CPU BUSINESS AND INFORMATION TECHNOLOGY COLLEGE

SCHOOL OF GRATUATE STUDIES

SUBMITTED TO CPU BUSINESS AND INFORMATION TECHNOLOGY

COLLEGE SCHOOL OF GRATUATE STUDIES IN PARTIAL FULFILMENT OF
THE COURSE MANAGEMENT

MANAGEMENT PLANNING

BY

 ABEBA ALEM – EMBA2382/14

 BETHLEHEM GETACHEW – EMBA2383/14
 ZEHAB SHEMSU – EMBA2019/14
 SARA KIFLE – EMBA2907/14
 SEWAGEGNEHU TAMENE -- – EMBA2908/14
 BESUFIKAD YITBAREK -- – EMBA2357/14
 FIKIR TESFAYE – EMBA. . 2960./14
 HAILEGEBRIEL GOTE –EMBA. , , 2902/14
 ZELALEM ESHETE– EMBA. . ,2957/14
 BAHIRU GOSA – EMBA. . 2515./14
 BISRAT ABAYNEH -- – EMBA. . .2514/14

SUB. TO: FELEKE (ASSISTANT PROFESSOR)

ADDIS ABABA, ETHIOPIA

December 14, 2023

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TABLE OF CONTENTS

1. Meaning and Definitions of Planning

2. Concept and Nature of Planning

3. Characteristics of Planning

4. Objectives of Planning

5. Steps to Make Plans Effective

6. Measures for Making Planning Effective

7. Types of Planning

8. Principles of Planning

9. Categories and Levels of Planning

10.Reasons of Planning

11.Components of Planning

12.Steps Involved in Planning

13.Advantages of Planning

14.Limitations of Planning
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1.
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Mea

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ning and Definitions of Planning

Planning is the fundamental management function, which involves deciding beforehand, what is to be
done, when is it to be done, how it is to be done and who is going to do it. It is an intellectual
process which lays down an organization’s objectives and develops various courses of action, by
which the organization can achieve those objectives. It chalks out exactly, how to attain a specific goal.
Planning is nothing but thinking before the action takes place. It helps us to take a peep into the
future and decide in advance the way to deal with the situations, which we are going to encounter in
future. It involves logical thinking and rational decision making.

Planning involves defining the organizational goals, establishing an overall strategy, and developing a
comprehensive set of plans to integrate and coordinate work in an org.

Planning is the basic function by which we use to select our goals and objectives and make plans to
achieve them. A large amount of data and information has to be gathered and processed before a plan
is formulated.

To understand the concept of planning, we have to know the meaning of two words;

Planning and Plan.

These two words are similar but their meanings are different. There is a fundamental difference
between planning and plan.

Planning is an activity. It can be considered as consisting of a process, there are various sub-activities
in the planning process. On the other hand,

A Plan is a commitment to a particular course of action that is necessary to achieve specific results.

Koontz and O’ Donnell say planning is deciding in advance what to do, how and when to do it and
who is to do it. Planning bridges the gap between where we are and where we want to go. It makes it
possible for things to happen which would, but for planning, not happen.

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Fixing Objectives and Deciding Plans to Achieve them:

Theo Haimann calls planning as the function that determines in advance what should be done. It begins
with selection of organization objectives; the manager must decide which of the alternative plans to
achieve the objectives are to be followed and executed. Planning is intellectual in nature. It is mental
work. It is looking ahead and preparing for the future.
McFarland describes planning as a concept of executive action that embodies the skills of anticipating,
influencing and controlling the nature and direction of change.
A plan is a commitment to particular course of action whereas planning is an activity consisting of a
process. In the words of Haiman, “Planning is the function that determines in advance what should be
done. It consists of selecting the enterprise objectives, policies, programmes, procedures and other
means of achieving these objectives”.
In the words of Hart planning is, “The determination in advance of a line of action by which certain
results are to be achieved”, Kuntz and O’Donnell defines planning as – “The selection from among
alternatives for future courses of action for the enterprise as a whole and each department with it”. In
the words of M.F. Yarlay, “Planning is deciding in advance what is to be done. It involves the selection
of objectives, policies, procedures and programmes from among alternatives.”
Planning is a process requiring the selection of a course of action. The ways and means required to
achieve organisational goals form the essential part of planning.

