NCERT Solutions for Class 12 Business Studies Chapter 1: Nature and Significance of Management (NCERT 2026–27)
These Class 12 Business Studies Chapter 1 solutions cover Nature and Significance of Management, the opening chapter of the NCERT textbook Business Studies (Part I) for the 2026–27 session. The chapter explains the concept, characteristics, objectives and importance of management, examines its nature as an art, a science and a profession, describes the levels and functions of management, and shows why coordination is the essence of management. Below you will find every NCERT exercise question (Very Short, Short and Long Answer types) answered step by step in exam-ready style, plus key concepts, extra practice, MCQs, Assertion–Reason questions and FAQs.
Class: 12Subject: Business StudiesBook: Business Studies (Part I)Chapter: 1Chapter Name: Nature and Significance of ManagementSession: 2026–27
Chapter 1, Nature and Significance of Management, defines management as the process of getting things done with the aim of achieving organisational goals effectively (doing the right task and completing it) and efficiently (doing the task correctly at minimum cost). It identifies the basic characteristics of management — it is a goal-oriented, all-pervasive, multidimensional, continuous, group and dynamic process, and an intangible force. Management seeks organisational, social and personal objectives, and is important because it helps achieve group goals, increases efficiency, creates a dynamic organisation, helps achieve personal objectives and aids the development of society. The chapter then discusses the nature of management as an art, a science and (to a large extent) a profession, the three levels of management (top, middle and supervisory/operational), the five functions of management (planning, organising, staffing, directing and controlling), and finally coordination — the orderly synchronisation of group efforts that binds all functions together and is therefore the very essence of management.
Key Concepts & Terms
Management: the process of getting things done with the aim of achieving organisational goals effectively and efficiently. It is a series of interrelated functions performed by all managers.
Effectiveness: doing the right task — completing activities and achieving goals; concerned with the end result.
Efficiency: doing the task correctly and with minimum cost; concerned with the relationship between inputs (resources) and outputs (benefits). Good management balances effectiveness and efficiency.
Characteristics of management: (i) goal-oriented process, (ii) all-pervasive, (iii) multidimensional (management of work, of people, of operations), (iv) continuous process, (v) group activity, (vi) dynamic function, (vii) intangible force.
Objectives of management:Organisational (survival, profit, growth), Social (creating benefit for society — eco-friendly methods, employment, basic amenities), and Personal/personnel (reconciling individual goals such as salary, recognition and growth with organisational goals).
Importance of management: it helps achieve group goals, increases efficiency, creates a dynamic organisation, helps achieve personal objectives, and helps in the development of society.
Nature — art, science, profession: management is an art (it has theoretical knowledge, personalised application and is based on practice and creativity); it is an inexact science (systematised body of knowledge based on experimentation, but not perfectly predictable as it deals with humans); and it has some features of a profession but does not meet all criteria (entry is not restricted, association membership is not compulsory).
Levels of management:Top management (chairman, CEO, COO, president, VPs — sets goals and strategy), Middle management (divisional/departmental heads — interpret and implement plans) and Supervisory/Operational management (foremen and supervisors — oversee the workforce directly).
Functions of management:Planning (deciding in advance what is to be done), Organising (assigning duties, grouping tasks, allocating resources), Staffing (finding the right people for the right job), Directing (leading, influencing and motivating) and Controlling (monitoring performance against standards and taking corrective action).
Coordination: the process by which a manager synchronises the activities of different departments; it integrates group efforts, ensures unity of action, is continuous, all-pervasive, the responsibility of all managers, and a deliberate function. Coordination is the essence of management — the common thread running through all managerial functions.
NCERT Exercises — Full Solutions
All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises. Answers are original, written in CBSE exam-ready style.
Very Short Answer Type
1. What is meant by management?
ANSWERManagement is the process of getting things done with the aim of achieving the goals of an organisation effectively and efficiently. It is a series of interrelated functions — planning, organising, staffing, directing and controlling — performed by all managers to coordinate human and material resources towards a common objective.
2. Name any two important characteristics of management.
ANSWERTwo important characteristics of management are: (i) Management is a goal-oriented process — it unites the efforts of different individuals towards achieving the organisation’s basic goals; and (ii) Management is all-pervasive — the activities of management are common to all organisations, whether economic, social or political.
