IIFT 2012 Question Paper

Pick the word with the correct spelling

Pick the odd word out

Read the following passages carefully and answer the questions at the end of each passage 

Asked what a business is, the typical businessman is likely to answer, “An organisation to make a profit.” The typical economist is likely to give the same answer. This answer is not only false, it is irrelevant. The prevailing economic theory of the mission of business enterprise and behaviour, the maximization of profit which is simply a complicated way of phrasing the old saw of buying cheap and selling dear — may adequately explain how Richard Sears operated. But it cannot explain how Sears, Roebuck or any other business enterprise operates, or how it should operate. The concept of profit maximization is, in fact, meaningless. The danger in the concept of profit maximization is that it makes profitability appear a myth.

Profit and profitability are, however, crucial for society even more than for the individual business. Yet profitability is not the purpose of, but a limiting factor on business enterprise and business activity. Profit is not the explanation, cause, or rationale of business behaviour and business decisions, but rather the test of their validity. If archangels instead of businessmen sat in directors’ chairs, they would still have to be concerned with profitability, despite their total lack of personal interest in making profits.

The root of the confusion is the mistaken belief that the motive of a person — the so called profit motive of the businessman is an explanation of his behaviour or his guide to right action. Whether there is such a thing as a profit motive at all is highly doubtful. The idea was invented by the classical economists to explain the economic reality that their theory of static equilibrium could not explain. There has never been any evidence for the existence of the profit motive, and we have long since found the true explanation of the phenomena of economic change and growth which the profit motive was first put forth to explain.

It is irrelevant for an understanding of business behaviour, profit, and profitability, whether there is a profit motive or not. That Jim Smith is in business to make a profit concerns only him and the Recording Angel. It does not tell us what Jim Smith does and how he performs. We do not learn anything about the work of a prospector hunting for uranium in the Nevada desert by being told that he is trying to make his fortune. We do not learn anything about the work of a heart specialist by being told that he is trying to make a livelihood, or even that he is trying to benefit humanity. The profit motive and its offspring maximisation of profits are just as irrelevant to the function of a business, the purpose of a business, and the job of managing a business.

In fact, the concept is worse than irrelevant: it does harm. It is a major cause of the misunderstanding of the nature of profit in our society and of the deep-seated hostility to profit, which are among the most dangerous diseases of an industrial society. It is largely responsible for the worst mistakes of public policy — in this country as well as in Western Europe — which are squarely based on the failure to understand the nature, function, and purpose of business enterprise. And it is in large part responsible for the prevailing belief that there is an inherent contradiction between profit and a company’s ability to make a social contribution. Actually, a company can make a social contribution only if it is highly profitable.

To know what a business is, we have to start with its purpose. Its purpose must lie outside of the business itself. In fact, it must lie in society since business enterprise is an organ of society. There is only one valid definition of business purpose: to create a customer.

Markets are not created by God, nature, or economic forces but by business people. The want a business satisfies may have been felt by the customer before he or she was offered the means of satisfying it. Like food in a famine, it may have dominated the customer’s life and filled all his waking moments, but it remained a potential want until the action of business people converted it into effective demand. Only then is there a customer and a market. The want may have been unfelt by the potential customer; no one knew that he wanted a Xerox machine or a computer until these became available. There may have been no want at all until business action created it — by innovation, by credit, by advertising, or by salesmanship. In every case, it is business action that creates the customer.

Read the following passages carefully and answer the questions at the end of each passage

The first thing I learned at school was that some people are idiots; the second thing I learned was that some are even worse. I was still too young to grasp that people of breeding were meant to affect innocence of this fundamental distinction. and that the same courtesy applied to any disparity that might rise out of religious. racial, sexual class, financial and (latterly) cultural difference. So in my innocence I would raise my hand every time the teacher asked a question, just to make it clear I knew the answer.