2. Concept and Nature

An organization can be successful in effective utilization of its human financial and material resources
only when its management decides in advance its objectives, and methods of achieving them. Without
it purposive and coordinated effort is not possible, and what results are chaos, confusion and wastage
of resources.
Planning involves determination of objectives of the business, formation of programmes and courses of
action for their attainment, development of schedules and timings of action and assignment of
responsibilities for their implementation. Planning thus precedes all efforts and action, as it is the plans
and programmes that determine the kind of decisions and activities required for the attainment of the
desired goals.

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It lies at the basis of all other managerial functions including organizing, staffing, directing and
controlling. In the absence of planning, it will be impossible to decide what activities are required, how
they should be combined into jobs and departments, who will be responsible for what kind of decisions
and actions, and how various decisions and activities are to be coordinated.
And, in the absence of organizing involving the above managerial activities, staffing cannot proceed,
and directing cannot be exercised. Planning is also an essential prerequisite for the performance of
control function, as it provides criteria for evaluating performance. Planning thus precedes all
managerial functions.
Nature of Planning:
Planning permits co-ordinated effort towards the attainment of predetermined objectives. It helps the
manager to shape the organisation’s future. Thus, the purpose of planning is to provide rationality to
the organisation. According to Lyndal Urwlck’s principle of objective, all actions in the organisation
must be directed towards the attainment of the enterprise’s objectives, and a wisely-conceived plan
facilitates just this.
Planning is a function of every manager. Every manager plans, irrespective of the level at which he
operates in the organisation. From the managing director down to the first-line supervisor — all plan in
an organisation, although the breadth and scope vary with the level of the hierarchy.
Planning, controlling, organising, staffing and directing all these are managerial functions designed to
realise the organisational objectives. Planning, however, precedes all other functions. It is through
planning alone that the manager decides what to do, when to do and who will do. Planning and control
go together. No doubt, planning and control are like the Siamese twins — one cannot survive without
the other. However, one cannot control what is not planned without predictability.

3. Characteristics of Planning

The following are Important characteristics of planning:

 Planning is looking into the future.
 Planning involves pre-determined line of action.
 Planning discovers the best alternative out of available many alternatives.
 Planning requires considerable time for implementation.
 Planning is a continuous process.

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 Planning’s object is to achieve pre-determined objectives in a better way.
 Planning integrates various activities of organisation.
 Planning is done for a specific period.
 Planning not only selects the objectives but also develops policies, programmes and
procedures to achieve the objectives.
 Planning is required at all levels of management.
 Planning is an inter-dependent process which co-ordinates the various business activities.
 Planning directs the members of the organisation.
 Growth and prosperity of any organisation depends upon planning.

4. Objectives of Planning

Planning in any organisation serves to realise the following objectives:

i. Reduces uncertainty – Future is an uncertainty. Planning may convert the uncertainty into
certainty. This is possible to some extent by, planning which is necessary to reduce uncertainty.
ii. Brings co-operation and co-ordination – Planning can bring co-operation and co-ordination
among various sections of the organisation. The rivalries and conflicts among departments
could be avoided through planning. Besides, planning avoids duplication of work.
iii. Economy in operation – Planning selects best alternatives among various available alternatives.
This will lead to the best utilisation of resources. The objectives of the organisation are
achieved easily.
iv. Anticipates unpredictable contingencies – Some events could not be predicted. These events are
termed as contingencies. These events may affect the smooth functioning of an enterprise. The
planning provides a provision to meet such contingencies and tackle them successfully.
v. Achieving the pre-determined goals – Planning activities are aimed at achieving the objectives
of the enterprise. The timely achievements of objectives are possible only through effective
planning.
vi. Reduce competition – The existence of competition enables the enterprise to get a chance for
growth. At the same time, stiff competition should be avoided. It is possible, to reduce
competition through planning.

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5. Steps to Make Plans Effective

Step 1: Create Suitable In-House Systems:

Management should create a system that facilitates planning. All conceivable hurdles to planning
should be foreseen, analyzed and action-plans should be prepared in advance. Managers at all levels
should be instructed to plan their goals and activities in consultation with their respective subordinates
and provided technological and financial resources to accomplish them.

Step 2: Encourage Wider Participation in Planning:

While long-term planning for the organization should be undertaken by owners and top management,
its implementation will be in the hands of middle and lower-level managers. In fact, the most effective
way to plan for the organization is to leave it to the middle and lower managers to devise own plans for
their areas of activity to translate the organizational plans into reality. It will be still better if they too
involve their subordinates in decision-making.
Participation by subordinates may be made possible through various ways, such as (a) Management by
objectives, under which goals at each level of activity are established by managers and workers
together; (b) Formation of planning committees at various levels, which may be made responsible for
providing planning information, inviting suggestions and reaction from subordinate managers in
respect of planning and formulation of plans; and (c) Grass-root budgeting, under which every unit
within the organization prepares its own performance budget and sends it to its superior for incorpo-
ration in the overall budget.