3. Identify and state the force that binds all the other functions of management.
ANSWERThe force that binds all the other functions of management is coordination. Coordination is the process of synchronising the activities of different departments and is the common thread running through all functions such as purchase, production, sales and finance. It is therefore regarded as the essence of management.
4. List any two indicators of growth of an organisation.
ANSWERTwo indicators of the growth of an organisation are: (i) an increase in sales volume, and (ii) an increase in the number of employees. (Other indicators include an increase in the number of products and an increase in capital investment.)
5. Indian Railways has launched a new broad gauge solar power train which is going to be a path breaking leap towards making trains greener and more environment friendly. The solar power DEMU (Diesel Electric Multiple Unit) has 6 trailer coaches and is expected to save about 21,000 liters of diesel and ensure a cost saving of Rs 12,00,000 per year. Name the objectives of management achieved by Indian Railways in the above case.
ANSWERIn the given case, Indian Railways has achieved two objectives of management:(i) Social objective — by using a solar power train that is greener and more environment friendly, the Railways is using environment-friendly methods of production and creating a benefit for society (a clean environment).(ii) Organisational objective — by saving about 21,000 litres of diesel and ensuring a cost saving of Rs 12,00,000 per year, the Railways is reducing costs, which contributes to the economic objectives of survival, profit and growth.
Short Answer Type
1. Ritu is the manager of the northern division of a large corporate house. At what level does she work in the organisation? What are her basic functions?
ANSWERAs the manager of the northern division, Ritu works at the middle level of management (a divisional head is a typical example of a middle-level manager). Middle management is the link between top management and first-line managers.Her basic functions are to carry out the plans formulated by top management. For this she needs to: (i) interpret the policies framed by top management; (ii) ensure that her department/division has the necessary personnel; (iii) assign necessary duties and responsibilities to them; (iv) motivate them to achieve the desired objectives; and (v) co-operate with other departments for smooth functioning. She is also responsible for all the activities of the first-line managers under her.
2. State the basic features of management as a profession.
ANSWERA profession has five basic features. Examining management against them:(i) Well-defined body of knowledge: management is based on a systematic body of knowledge with well-defined principles, taught at colleges and institutes such as the IIMs — so this criterion is met.(ii) Restricted entry: entry to a profession is restricted through an examination or qualification. However, anyone can be appointed a manager irrespective of qualifications, so this criterion is not strictly met.(iii) Professional association: there are associations of managers such as the AIMA (All India Management Association) with a code of conduct, but membership is not compulsory nor statutorily backed.(iv) Ethical code of conduct: the AIMA has laid down a code of conduct, but it has no statutory backing.(v) Service motive: the basic purpose of management is to help the organisation achieve its goal; in doing so efficiently and effectively, it also serves society.Thus management does not meet the exact criteria of a profession, but it does possess several professional features.
3. Why is management considered to be a multi-dimensional concept?
ANSWERManagement is considered multidimensional because it is a complex activity that has three main dimensions:(i) Management of work: all organisations exist to perform some work — manufacturing a product, satisfying a customer’s need or treating a patient. Management translates this work into goals and decides how to achieve them (problems to be solved, decisions to be made, plans, budgets, responsibilities and authority).(ii) Management of people: human resources are an organisation’s greatest asset, so getting work done through people is a major task. This means dealing with employees both as individuals with diverse needs and as a group, making their strengths effective and weaknesses irrelevant.(iii) Management of operations: every organisation has a basic product or service to provide, which requires a production process that converts input material into the desired output. This is interlinked with the management of work and of people.
4. Company X is facing a lot of problems these days. It manufactures white goods like washing machines, microwave ovens, refrigerators and air conditioners. The company’s margins are under pressure and the profits and market share are declining. The production department blames marketing for not meeting sales targets and marketing blames production department for producing goods, which are not of good quality meeting customers’ expectations. The finance department blames both production and marketing for declining return on investment and bad marketing. State the quality of management that the company is lacking? What quality of management do you think the company is lacking? Explain briefly. What steps should the company management take to bring the company back on track?
