MEANING OF HUMAN RESOUCE PLANNING

The Terms of Manpower Planning and Human Resources Planning are either
synonymous. 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. HRP
involves estimating the size and composition of the future workforce. In other words, HRP
refers to the estimation of the number and type of people needed during the ensuring
period. HRP is the process of forecasting an organizations future demand for, and supply of
right of people in right number at the right place and at right time. It involves estimating
manpower needs and formulating plans to meet these needs. Human resource planning is a
strategy 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 the
expansion and development programmes.
b. Acquiring the required manpower from different internal and external sources available
for recruitment and selection.
c. Developing the manpower through education, training and manpower development
programmes with a view to providing the right type of manpower required.
d. Maintaining stable manpower through attractive wages, monetary incentives, attractive
welfare and other facilities and scientific personnel policies.
HRP is the sub-system in the total organizational planning. It facilitates the realisation of the
companies objectives by providing right type and right number of personnel to the
organization. HRP covers the following: i. Manpower, forecasting and allocation, ii.
Manpower utilization and, iii. Human Resource Development. HRP is beneficial to the
enterprise and also to the employees working in an organization. It facilitates the
achievement of organizational as well as individual objectives of employees.

FEATURES OF HUMAN RESOURCE PLANNING

The 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 be
no manpower plan. The basic objective of HRP is to make optimum utilization of human
resources available.
2. Aims of optimum utilisation of human resources:
The basic purpose of human resource planning is to make optimum utilisation of current and
future 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 of
organisational planning. Determination of manpower needs in advance facilitates
management to take up necessary decisions and follow-up actions. Manpower planning is
forward looking or future- oriented. It involves forecasts of future manpower needs and
timely provisions to meet such needs.
4. On-going/continuous process:
Human resource planning is a regular and continuous process as demand for and supply of
human resource undergoes frequent changes along with the expansion or modernization of
production and other activities.
5. Includes quantitative and qualitative aspect:
Human resource planning has two aspects quantitative and qualitative. The quantitative
aspect implies the right number of employees in an organization at any time. The quality
aspect relates to right type of people (education, skills, talents, leadership, qualities and so
on) 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 of
human resource, so as to secure equilibrium the two. A manpower plan includes two subplans: i. a manpower demand plan, and ii. A manpower supply plan.
7. Facilitates manpower development:
Manpower development is not possible without manpower planning. Employees need
training to keep their knowledge and skills updated. In addition, career guidance anf
facilities 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.
2

IMPORTANCE OF HUMAN RESOURCE PLANNING

Human 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 functioning
and progress through expansion and diversification. Advantages of HRP justify its needs.
HRP facilitates full utilisation of resource and ensures orderly and efficient functioning of the
whole business enterprises. It avoids surplus or shortage of human resource in an
organisation. Human resource planning also plays an important role in the human resource
development in an organisation. It acts as an aid to manpower development programmes.
The management gets best contribution from its employees due to human resource
planning. It also motivates the exiting employees. HRP ensures maximum utilization of
available manpower in the organisation. Human resource planning is also useful dor making
the training programmes more effective/purposeful.
1. Meeting manpower needs:
Every organisation needs adequate and properly qualified staff for the conduct of regular
business activities. HRP is useful for meeting the growing and changing human resource
needs of an organization.
2. Replacement of manpower:
The existing manpower in an organisation is affected due to various reasons such as
retirement and removal of employees and labour turnover. HRP measures the shortfall in
the manpower requirement and suggest suitable arrangements for the recruitment and
selection 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 requirement
due to expansion and growth needs.
4. Meeting challenges of technological environment:
When new technology is introduced, there may be need of additional manpower or there
may be a problem of surplus manpower. HRP is useful for dealing with both the situations
and 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 personnels.

6. Increasing investment in HR:

Human assets, in contract with physical assets, can increase in value. An employee who
picks up skills and abilities becomes a valuable resource because an organisation makes
investment 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 one
department and shortage of staff in some other department. Transfers and promotions are
made for meeting such situations.
8. Recruitment and selection of employees:
HRP suggests the type of manpower required in an organisation. This facilitates recruitment
and 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 the
qualifications and also as per the need of different departments. This ensures optimum
utilisation of available manpower.

FUNDAMENTAL ANALYSIS
In order to make safe, secured and profitable investment in securities, fundamental analysis
is 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 assignment
of the fundamentals of the economy, the industry and the company. It is an attempt to
estimate the real worth of a security by considering the earnings potential of a company. A
fundamental analyst studies the economy and market situation and select suitable securities
for investment proposed. He is not unduly influenced by what happens to security prices on
one particular day in the stock market. He studies the overall economic situation in the
country, makes evaluation of an industry and finally does an in-depth study of the company
of his choice. Fundamental analysis is the method of finding out the future price of a
security which an investor wants to buy. The objective of fundamental analysis is to
appraise 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 for
investment 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 deciding
to 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 phase
analysis 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 economic
situation in necessary/useful. Stock market operates as an integral part of national and even
global economy. The overall economic situation has its impact on the working of stock
exchanges. Naturally, an investor has to study the economic situation at present and likely
economic situation in the near future while taking investment decisions in regard to
corporate securities. The recession in the USA has created certain adverse effects on Indian
economy as well as on Indian stock exchanges. Similarly, political instability, reduction in
industrial or agricultural product, inflation etc. create favourable or unfavourable effects on
the prices of corporate securities. In order to have an insight into the complexities of the
stock market, one needs to develop a sound understanding of the national economy. For
this, study or analysis of economic indicators and their impact on the stock markets is a
must.

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 concept
of fundamental analysis.