Step 3: Ensure Effective Communication of Planning Information:

The organization should have an effective network to communicate all the information that is relevant
to planning of the goals at every level. This should include specific and clear information regarding
organizational policies, strategies, resource availability, and so on.

Step 4: Integrate Long-Term and Short-Term Plans:

Long-term plans are split into several short-term plans to make for easy implementation. However,
they need to be effectively integrated to achieve accomplishment of both.

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Step 5: Make Plans Flexible and Alterable:

Planning must provide for occurrence of unforeseen events, whether inside or outside the organization.
Therefore, each plan should be flexible enough to be modified and altered in the light of new devel -
opments. To this end, alternative plans and contingency strategies should be formulated in advance.

6. Important Measures for Making Planning Effective

After identifying the essential features of a sound plan, managers can adopt various measures to make
their planning exercise effective.
These measures are as follows:
 Initiative at Top Level:
Planning can be effective only when it is initiated at top management level. Role of top management in
planning is quite unique because overall organizational objectives are set at this level. These objectives
provide base for undertaking planning organization-wide. If objectives have been defined properly,
other steps of planning become comparatively easier.
 Establishing Climate for Planning:
Organization should create a climate in which every person takes planning action. Every superior
manager should present facilities for planning and remove its obstacles. This can be done by
establishing and communicating planning premises, involving all managers in planning process,
reviewing subordinates’ plans and their performance, and ensuring that managers have appropriate
staff assistance and information.
 Participation in Planning Process:
No doubt, top management can initiate planning process by providing objectives and planning
premises, effective planning can take place by the participation of sub-ordinate managers. Planning is
likely to be effective when managers are given opportunities to contribute to plans affecting their areas
of operations, sharing relevant information with them, and encouraging them to give their suggestions
and incorporating worthwhile suggestions in planning process. Participation in planning by managers
leads to their commitment to plan and enthusiasm to implement it.
 Integration of Long-Term and Short-Term Plans:
To be effective, it is necessary that both long-term and short-term plans are fully integrated in which
short-term plans should be taken as means for contributing to long-term plans. If managers emphasize
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only short-term plans, they cannot set direction for their future course of action. Long-term and short-
term plans can best be integrated if the latter is prepared in the light of the former. Similarly, if the
long-term plans are prepared keeping in view what the organization can implement by way of its short-
term plans, integration between the two can be achieved easily.
 An Open System Approach:
Planning can be made effective by taking it as an open system approach. It suggests that managers
must take into account total environment in every aspect of planning. Objectives, the starting point in
planning, should be set taking into account the various environmental forces; planning premises
represent a clear recognition that plans cannot be formulated in vacuum; plan formulation is a process
involving analysis of large number of variables. This fact should be recognized in the planning
process. Therefore, it should not be taken as a simple process, but the process of many interactions and
influences.

7. Types of Planning
There are various types of planning (also known as scope of planning). These are identified on
different dimensions which are as follows:
a. Coverage of activities: Corporate planning and functional planning
b. Importance of contents: Strategic planning and operational planning
c. Time period involved: Long-term planning and short-term planning
The above classification of types of planning is not mutually exclusive but iterative. For example,
strategic planning tends to have long-term orientation while operational planning has short-term
orientation. Further, the basic process of planning remains same in these types of planning though level
of complexity of different steps in different types of planning may vary. For example, steps involved in
strategic planning are more complex as compared to operational planning.
Let us discuss different types of planning:
1.1.1.1 Type # 1: Corporate Planning and Functional Planning:
Planning activity is pervasive and can be undertaken at various levels of an organization. It may be for
the organization as a whole or for its different functions. Thus, based on the coverage of activities,
there may be planning for the organization as a whole, known as corporate planning or for its different
functions, known as functional planning.
i. Corporate Planning:

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Corporate planning is undertaken at the top level, also known as corporate level, and covers the entire
organizational activities. It is of integrative nature and integrates entire planning process of the
organization. The basic focus of corporate planning is to determine the long- term objectives of the
organization as a whole and to generate plans to achieve these objectives bearing in mind the probable
changes in the environment. Corporate planning, generally, has long-term orientation and provides
basis for functional planning.
ii. Functional Planning:
Functional planning is of segmental nature and is undertaken for each major function of the
organization like production/operations, marketing, finance, human resource, etc. At the second level,
functional planning is undertaken for sub-functions within each major function. For example,
marketing planning is undertaken at the level of marketing department and to put marketing plan in
action, planning at sub-functions of marketing like sales, product promotion, marketing research, etc. is
undertaken.
A basic feature of functional planning is that it is derived out of corporate planning and, therefore, it
should contribute to the latter. This contribution is achieved by integrating and coordinating functional
planning with corporate planning.
1.1.1.2 Type # 2: Strategic Planning and Operational Planning:
On the basis of importance of contents, planning may be divided into Strategic planning and
Operational planning.
i. Strategic Planning:
Strategic planning involves setting long-term direction of the organization in which it wants to proceed
in future. It is the process of deciding long-term objectives of the organization and defining where the
organizational resources and efforts should be put to achieve organizational objectives.
Strategic planning deals with strategic issues like type of business to be undertaken, diversification of
business into new lines, type of products to be offered, and so on. This way, strategic planning
encompasses all the functional areas of business and is effected within the existing and long-term
framework of environmental factors. Strategic planning also involves rigourous analysis of various
environmental factors to relate the organization relates to its environment.
ii. Operational Planning:

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Operational planning, also known as tactical planning, is the process of deciding the most effective use
of the resources already allocated though strategic planning and to develop a control mechanism to
ensure effective implementation of the actions so that organizational objectives are achieved.
Usually operational planning covers one year or so. It aims at sustaining the organization in its
production/generation and distribution of current products (goods and services) to the existing markets.
Operational planning answers the questions about a particular action as follows:
a. Why is the action required?
b. What action is to be taken?
c. What will the action accomplish?
d. What are the likely results of the action?
e. What conditions must be met in putting the action in operation?
Operational planning is undertaken within the framework of the strategic planning. Examples of
operational planning are adjustment of production within given capacity, increasing the efficiency of
operating activities through analysis of past performance, budgeting future costs, specific details of
future short-term operations, and so on.
Difference between Strategic Planning and Operational Planning:
Apart from the period of time involved in strategic planning and operational planning, there are certain
differences between the two.
The major differences between the two are as follows:
 Range of Choice:
Strategic planning guides the choice among the broad directions in which the organization seeks to
move and allocation of its financial, physical, and human resources over future specified period of
time. Operational planning, on the other hand, focuses on the ways and means in which each of the
individual functions may be programmed so that progress may be made towards the attainment of
organizational objectives.
 Type of Environment:
The type of environment for two types of planning is different. Strategic planning takes into account
the external environment and tries to relate the organization with it. The nature of external
environment, thus, is of prime concern of strategic planners. Operational planning mostly focuses on
internal organizational environment so as to make the effective use of given resources.
 Focus:

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Strategic planning focuses on setting long-term trend and direction for managerial actions. Focus of
operational planning is on making effective use of organizational resources allocated by strategic
planning process.
 Sequence of Formulation:
Strategic planning precedes operational planning and the latter is primarily concerned with the
implementation of the former. Therefore, operational planning is based on strategic planning.
 Level of Formulation:
Strategic planning is formulated by top-level management with the support of specified planning staff
in the organization. At this level, managers can take overall view of the organization and have
necessary capability to relate the organization with its environment. Operational planning is usually
spread over a wide range within the organization and is generally performed by operating managers
with the help of the subordinate staff.
1.1.1.3 Type # 3:. Long-Term Planning and Short-Term Planning:
Planning is concerned with future course of action. This may be of long term or short term. Thus, there
are long-term planning and short-term planning.
i. Long-Term Planning:
Long-term planning is of strategic nature and involves more than one year period, usually 3- 5 years
though period of 5 years is more common in Indian context. Long-term planning usually covers all the
functional areas of the business and is undertaken within the existing and long-term future
environmental scenario. In the long-term planning process, high emphasis is placed on analysis of
environmental factors.
Sometimes, basic changes in the organization like change in organizational vision and mission, major
change in organization structure, change in key personnel of the organization, etc. become the
significant factor for long-term planning.
ii. Short-Term Planning:
Short-term planning usually covers one year. This aims at making effective use of organizational
resources — financial, physical, and human resources. Short-term planning directly and immediately
affects functional areas — production, marketing, finance, etc.
Coordination of Short-Term Planning and Long-Term Planning:
In fact, in a successful planning process, short-term plans are made with reference to long-term plans
because short- term plans contribute to long-term plans. As such, there is a need for coordination