ANSWERQuality of management the company is lacking: the company is lacking coordination — the orderly synchronisation of the efforts of its different departments.Explanation: Each department (production, marketing and finance) is working in isolation and blaming the others instead of integrating its efforts towards the common organisational goals. In the absence of coordination there is overlapping, conflict and chaos instead of harmony, which is why margins, profits and market share are all declining. Coordination integrates group efforts, ensures unity of action and binds all the functions of management together — it is the very essence of management.Steps the management should take: The top management should give a common direction to all departments and harmonise their individual goals with the organisational goal. It should ensure that production manufactures goods of the quality and quantity demanded by the market, that marketing achieves the planned sales targets, and that finance supports both. Coordination must begin at the planning stage and continue through organising, directing and controlling, so that the work of all departments is synchronised in amount, timing and quality. This will reduce conflict, improve quality and bring the company back on track.
5. Coordination is the essence of management. Do you agree? Give reasons.
ANSWERYes, I agree that coordination is the essence of management, because it is the common thread that runs through all the functions of management and is not a separate function but their very basis. Reasons:(i) Coordination is needed at every function: While planning, plans of different departments are coordinated; while organising, authority and responsibility relationships are coordinated; staffing coordinates people with jobs; directing coordinates the efforts of subordinates; and controlling coordinates actual performance with planned standards.(ii) Coordination is needed at all levels: top, middle and operational management all require coordination because of the interdependent nature of departmental activities.(iii) It integrates group efforts and ensures unity of action towards common goals, binds all other functions together, and is required throughout the organisation. Since management exists to achieve harmony among individual efforts towards group goals, coordination is implicit and inherent in all functions — hence it is the essence of management, like a thread running through a garland.
6. Ashita and Lakshita are employees working in Dazzling enterprises dealing in costume jewellery. The firm secured an urgent order for 1,000 bracelets that were to be delivered within 4 days. They were assigned the responsibility of producing 500 bracelets each at a cost of Rs 100 per bracelet. Ashita was able to produce the required number within the stipulated time at the cost of Rs 55,000 whereas, Lakshita was able to produce only 450 units at a cost of Rs 90 per unit. State whether Ashita and Lakshita are efficient and effective. Give reasons to justify your answer.
ANSWEREffectiveness means completing the given task (achieving the target), while efficiency means doing the task at minimum cost. Each worker was assigned 500 bracelets at a budgeted cost of Rs 100 per bracelet (i.e., Rs 50,000 for 500 units).Ashita: She produced the full target of 500 bracelets within the stipulated time, so she is effective. Her actual cost was Rs 55,000, i.e., Rs 110 per bracelet, which is higher than the budgeted Rs 100 per unit, so she is not efficient. Ashita is effective but not efficient.Lakshita: She produced only 450 bracelets against the target of 500, so she did not complete the task and is not effective. However, her cost was Rs 90 per unit, which is lower than the budgeted Rs 100 per unit, so she is efficient. Lakshita is efficient but not effective.
Long Answer Type
1. Management is considered to be both an art and science. Explain.
ANSWERManagement as an art: Art is the skilful and personal application of existing knowledge to achieve desired results. Management satisfies the features of art because — (i) existence of theoretical knowledge: there is vast literature on management in areas like marketing, finance and HR; (ii) personalised application: every manager applies this knowledge in his own unique style; and (iii) based on practice and creativity: a manager achieves perfection through continuous practice, creativity and innovation. So the practice of management is an art.Management as a science: Science is a systematised body of knowledge explaining general truths based on cause-and-effect. Management has the features of science because — (i) it has a systematised body of knowledge with its own theories, principles and vocabulary; (ii) its principles are based on observation and experimentation; and (iii) the principles have some universal validity. However, because management deals with human beings, its outcomes cannot be accurately predicted, so it is called an inexact science.Conclusion: The practice of management is an art, while the principles underlying it constitute the science of management. Managers work better when their practice is based on the principles of management. Hence management is both an art and a science — they are not mutually exclusive but complement each other.