B. Industry Analysis:
The second phase of fundamental analysis relates to the detailed analysis of a specific
industry 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 the
investment point of view. There may be industries which are doing well at present but are
likely to face stagnation or decline in future. Similarly, there may be industries which are
facing 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 of
view. While conducting industrial analysis, attention should be given to the following
aspects:
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 analysis
of market structure, competitive forces, and profitability of the industry.
3. Classifications and identifications of profitable segments from the investment point of
view.
It is important to note that analysis of industry will be useful for deciding the most profitable
and promising industry for investment purpose. This facilitates the selection of a most
promising company from the profitable industry in the third stage of fundamental analysis.

C. Company Analysis:
Third phase of fundamental analysis relates to the detailed analysis of the company in which
actual investment is to be made by purchasing shares. In every industry, some companies
show 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 major
components of company analysis:
a. Financial Analysis of a Company:
A company publishes its balance sheet every year. The accounts of the company give useful
financial data on various aspects of its operations. A good analyst first look at the overall
quality 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, loans
and 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 respect
of 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 be
followed by fund flow analysis and ratio analysis. Finally, the analyst will make sustainable
competitive advantage and leadership analysis. Here, cost leadership, profit leadership, etc.
will be taken into consideration. This type of analysis of companies is very crucial for
investors. The company is suitable for selection if it enjoys leadership position in terms of
cost leadership or profit leadership. Similarly, a company enjoying any competitive
advantage 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 company
for investment purpose. Such analysis relates to promoters of the company, production
activities, technology used and product range, marketing and distribution, environment,
industrial relations and productivity. Information on these aspects will be available from
different sources such as companys prospectus, annual reports of the company, newspaper
and magazines report and so on. This information is useful for judging the quality of
management of the company. The future of company depends on the policy decisions by
promoters, directors, and top level management of the company.
8

MEANING OF TECHNICAL ANALYSIS

In addition to fundamental analysis, there is another approach to corporate investment
decision making which is followed ardently by market operators and aggressive investors in
financial decision making called technical analysis/approach. Technical analysis is a study of
a 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 share
prices. A technical analyst believes that greater importance should be given to technical
aspects of the market, such as, prices, price alteration and trading volume. The time
perspective of a technical analyst is short term. Technical analyst follows the chart and
graphs of share prices and interprets them in the context of various technical features of the
market 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 Theory
is one of the most popular technical analysis theories. Technical analysis is a method of a
prediction of share price movements based on the study of price graphs or charts on the
assumption that share price trends are repetitive, that since investor psychology follows a
certain 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 an
industry. 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. Technical
analysis deals with the forces of supply and demand for shares as indicated/reflected in the
behaviour of the market. In brief, technical analysis is market-oriented. A technical analyst is
not worried about a companys assets, profits, dividends, turnover, reserves, and products
and 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. His
outlook is oriented towards short term profits. He believes in making a quick buck. At the
same time, he is prepared to accept frequent small losses. He does not believe in a buyand-hold policy. He shuffles his investment in securities quiet often. His basic approach is
based on the assumption that the market always repeats itself. He tries to go beyond the
fundamentals and acts on the basis of what the market does. In fact, technical analysis is
the study of stock market information per se.
Here, the word technical implies a study of the market itself and not of the various external
factors which affect the market. According to technical analysts, all relevant factors get
reflected in the volume of the stock exchange transactions and the level of share prices.

The basic assumptions in technical analysis are:

1. Market price of shares is determined solely by the interaction of demand and supply of
shares.
2. The supply and demand for shares are governed by many rational and irrational
factors/forces.
3. Subject to minor fluctuations in the stock market, share prices tend to move in the trends
which persist for an appreciable length of time.
4. Changes in such trends are caused mainly by shifts in the demand and supply position of
shares.
5. Shifts in demand and supply can be detected sooner or later in the chart of market
action.
6. Some charts, patterns tend to repeat themselves.
Along with these assumptions, a technical analyst believes that fundamentals have no role
to play in short term price fluctuations. The technical analyst concludes that one need deal
only with a shares market price and not worry about the underlying reasons. His game plan
is 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 you
be concerned with whether a company is promoted by tatas or birlas or ambanis? Whether
it makes computers, cement or steel? And finally whether it is earning profits or making
losses? According to technical analyst, it is meaningless to assign any intrinsic value to a
share certificate. Fluctuations in market values of share keep happening all the time on the
stock markets. When Infosys shares are in demand, the price goes up. If the demand
reduces, the price comes down. On this base, the technical analyst believes that a shares
market price is more relevant than its intrinsic value.
For an ordinary investor, the market price is easier indicator to understand than the complex
framework of fundamental analysis. Moreover, charts of market prices are visually more
appealing and easy and quick to understand. This explains the popularity of technical
analysis among professional money managers and individual investors. However, this is not
an accurate method but it gives the general indication of the behaviour of the prices in the
stock market.

10

D.T.S.S COLLEGE OF
COMMERCE
PRINCIPLES OF MANAGEMENT
NAME:

VIRAL.H.VADODARIA

STD:

T.Y.B.A.F
(ACCOUNTING AND
FINANCE) 6th Semester

DIVISION:

ROLL NO.:

46

SUBJECT :

PRINCIPLES OF
MANAGEMENT
PROF.NAGRAJU

PROJECT GIVEN BY:

DATE OF SUBMISSION:

10th FEBRUARY 2014

CONTENTS
Meaning of Human Resource Planning

Features of Human Resource Planning

Importance of Human Resource Planning

Meaning of Fundamental Analysis

Meaning of Technical Analysis