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between these two plans. While preparing the short-term plans, the managers should consider that they
Eire contributing to the long-term plains.
For this purpose, they should scrutinize the former in the light of the latter. People at comparatively
lower levels should also be made aware of this fact. Sometimes, the short-term plans do not contribute
to long-term plans, though they may contribute to achieve immediate organizational objectives, for
example, cutting cost of research and development to show higher profitability. This type of problem
may be overcome by coordination in short-term planning and long-term planning.

8. Important Principles of Planning

Planning is a rational approach. It is usually characterized by choosing appropriate means for desired
results.

To make planning effective, it is supported by important principles:

1. Principle of Contribution to Objectives – Managerial planning facilitates the realization of

organizational objectives. A plan should be prepared and put into operation to contribute to the
achievement of organizational objectives. Plans only seek to achieve pre-determined goals by
meshing long-term plans and short-term plans.
2. Principles of Limiting Factors – Managerial planning must take into account the limiting factors
and managers must concentrate on them while developing plans and their components.
Organizations have limited resources to achieve the objectives and these constraints must be
considered by the management.
3. Principle of Flexibility – The principle of flexibility states that management should be able to
change an existing plan because of change in environment. Planning should be flexible enough to
incorporate unforeseen future events as the organization is an open system and it interacts with the
external environment.
When some types of changes take place in the external environment, this forces the organization
to change their strategies, when managers take all these into account, they will be in a position to
incorporate these in future, they are in a better position to plan and execute their action.

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4. Principles of Navigational Change – This principle is based on a Navigator’s example of
checking periodically where his ship is going in the vast ocean, whether his ship is following the
right direction as scheduled.
Similarly, a manger, like a navigator, should constantly check his plans that these are proceeding
in the right way, and if these are proceeding in the right way; what type of actions are required to
achieve the desired objectives of the organization. They should change the direction of plans to
achieve the pre-determined targets.
5. Principles of Commitment – Principle of commitment helps in determining the length of the
planning period. Planning should cover a time frame taking into account the future risk and
fulfillment of commitments.
6. Principle of Primary of Planning – Planning is the basic and primary function of management
process. Planning precedes all other managerial functions. Every function and activity of an
organization basically depends upon planning. It is planning that provides the area of
implementation. Other managerial functions have to follow planning. So managers should devote
their attention to make an effective planning premise.

9. Categories and Levels of Planning

Planning can be classified on different bases, which are discussed below:

1. Strategic and Functional Planning:
In strategic or corporate planning, the top management determines the general objectives of the
enterprise and the steps necessary to accomplish them in the light of resources currently available and
likely to be available in the future. Functional planning, on the other hand, is planning that covers
functional areas like production, marketing, finance and purchasing.
2. Long-Range and Short-Range Planning:
Long-range planning sets long-term goals of the enterprise and then proceeds to formulate specific
plans for attaining these goals. It involves an attempt to anticipate, analyze and make decisions about
basic problems and issues which have significance reaching well beyond the present operating horizon
of the enterprise.

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Short-range planning, on the other hand, is concerned with the determination of short-term activities to
accomplish long-term objectives. Short-range planning relates to a relatively short period and has to be
consistent with the long-range plans. Operational plans are generally related to short periods.
3. Ad Hoc and Standing Planning:
Ad hoc planning committees may be constituted for certain specific matters, as for instance, for project
planning. But standing plans are designed to be used over and over again. They include organizational
structure, standard procedures, standard methods, etc.
4. Administrative and Operational Planning:
Administrative planning is done by the middle level management, which provides the foundation for
operative plans. The lower level managers to put the administrative plans into action, on the other
hand, do operative planning.
5. Physical Planning:
It is concerned with the physical location and arrangement of building and equipment.
6. Formal and Informal Planning:
Various types of planning discussed above are of formal nature. The management carries them on
systematically. They specify in black and white the specific goals and the steps to achieve them. They
also facilitate the installation of internal control systems. Informal planning, on the other hand, is mere
thinking by some individuals, which may become the basis of formal planning in future.

10. Need for Planning

Planning is the first step in management. The increasing complexities of business, technological
changes, increasing marketing competition, changing consumer preferences have necessitated proper
planning.

