company. It is an attempt toestimate the real worth of a security by considering the earnings potential of a company. Afundamental analyst studies the economy and market situation and select suitable securitiesfor investment proposed. He is not unduly influenced by what happens to security prices onone particular day in the stock market. He studies the overall economic situation in thecountry, makes evaluation of an industry and finally does an in-depth study of the companyof his choice. Fundamental analysis is the method of finding out the future price of asecurity which an investor wants to buy. The objective of fundamental analysis is toappraise the intrinsic value of a security. The intrinsic value of a security is closely

associated with the economic environment in a country. In short, fundamental analysis forinvestment decision-making is a three phase analysis of:

a. the economy, (To assess the general economic situation in the country)

b. the industry, (to review prevailing conditions within a specific industry)

c. the company, (To analyse financial and non-financial aspects of the company for decidingto buy, to sell or to hold the shares of the company).

It may be noted that fundamental approach to investment analysis is comprehensive and

includes analysis three levels (national economy, industry and company). This three phaseanalysis facilitates appropriate investment analysis for investment decision-making.

A. Economic Analysis (Current State of Economy):

For taking decision relating to buying or selling a security, the analysis of overall economicsituation in necessary/useful. Stock market operates as an integral part of national and evenglobal economy. The overall economic situation has its impact on the working of stockexchanges. Naturally, an investor has to study the economic situation at present and likelyeconomic situation in the near future while taking investment decisions in regard tocorporate securities. The recession in the USA has created certain adverse effects on Indianeconomy as well as on Indian stock exchanges. Similarly, political instability, reduction inindustrial or agricultural product, inflation etc. create favourable or unfavourable effects onthe prices of corporate securities. In order to have an insight into the complexities of thestock market, one needs to develop a sound understanding of the national economy. Forthis, study or analysis of economic indicators and their impact on the stock markets is amust.

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Economic factors affecting national economy as well as stock markets are as noted below:

1. Economic growth which is visible through national income, growth rate of the economy,per capita income and so on.

2. Monsoon and agricultural production.3. Industrial production, employment growth, export growth etc.

4. Inflation rate and its impact on various sectors of the economy.

5. Interest rate structure within the economy.

6. Foreign Exchange Reserves, balance of trade and balance of payments position.

7. Budgetary deficit, public debt and foreign debt.

8. Domestic savings, tax rates and overall employment situation.

9. Progress in the infrastructure sector.

10. Government policies, political situation and political stability.

It may be pointed out that key economic indicators such as GDP growth, per capita income,price level, industrial production etc. are published by the government agencies periodically.Detailed study of these indicators is necessary for economic analysis is an essential conceptof fundamental analysis.

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B. Industry Analysis:

The second phase of fundamental analysis relates to the detailed analysis of a specificindustry from which a specific company is to be selected for investment purpose. Here,detailed study of the industry its future, past record, present position and future prospects

is necessary. Such study will indicate the soundness and profitability of the industry from theinvestment point of view. There may be industries which are doing well at present but arelikely to face stagnation or decline in future. Similarly, there may be industries which arefacing recession at present but are likely to move towards prosperity in the near future.

Analysis of industry will be useful for finding out its potential from the investment point ofview. While conducting industrial analysis, attention should be given to the followingaspects:

1. Life cycle of an industry and likely future prospects of the industry.

2. Analysis of competitive conditions in the industry. This type of analysis includes analysisof market structure, competitive forces, and profitability of the industry.

3. Classifications and identifications of profitable segments from the investment point ofview.

It is important to note that analysis of industry will be useful for deciding the most profitableand promising industry for investment purpose. This facilitates the selection of a mostpromising company from the profitable industry in the third stage of fundamental analysis.

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C. Company Analysis:

Third phase of fundamental analysis relates to the detailed analysis of the company in whichactual investment is to be made by purchasing shares. In every industry, some companiesshow good performance while some others face difficulties and incur loss. To select

appropriate company for investment is a critical and difficult decision. Tyhere are two majorcomponents of company analysis:

a. Financial Analysis of a Company:

A company publishes its balance sheet every year. The accounts of the company give usefulfinancial data on various aspects of its operations. A good analyst first look at the overallquality of the balance sheet and accounts before attempting a detailed financial analysis.Here, he considers the following:

i. Serious qualifications in the report of auditors, if any.

ii. Important notes at the end of the balance sheet, if any.

iii. Changes in the accounting policies during the year, if any.

iv. Important observations in the annual report, if any.

v. Window dressing on the balance sheet by manipulating inventories, depreciation, loansand advances etc., if any.

If the financial data and other details are satisfactory, the analyst will consider the

performance of the company over the last five years. The trend analysis is made in respectof sales cost of sales, cost of sales, gross profit, net profit (before and after tax payment),net worth, bonus and rights issues, earning per share etc. The trend analysis will befollowed by fund flow analysis and ratio analysis. Finally, the analyst will make sustainablecompetitive advantage and leadership analysis. Here, cost leadership, profit leadership, etc.will be taken into consideration. This type of analysis of companies is very crucial forinvestors. The company is suitable for selection if it enjoys leadership position in terms ofcost leadership or profit leadership. Similarly, a company enjoying any competitiveadvantage is suitable for selection for investment purpose.

b. Non-Financial Analysis of a Company:

Numerous non-financial aspects of a company have to be evalued while selecting a companyfor investment purpose. Such analysis relates to promoters of the company, productionactivities, technology used and product range, marketing and distribution, environment,industrial relations and productivity. Information on these aspects will be available fromdifferent sources such as company s prospectus, annual reports of the company, newspaperand magazines report and so on. This information is useful for judging the quality ofmanagement of the company. The future of company depends on the policy decisions bypromoters, directors, and top level management of the company.