2. Do you think management has the characteristics of a full-fledged profession?
ANSWERNo, management does not meet the exact criteria of a full-fledged profession, though it possesses several professional features. Comparing it with the five characteristics of a profession:(i) Well-defined body of knowledge: Management is based on a systematic, well-defined body of knowledge that can be acquired at colleges and institutes (such as the IIMs). This criterion is met.(ii) Restricted entry: A profession restricts entry through examination or qualification. But anyone can be appointed a manager irrespective of qualifications, even though professional knowledge is desirable. This criterion is not strictly met.(iii) Professional association: There are associations of managers in India, like the AIMA, which has a code of conduct. However, membership is not compulsory and the association has no statutory backing. This criterion is only partly met.(iv) Ethical code of conduct: The AIMA has laid down a code of conduct, but unlike doctors or lawyers, managers are not legally bound by it.(v) Service motive: The basic purpose of management is to help the organisation achieve its goal; profit maximisation is fast changing as the sole objective, and an efficient and effective management automatically serves society.Conclusion: Since entry is unrestricted, association membership is not compulsory and there is no enforceable code of conduct, management is not a full-fledged profession but is professional in character to a large extent.
3. “A successful enterprise has to achieve its goals effectively and efficiently.” Explain.
ANSWERFor a successful enterprise, management must be both effective and efficient, as these are the two sides of the same coin.Effectiveness means doing the right task and completing it — it is concerned with achieving the end result (the goal). For example, if a company’s target is 5,000 units a year and it produces 5,000 units, it is effective.Efficiency means doing the task correctly and at minimum cost — it is concerned with the relationship between inputs and outputs. Efficiency increases when more output is obtained from fewer resources, or the same output from fewer resources, thus reducing cost.Balancing the two: Being effective while ignoring efficiency (e.g., producing 5,000 units but on double shifts due to power failure, raising cost) is poor management; so is being efficient but not effective (cutting cost but not meeting the target, so goods do not reach the market). A successful enterprise must achieve its goals (effectiveness) with minimum resources (efficiency), maintaining a balance between the two. High efficiency usually accompanies high effectiveness, but undue emphasis on efficiency alone is not desirable. Poor management results from both inefficiency and ineffectiveness.
4. Management is a series of continuous interrelated functions. Comment.
ANSWERManagement is described as the process of planning, organising, staffing, directing and controlling. These functions are a series of continuous, composite but separate functions that are performed simultaneously by all managers all the time.Planning is determining in advance what is to be done and who is to do it. Organising is assigning duties, grouping tasks, establishing authority and allocating resources to carry out the plan. Staffing is finding the right people for the right job through recruitment, selection, placement and training. Directing is leading, influencing and motivating employees to perform their tasks (through motivation, leadership, communication and supervision). Controlling is monitoring performance by setting standards, measuring actual performance, comparing it with standards and taking corrective action.Continuous and interrelated: Although these functions are usually discussed in the order ‘plan → organise → staff → direct → control’, in reality managers rarely carry them out in isolation. The activities of a manager are interrelated, and it is often difficult to pinpoint where one function ends and another begins. They form an ongoing, continuous series — for example, controlling may lead back to fresh planning — which is why management is a series of continuous, interrelated functions.
5. A company wants to modify its existing product in the market due to decreasing sales. You can imagine any product about which you are familiar. What decisions/steps should each level of management take to give effect to this decision?
ANSWERSuppose the company manufactures washing machines whose sales are falling, and wants to modify the product (e.g., add a fully automatic, water-saving model). The three levels of management would act as follows:(i) Top management: It analyses the business environment and the reasons for falling sales, then takes the strategic decision to modify the product. It formulates the overall organisational goal and strategy — deciding what changes to make, the budget and the broad timeline — and integrates and coordinates the activities of the different departments (finance, marketing, production) according to the overall objectives.(ii) Middle management: The departmental/divisional heads interpret the policies framed by top management. The production head plans the new design and arranges raw materials and technology; the marketing head plans the promotion and pricing of the modified product. They ensure their departments have the necessary personnel, assign duties, motivate employees and co-operate with other departments to implement the plan.(iii) Supervisory/Operational management: Foremen and supervisors directly oversee the workforce to actually produce the modified product. They pass on the instructions of middle management to the workers, ensure the quality of output is maintained, minimise wastage of materials and maintain safety standards, so that the modified product is manufactured as planned.