Following reasons emphasise the need for planning:

1. Essential for Modern Business:

The growing complexities of modern business, rapid technological changes, opening of economies to
international competition, changes in consumer tastes necessitate planning not only in the current
context but also in the future environment. Planning has a future outlook and it takes into account all
possible future developments.

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2. Related to Performance:
Planning helps in setting goals for each function and for each employee. The concerns having formal
planning have performed better as compared to those where planning is not taken up as a regular
activity. The variables for assessing performance may be return on investment, sales target, earning per
share etc. Studies have proved that planning has been an instrument in improved performance.
3. Focus on Objectives:
The thrust of formal planning is on setting objectives and providing guidelines for reaching them.
Objectives provide a direction and all planning decisions are directed towards achieving them. It
ensures maximum utilisation of managerial time and efforts.
4. Proper Allocation of Resources:
The needs of the organisation are anticipated with the help of planning. The acquisition and allocation
of resources can be properly planned thus minimising wastages and ensuring optimal utility of these
resources.
5. Facilitates Control:
Planning can be used to devise a mechanism of control. There can be quantitative targets and their
comparison with actual performance can bring to notice any deviations. A periodical review can also
help in pointing out low performance. The deviations in production, sales, profits etc., may come to
light during periodic investigations and remedial action can be taken.
6. Helpful in Decision making:
Planning is helpful in the process of decision-making. Since planning helps in specifying the actions to
be taken for achieving organisational objectives, it serves as a basis for decision-making for the future.
The objectives, plans, policies, schedules, rules etc., serve as guidelines for routine decision making.
7. Avoiding Business Failures:
Business failures may be due to wrong and unscientific planning. A bad planning may result into
wastage of human and physical resources. The enterprise may not be able to face competition from
well-planned units. Good planning will help in utilising available resources in a best possible way thus
reducing the chances of failures.

11. Components of Planning

The ingredients of planning are as follows:

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1. Objectives:
The activity in the organisation is directed to its objectives. Corporate objectives are framed for the
organisation as a whole. In consonance with these objectives, departmental objectives are framed.
2. Policies:
Objectives determine the ‘what-to-do’ aspect for the persons in the organisation, while policies tell
‘how-to-do’ aspect. Policy statements present broad guidelines for the executives. We should purchase
our raw materials from the local dealers only. This is policy statement of the purchase department.
All promotions should be from within the organisation. All bills must be collected within 30 days.
These are examples of policy statements. They prove to be solutions for recurring problems. We
should make clear our policies to our employees and the logic behind our policies. Then the employees
will enthusiastically carry-out the policies.
3. Procedures:
Policy statements are broad guidelines. While implementing them a detailed step-by-step routine is
necessary. It is called procedure. Procedure the mechanical part of policy implementation. We should
collect our bills within 30 days is a policy statement. Now it is for those who execute this policy to set
a procedure for its implementation. Who shall write to the debtor? How? How many times? What is
the final action?
Who shall approach him personally for collection? These are the procedural aspects. Procedures are
different for different levels in the organisation. They also charge from department-to-department, and
from policy- to-policy. Procedure can exist without planning, but planning cannot exist without
procedure.
4. Rules:
Rules is the ultimate analysis of a plan. It is the simplest possible version of the plan as it directs a
particular activity in a particular way, and prevents us doing a particular activity in a particular way.
Procedure and rules are different in the sense that procedure is a routinized step-by-step arrangement,
whereas rule has no order. ‘Do not smoke in factory premises’ is a rule, but ‘how to requisition goods
from the stores’ is a procedure.
5. Budgets:
Budget is also a plan where estimated results are shown in terms of money. Budget is a very important
tool for planning in many organisations, though it is also a tool of control budget fails as a control

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device if there is no plan to compare the actuals against the estimated figures. Budget is a device for
cost control also.
6. Programmes:
Programme is the composite of many small plans, where each plan contributes to the objective of the
overall plan called programme. Sales campaign with the objective of increasing sales by 25% is a
programme.
It is made up of several small plans — promotion through advertising, promotion through salesmen,
promotion through dealers, promotion through direct mailing. Each small plan contributes to overall
objective of the programme, till it climaxes into the desired level of sales increase.
7. Strategies:
Strategy means tactical planning in competitive environment. We should plan not in isolation, but in
keeping with the forces of external environment — our suppliers, our customers, government and
competitors. There is inherent resistance to change, and so strategical plans are also plans that invite
least resistance of our employees.
The plan should have lesser obstacles from competitors also, and so a strategic approach towards
planning is necessary. Even the process of selecting one out of several alternatives available is a
strategic process.