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MEANING OF TECHNICAL ANALYSIS

In addition to fundamental analysis, there is another approach to corporate investmentdecision making which is followed ardently by market operators and aggressive investors infinancial decision making called technical analysis/approach. Technical analysis is a study ofa market data in terms of factors affecting supply and demand schedules, such as, prices,volume of trading, etc. It is a simple and quick method of forecasting behaviour of shareprices. A technical analyst believes that greater importance should be given to technicalaspects of the market, such as, prices, price alteration and trading volume. The timeperspective of a technical analyst is short term. Technical analyst follows the chart andgraphs of share prices and interprets them in the context of various technical features of themarket as a whole. It may be noted that both of the approach is (fundamental and

technical) to investment analysis are like two sides to the investment coin. The Dow Theoryis one of the most popular technical analysis theories. Technical analysis is a method of aprediction of share price movements based on the study of price graphs or charts on theassumption that share price trends are repetitive, that since investor psychology follows acertain pattern, what is seen to have happen before is likely to happen again i.e. repeated.The technical analyst is not concerned with the fundamental strength or weakness of anindustry. He only studies investor and price behaviour. In contrast to fundamental analysis,technical analysis is not concerned with the intrinsic worth of a share/security. Technicalanalysis deals with the forces of supply and demand for shares as indicated/reflected in thebehaviour of the market. In brief, technical analysis is market-oriented. A technical analyst is

not worried about a company s assets, profits, dividends, turnover, reserves, and productsand so on. He looks only at its share price chart in order to decide whether to invest in it.Technical analysis is a simple and quick method of a forecasting behaviour of share price.The technical analyst does not distinguish between current income and capital gains. Hisoutlook is oriented towards short term profits. He believes in making a quick buck. At thesame time, he is prepared to accept frequent small losses. He does not believe in a buy-and-hold policy. He shuffles his investment in securities quiet often. His basic approach isbased on the assumption that the market always repeats itself. He tries to go beyond thefundamentals and acts on the basis of what the market does. In fact, technical analysis isthe study of stock market information per se.

Here, the word technical implies a study of the market itself and not of the various externalfactors which affect the market. According to technical analysts, all relevant factors getreflected in the volume of the stock exchange transactions and the level of share prices.

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The basic assumptions in technical analysis are:

1. Market price of shares is determined solely by the interaction of demand and supply ofshares.

2. The supply and demand for shares are governed by many rational and irrationalfactors/forces.

3. Subject to minor fluctuations in the stock market, share prices tend to move in the trendswhich persist for an appreciable length of time.

4. Changes in such trends are caused mainly by shifts in the demand and supply position ofshares.

5. Shifts in demand and supply can be detected sooner or later in the chart of marketaction.

6. Some charts, patterns tend to repeat themselves.

Along with these assumptions, a technical analyst believes that fundamentals have no roleto play in short term price fluctuations. The technical analyst concludes that one need dealonly with a share s mar ket price and not worry about the underlying reasons. His game planis easy and simple. The plan is:

a. If the market price is going up, buy,

b. If the market price is going down, sell,

c. If the market price is steady, wait and watch.

The logic in technical analysis is simple. If you can follow such simple rules, why should yoube concerned with whether a company is promoted by tata s or birla s or ambani s? Whetherit makes computers, cement or steel? And finally whether it is earning profits or makinglosses? According to technical analyst, it is meaningless to assign any intrinsic value to ashare certificate. Fluctuations in market values of share keep happening all the time on thestock markets. When Infosys shares are in demand, the price goes up. If the demandreduces, the price comes down. On this base, the technical analyst believes that a share smarket price is more relevant than its intrinsic value.

For an ordinary investor, the market price is easier indicator to understand than the complexframework of fundamental analysis. Moreover, charts of market prices are visually moreappealing and easy and quick to understand. This explains the popularity of technicalanalysis among professional money managers and individual investors. However, this is notan accurate method but it gives the general indication of the behaviour of the prices in thestock market.

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D.T.S.S COLLEGE OFCOMMERCE

PRINCIPLES OF MANAGEMENT

NAME : VIRAL.H.VADODARIA

STD: T.Y.B.A.F

(ACCOUNTING ANDFINANCE) 6th Semester

DIVISION: A

ROLL NO.: 46

SUBJECT : PRINCIPLES OF

MANAGEMENT

PROJECT GIVEN BY: PROF.NAGRAJU

DATE OF SUBMISSION: 10 th FEBRUARY 2014

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CONTENTS

Meaning of Human Resource Planning

Features of Human Resource Planning

Importance of Human Resource Planning

Meaning of Fundamental Analysis

Meaning of Technical Analysis