6. A firm plans in advance and has a sound organisation structure with efficient supervisory staff and control system but on several occasion it finds that plans are not being adhered to. It leads to confusion and duplication of work. Advise remedy.
ANSWERThe firm performs all the functions of management — planning, organising, staffing, supervising (directing) and controlling — yet plans are not being adhered to and there is confusion and duplication of work. This clearly indicates that the firm is lacking coordination.Remedy — coordination: The firm should ensure proper coordination, which is the orderly synchronisation of the efforts of different individuals and departments to provide the right amount, timing and quality of work. Coordination integrates group efforts, ensures unity of action and binds all the functions of management together; without it, even sound planning, organising and control systems lead to overlapping and chaos.The management should: give a common direction to individual efforts; harmonise the goals of different departments with the organisational goal; and apply coordination at every function (planning, organising, staffing, directing and controlling) and at every level (top, middle and operational). Since coordination is a continuous, deliberate and all-pervasive function and the responsibility of every manager, ensuring it throughout the organisation will remove the confusion and duplication of work and make plans adhere to schedule.
Extra Practice Questions
Short Answer Type Questions
Q1. Differentiate between effectiveness and efficiency.
ANSWEREffectiveness means doing the right task and completing it to achieve the goal — it is concerned with the end result. Efficiency means doing the task correctly with minimum cost — it is concerned with the relationship between inputs and outputs. A good manager balances both: achieving goals while using the least resources.
Q2. Why is management called a goal-oriented process?
ANSWERManagement is goal-oriented because every organisation has a set of basic goals that are the reason for its existence, and these should be simple and clearly stated. Management unites the efforts of different individuals in the organisation and directs them towards achieving these common goals.
Q3. State any three points highlighting the importance of management.
ANSWER(i) Management helps in achieving group goals by giving a common direction to individual efforts. (ii) Management increases efficiency by reducing costs and raising productivity through better planning, organising, directing, staffing and controlling. (iii) Management creates a dynamic organisation by helping people adapt to a changing environment so the firm maintains its competitive edge.
Q4. What is meant by ‘management is all-pervasive’?
ANSWERIt means that the activities involved in managing an enterprise are common to all organisations — economic, social or political. A petrol pump needs to be managed as much as a hospital or a school, and what managers do in India, the USA, Germany or Japan is the same, though how they do it may differ due to differences in culture and tradition.
Q5. Name the three levels of management.
ANSWERThe three levels of management are: (i) Top management (chairman, CEO, COO, president, vice-presidents); (ii) Middle management (divisional and departmental heads); and (iii) Supervisory or operational management (foremen and supervisors who directly oversee the workforce).
Long Answer Type Questions
Q1. Explain the basic characteristics of management.
ANSWER(i) Goal-oriented process: management unites individual efforts towards the organisation’s clearly stated goals. (ii) All-pervasive: management activities are common to all organisations everywhere. (iii) Multidimensional: it involves management of work, of people and of operations. (iv) Continuous process: the functions of planning, organising, staffing, directing and controlling are performed continuously and simultaneously. (v) Group activity: it coordinates the efforts of diverse individuals towards a common goal and helps members grow. (vi) Dynamic function: it adapts to a changing environment (e.g., McDonald’s changing its menu for India). (vii) Intangible force: management cannot be seen, but its presence is felt through orderliness, met targets and satisfied employees.
Q2. Explain the objectives of management.
ANSWER(i) Organisational objectives: management must set and achieve objectives considering all stakeholders. The main economic objectives are survival (earning enough revenue to cover costs), profit (a vital incentive covering costs and risks) and growth (adding to prospects in the long run, measured by sales, employees, products or capital). (ii) Social objectives: creating benefit for society — using eco-friendly production methods, providing employment to underprivileged sections, and offering basic amenities like schools and healthcare. (iii) Personal/personnel objectives: reconciling the personal goals of employees (competitive salaries and perks, peer recognition, personal growth) with organisational objectives for harmony in the organisation.
Q3. Explain the five functions of management.