12. Steps Involved in Planning

1. Gathering Information:
The first step in planning is the gathering of information, i.e., relevant facts and figures. In fact, before
objectives are formulated and ways and means to achieve them are developed, it is important for the
manager to have relevant information.
Thus, a company constantly asks itself questions like:
 Who are our customers?
 Why?
 Under what circumstances does a customer become a non-customer?
 What are the functions and values of our product to our customers?
 What is our main strength?
 Are we making the product or selling it?

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Answers to such questions provide vital information based on which the company sets itself realistic
objectives and seeks the most promising courses of action to achieve them. McGraw-Hill which is in
the publishing business, for instance, may decide to publish fiction. But before it can plan its activities,
it would need specific information such as the reading habit, the buying capacity, the level of
education, etc. of its customers. Only then can realistic plans be drawn.
2. Identifying and Studying Vital Factors Affecting the Company’s Growth and Efficiency:
Just as the most scientifically-prepared manpower inventory is of little use to a company unless
manpower audit is carried out to project the trend, a company having information may not be able to
plan its future activities unless it identifies and makes a careful study of the factors which may limit a
company’s growth and efficiency.
In fact, an organization which behaves in scientific planning does involve itself in such an exercise. It
constantly seeks to find out its strengths and weaknesses, where the opportunities exist and what could
be regarded as potential threats to the company’s survival and growth.
3. Laying Down Plan Objectives:
Objective-formulation is the third logical step in the planning process. Objectives specify the end
results which a plan seeks to achieve and determine as to what is to be achieved by the complex of
policies, rules, programmes and procedures. Objectives should be formulated at every level. From
the corporate objectives emerge the unit-level objectives.
4. Determining and Evaluation of Action Patterns:
The next step in planning obviously is to find out the various courses of action that are available for the
accomplishment of the plan objectives.
Of course, several alternatives may be available to realize the plan but what is important is to narrow
down the number of alternatives available and then to select the most promising courses of action.
Herein lies the task of evaluating the courses of action against the plan objectives and the planning
assumptions before the final choice is made.
5. Selection of a Course of Action:
The fifth step in planning is to select the best course of action. The evaluation of various courses of
action would reveal that of the different alternatives available, one or two prove to be the most suitable
for the accomplishment of the plan objectives.
6. Setting up of a Timetable:

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Setting up of a timetable is as important as any other step in planning. Though not often mentioned in
the textbooks on management, its importance need hardly be emphasized. Today, constantly an
enterprise operates in an environment which is highly dynamic and changing.
Thus, when the future is uncertain, it is important to determine in advance the plan period. No plan
period should be longer than what is economically desirable. On the other hand, the plan period should
not be too short. Hence, the manager must ensure that the plan period is long enough to enforce,
through a series of actions, the fulfillment of commitments involved in a decision.
As elusive as this may be, this perhaps is the only realistic standard available. The plan period thus
must take into account certain factors such as- (i) lead time, (ii) length of time required to recover the
capital funds invested in plant and equipment and in training personnel, (iii) expected future
availability of customers, and (iv) expected future availability of raw materials and components.

13. Advantages of Planning

Planning is one of the crucial functions of management. It is basic to all other functions of
management. There will not be proper organization and direction without proper planning. It states the
goals and means of achieving them.

Above all other things, planning is important for the following reasons:

1. Facing Complexities of Modern Business:

The business is becoming more and more complex. There is a globalization of business, competition is
increasing, and constant need for creativity and many more issues crop up in day to day working.
There is a constant need to plan the things to face complex situations. Planning helps as a tool in
anticipating emerging business situations and suggesting ways to take advantage from it. Planning
helps a businessman to face emerging situations in a systematic way.
2. Forewarn against Business Failures:
Business failures may be due to wrong and unscientific planning. A bad planning may cause wastage
of resources and loss of opportunities. The business may fail to face competition from efficiently run
units. The indications of future failures will be visible from the current situation. Better planning and
proper implementation will be able to save the business from failures.
3. Attention on Objectives:

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Planning helps in clearly laying down objectives of the organization. The whole attention of
management is given towards the achievement of those objectives. There can be priorities in
objectives, important objectives to be taken up first and others to be followed after them.
4. Minimizing Uncertainties:
Planning is always done for the future. Nobody can predict accurately what is going to happen.
Business environments are always changing. Planning is an effort to foresee the future and plan the
things in a best possible way. Planning certainly minimizes future uncertainties by basing its decisions
on past experiences and present situations.
5. Better Utilization of Resources:
Another advantage of planning is the better utilisation of resources of the business. All the resources
are first identified and then operations are planned. All resources are put to best possible uses.