After some months of this, the teacher and my classmates must have been vaguely aware I was a good student, but still I felt the compulsion to raise my hand. By now the teacher seldom called on me, preferring to give other children a chance to speak, too. Still my hand shot up without my even willing it, whether or not l knew the answer. If I was putting on airs, like someone who even in ordinary clothes, adds a gaudy piece of jewellery, it’s also true that I admired my teacher and was desperate to cooperate.

Another thing I was happy to discover at school was the teacher’s ‘authority’. At home, in the crowded and disordered Pamuk Apartments, things were never so clear; at our crowded table, everyone talked at the same time. Our domestic routines, our love for one another, our conversations, meals and radio hours; these 'were never debated — they just happened. My father held little obvious authority at home, and he was often absent. He never scolded my brother or me, never even raised his eyebrows in disapproval. In later years, he would introduce us to his friends as ‘my two younger brothers’, and we felt he had earned the right to say so. My mother was the only authority I recognised at home. But she was hardly a distant or alien tyrant: her power came from my desire to be loved by her. And so - I was fascinated by the power my teacher wielded over her twenty-five pupils.

Perhaps I identified my teacher with my mother, for I had an insatiable desire for her approval. ‘Join your arms together like this and sit down quietly,’ she would say, and I would press my arms against my chest and sit patiently all through the lesson. But gradually the novelty wore off; soon it was no longer exciting to have every answer or solve an arithmetic problem ahead of everyone else or earn the highest mark; time began to flow with painful slowness, or stop flowing altogether.

Turning away from the fat, half-witted girl who was writing on the blackboard, who gave everyone — teachers, school caretakers and her classmates — the same vapid, trusting smile, my eyes would float to the window, to the upper branches of the chestnut tree that I could just see rising up between the apartment buildings. A crow would land on a branch. Because I was viewing it from below, I could see the little cloud floating behind it — as it moved, it kept changing shape: first a fox’s nose, then a head, then a dog. I didn’t want it to stop looking like a dog, but as it It was exciting, though sometimes painful, to get to know my classmates as individuals, and to find out how different they were from me. There was that sad boy who, whenever he was asked to read out loud in Turkish class, would skip every other line; the poor boy’s mistake was as involuntary as the laughter it would elicit from the class. In first grade, there was a girl who kept her red hair in a ponytail, who sat next to me for a time. Although her bag was a slovenly jumble of half-eaten apples, simits, sesame seeds, pencils and hair bands, it always smelled of dried lavender around her, and that attracted me; I was also drawn to her for speaking so openly about the little taboos of daily life, and if I didn’t see her at the weekend, I missed her, though there was another girl so tiny and delicate that I was utterly entranced by her as well. Why did that boy keep on telling lies even knowing no one was going to believe him‘? How could that girl be so indiscreet about the goings-on in her house? And could this other girl be shedding real tears as she read that poem about Ataturk?'

Just as I was in the habit of looking at the fronts of cars and seeing noses, so too did I like to scrutinise my classmates, looking for the creatures they resembled. The boy with the pointed nose was a fox and the big one next to him was, as everyone said, a bear, and the one with the thick hair was a hedgehog... I remember a Jewish girl called Mari telling us all about Passover — there were days when no one in her grandmother’s house was allowed to touch the light switches. Another girl reported that one evening, when she was in her room, she turned around so fast she glimpsed the shadow of an angel — a fearsome story that stayed with me. There was a girl with very long legs who wore very long socks and always looked as if she was about to cry; her father was a government minister and when he died in a plane crash from which Prime Minister Menederes emerged without a scratch, I was sure she’d been crying because she had known in advance what was going to happen. Lots of children had problems with their teeth; a few wore braces. On the top floor of the building that housed the lycée dormitory and the sports hall, just next to the infirmary, there was rumoured to be a dentist, and when teachers got angry they would often threaten to send naughty children there. For lesser infractions pupils were made to stand in the corner between the blackboard and the door with their backs to the class, sometimes one leg, but because we were all so curious to see how long someone could stand on one leg, the lessons suffered, so this particular punishment was rare.