ANSWERPlanning: determining in advance what is to be done and who is to do it — setting goals and developing ways to achieve them efficiently. Organising: assigning duties, grouping tasks into departments, establishing authority and reporting relationships, and allocating resources to carry out the plan. Staffing: finding the right people for the right job through recruitment, selection, placement and training (the human resource function). Directing: leading, influencing and motivating employees to do their best, through motivation, leadership, communication and supervision. Controlling: monitoring performance by setting standards, measuring actual performance, comparing it with standards and taking corrective action where there is a deviation. These functions are interrelated and performed continuously.
MCQs & Assertion–Reason
1. Doing the right task and completing activities to achieve goals is called:
2. “Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims” was defined by:
(a) Henri Fayol (b) F.W. Taylor (c) Koontz and Weihrich (d) Kreitner
3. Which of the following is NOT a function of management?
5. Management of work, management of people and management of operations are the three dimensions that show management is:
(a) goal-oriented (b) multidimensional (c) all-pervasive (d) an intangible force
6. Which objective of management includes survival, profit and growth?
(a) Social objective (b) Personal objective (c) Organisational objective (d) National objective
7. Management is called an ‘inexact science’ mainly because:
(a) it has no principles (b) it deals with human beings whose behaviour cannot be accurately predicted (c) it has no body of knowledge (d) it cannot be taught
8. ‘Finding the right people for the right job’ refers to which function of management?
For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.
A-R 1. Assertion: Coordination is the essence of management.
Reason: Coordination is the common thread that runs through all the functions of management and binds them together.
A-R 2. Assertion: Management is a full-fledged profession like medicine or law.
Reason: Anyone can be appointed a manager irrespective of educational qualifications, and membership of a managers’ association is not compulsory.
A-R 3. Assertion: Management is called an inexact science.
Reason: Management deals with human beings, so the outcomes of its experiments cannot be accurately predicted or replicated.
A-R 4. Assertion: Management is an all-pervasive activity.
Reason: The activities of management are common to all organisations, whether economic, social or political.
A-R 5. Assertion: A manager who completes the target but at a very high cost is efficient.
Reason: Efficiency means doing the task correctly and at minimum cost.
Answer key: 1-(A), 2-(D), 3-(A), 4-(A), 5-(D).
Exam Tips & Common Mistakes
How to score full marks in this chapter
Learn the seven characteristics, the three objectives (organisational/social/personal), the five points on importance, the three levels, the five functions and the six features of coordination — these are the most frequently asked. For ‘art, science and profession’ questions, always give the features of each and then match management against them point by point. In case-study/application questions, first identify the concept (often coordination, or effectiveness vs efficiency, or the level of management) and then explain it with reasons linked to the case. For coordination questions, remember the keywords: integrates group efforts, unity of action, continuous, all-pervasive, responsibility of all managers, deliberate function — and the line “coordination is the essence of management.”
Common mistakes to avoid
Confusing effectiveness (achieving the goal/target) with efficiency (achieving it at minimum cost) in numerical case studies.
Calling management a full-fledged profession — it has only some professional features (entry is unrestricted, no statutory code of conduct).
Treating coordination as a separate sixth function of management instead of the essence that runs through all functions.
Listing only three or four functions — remember all five: Planning, Organising, Staffing, Directing, Controlling.
Confusing the levels of management with the functions of management.
Writing ‘cooperation’ in place of ‘coordination’ — cooperation is voluntary; coordination is a deliberate, planned synchronisation of efforts.
Frequently Asked Questions
What is Chapter 1 of Class 12 Business Studies about?
Chapter 1, Nature and Significance of Management, explains the concept, characteristics, objectives and importance of management, its nature as an art, science and profession, the three levels and five functions of management, and why coordination is the essence of management.
What is the difference between effectiveness and efficiency in management?
Effectiveness means doing the right task and completing it to achieve the goal — it is about the end result. Efficiency means doing the task correctly at minimum cost — it is about the relationship between inputs and outputs. Good management balances both, achieving goals while using the least resources.
Why is coordination called the essence of management?
Coordination is called the essence of management because it is not a separate function but the common thread that runs through every function (planning, organising, staffing, directing and controlling) and every level (top, middle and operational). It integrates group efforts and ensures unity of action towards common goals, so management cannot achieve its objectives without it.