6. Economy in Operations:
The objectives are determined first and then best possible course of action is selected for achieving
these objectives. The operations selected being better among possible alternatives, there is an economy
in operations. The method of trial and error is avoided and resources are not wasted in making choices.
The economy is possible in all departments whether production, sales, purchases, finances, etc.
7. Better Co-Ordination:
The objectives of the organisation being common, all efforts are made to achieve these objectives by a
concerted effort of all. The duplication in efforts is avoided. Planning will lead to better co-ordination
in the organisation which will ultimately lead to better results.
8. Encourages Innovations and Creativity:
A better planning system should encourage managers to devise new ways of doing the things. It helps
innovative and creative thinking among managers because they will think of many new things while
planning. It is a process which will provide awareness for individual participation and will encourage
an atmosphere of frankness which will help in achieving better results.
9. Management by Exception Possible:
Management by exception means that management should not be involved in each and every activity.
If the things are going well then there should be nothing to worry and management should intervene
only when things are not going as per planning.

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Planning fixes objectives of the organisation and all efforts should be made to achieve these objectives.
Management should interfere only when things are not going well. By the introduction of management
by exception, managers are given more time for planning the activities rather than wasting their time in
directing day-to-day work.
10. Facilitates Control:
Planning and control are inseparable. Planning helps in setting objectives and laying down
performance standards. This will enable the management to check performance of subordinates. The
deviations in performance can be rectified at the earliest by taking remedial measures.

14. Limitations of Planning:

Planning has some limitations, though most of the limitations are related with the uncertainties of the
future. The reasons why people fail in it, planning emphasize the practical difficulties encountered in
planning.
Efficient planning is not an easy task. Managers encounter various barriers in making and
implementing plans despite the primacy of management process. Managers should develop awareness
of these limitations.

The major limitations are described below:

1. Lack of Accurate Information:

Planning involves forecasting and future is quite uncertain and complex and loses its value if
information is not accurate. Planning concerns future activity and quality of information determines the
basic output of planning. Sometimes, managers do not know how to use the information efficiently; in
that case planning may pose problems in operations.
2. Resistance to Change:
Resistance to change is another factor which puts limits on planning. Most people resist change due to
fear of failure and uncertainty. However, planning changes the attitude of people to make planning
more effective. Planning gives a false sense of security to the people in the organization.
3. Inflexibility:
Planning gives the spectrum of every activities and generally planning results in rigidity in the internal
working of the organization. Managers are required to follow the procedures rigidly. Internal

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inflexibilities that may limit planning are related to human psychology, organizational policies and
procedures, and long-term capital investment.
Beside this, managers are confronted with much external inflexibility, and they do not have control
over men. These factors are social, legal, technological, etc. The managers have to formulate their
plans keeping in view the demand of these factors. Thus, their scope of action is limited for planning
effectively in many cases.
4. Inadequate Planning:
There are many reasons why people fail in planning, both at the formulation level as well as
implementation level. Some of the drawbacks are lack of commitment to planning, ambiguous
objective, tendency to overlook planning premises, reliance on past happenings, lack of management
support, lack of controlling techniques and resistance to change, etc. These factors are responsible for
either inadequate planning or wrong planning in the concerned organizations.
5. Time and Cost Factors:
Time and cost factors are considered as real limitations to planning. Managers should also take into
account both time and cost factors. Planning suffers because of time and cost factors. Time is a
limiting factor for every manager in the organization, because enough time may not be available to go
through the entire planning process.
The Planning involves cost on the part of the organization. Costs increase in planning if it becomes
more detailed. Thus, planning cannot be undertaken beyond a certain limit, but it must justify its costs.
With regard to cost, it should not be, in any situation, more than the value of planning or benefits
derived from it.
Often, the philosophy of management may also impede the process of planning. Once the managers
become accustomed to a particular philosophy continued over a long period of time, it tends to impose
internal inflexibility limitations to planning.
The various factors analyzed above contribute to the limitations of planning either making planning
ineffective or making lesser degree of planned work. However, it should be recognized and accepted
that planning is essential, and managers must take steps to make it more effective.

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