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CHAPTER-4 PLANNING
KEY WORDS OF BUSINESS STUDIES
1 Planning Deciding in advance what to do and how to do.
2 Planning It seeks to bridge the gap between where we are and where we want to go.
3 Planning Setting objectives and developing appropriate courses of action to achieve these
objectives.
4 Planning provides directions It ensures that the goals or objectives are clearly stated so that they
act as a guide for deciding what action should be taken and in which direction.
5 Planning reduces the risks of uncertainty By deciding in advance the tasks to be performed,
planning shows the way to deal with changes and uncertain events.
6 Planning reduces overlapping and wasteful activities Since planning ensures clarity in thought and
action, work is carried on smoothly without interruptions. Useless and redundant activities are
minimised or eliminated.
7 Planning promotes innovative ideas New ideas can take the shape of concrete plans.
8 Planning facilitates decision making Planning helps the manager to look into the future and make
a choice from amongst various alternative courses of action.
9 Planning is a primary function of management Planning lays down the base for other functions of
management.
10 Planning is pervasive Planning is required at all levels of management as well as in all
departments of the organisation.
11 Planning is continuous A plan is framed, it is implemented and is followed by another plan.
12 Planning is futuristic Planning essentially involves looking ahead and preparing for the future.
13 Planning involves decision making Planning involves thorough examination and evaluation of
each alternative and choosing the most appropriate one.
14 Planning is a mental exercise Planning requires application of the mind involving foresight,
Intelligent imagination and sound judgment.
15 Planning leads to rigidity Plans decide the future course of action and managers may not be in a
position to change
16 Planning may not work in a dynamic environment Planning cannot foresee everything and thus,
there may be obstacles to effective planning.
17 Planning reduces creativity Decision makers are neither allowed to deviate from plans nor are
they permitted to act on their own.
18 Planning is a time consuming process Sometimes plans to be drawn up take so much of time that
there is not much time left for their implementation.
19 Planning does not guarantee success It is not always true that just because a plan has worked
before it will work again.
20 Developing Premises The manager is required to make certain assumptions about the future.
21 Evaluating Alternative Courses To weigh the pros and cons of each alternative.
22 Identifying Alternative Courses of Action There may be many ways to act and achieve objectives
23 Selecting an Alternative The best plan has to be adopted and implemented.
24 Implementing the Plan Putting the plan into action.
25 Follow-up Action To see whether plans are being implemented and activities are performed
according to schedule.
26 Single-use Plan A plan that is developed for a one-time event or project.
27 Standing Plan A plan that is used for activities that occur regularly over a period of time.
28 Objectives The desired future position that the management would like to reach.
29 Strategy Future decisions defining the organizations direction and scope in the long run.
30 Policy These are general statements that guide thinking or channelize energies towards a
particular direction.
31 Procedure These are routine steps on how to carry out activities.
32 Method These provide the prescribed ways or manner in which a task has to be performed
considering the objective.
33 Rule Specific statements that inform what is to be done.
34 Programme Detailed statements about a project which outlines the objectives, policies,
procedures, rules, tasks, human and physical resources required and the budget to implement any
course of action.
35 Budget A statement of expected results expressed in numerical terms.
NOTES
Planning can be defined as “thinking in advance what is to be done, when it is to be done, how it is
to be done and by whom it should be done.”
According to Fayol, “Planning is chalking out a plan of action, i.e., the result envisaged in the line of
action to be followed, the stages to go through the methods to use.”
IMPORTANCE OF PLANNING:
● Planning Provides Directions: Planning provides the directions to the efforts of employees.
Planning makes clear what employees have to do, how to do etc.
● Planning Reduces the Risk Uncertainty: Planning helps the manager to face the uncertainty
because planners try to force the future by making some assumptions. The plans are made to
overcome uncertainties.
● Planning Reduces Overlapping and Wasteful Activities: Planning evaluates the alternatives uses of
the available and prospective resources of the business and makes their most appropriate use.
● Planning Promotes Innovative Ideas: Planning requires high thinking and it is an intellectual
process. So it makes the managers innovative and creative.
● Planning Facilitates Decision Making: Planning helps the managers to look into the future and
make a choice from amongst various alternative courses of action.
● Planning Establishes Standards for Controlling: It has a predetermined goal with which the actual
performances are compared to find out deviation and suggest remedial measures.
FEATURES OF PLANNING:
● Planning Focuses on Achieving Objectives: Organizations are formed with a certain goal in mind.
The goals, general and specific as well as the strategies and activities to attain these goals, are
established by organizations under the planning function.
● Planning is a Primary Function of Management: Planning lays the groundwork for all other
management tasks, without planning no other function can take place.
● Planning is Pervasive: Planning is required in all types of organizations, at all the levels of
management, as well as all the departments within the organization. Though at different levels and
for different departments, the extent of planning varies.
● Planning is Continuous: The planning cycle is linked to planning continuity. It indicates that a
strategy is devised, implemented, and then followed by another strategy, and so on. Hence planning
keeps on going, and is a never ending process.
● Planning is Futuristic: The goal of planning is to efficiently meet future occurrences to an
organization's benefit. Planning entails predicting future events and situations and making plans
based on those predictions.
● Planning Involves Decision Making: Choosing among a variety of options and activities is the
essence of planning. There is no need to plan if there is just one conceivable aim or course of action
because in that case no planning or decision making is required.
● Planning is a Mental Exercise: Planning necessitates the use of the mind and foresight. Rather than
guesswork, planning is an intellectual activity that necessitates logical and organized thought.
LIMITATIONS OF PLANNING:
● Planning leads to rigidity: Planning discourages an individual's initiative &creativity. The managers
do not make changes according to the changing business environment. They stop taking or giving
suggestions and new ideas. Thus detailed planning may create a rigid framework in the organization.
● Planning may not work in a dynamic environment: Planning is based on anticipation of future
happenings and since the future is uncertain and dynamic therefore, the future anticipations are not
always true.
● Planning involves huge costs: When plans are drawn up, huge costs are involved in their
formulation.
● Planning is time consuming: Sometimes plans to be drawn up take so much time that there is not
much time left for their implementation.
● Planning does not guarantee success: The success of an enterprise is possible only when plans are
properly drawn and implemented. Sometimes managers depend on previously tried successful plans,
but it is not always true that a plan which has worked before will work effectively again.
● Planning reduces creativity: In planning, work is to be done as per pre-determined plans. It is
decided in advance what is to be done, how it is to be done and who is going to do it. Moreover,
planning is done by top management which leads to reduction of creativity of other levels of
management.
PLANNING PROCESS
● Setting Objectives: In planning function managers begin with setting up objectives because all the
policies, procedures and methods are framed for achieving objectives only.
● Developing Premises: Premises refers to making assumptions regarding the future. The
assumptions are made on the basis of forecasting. Forecast is the technique of gathering
information.
● Identifying Alternative Courses of Action: After setting up objectives the managers make a list of
alternatives through which the organisation can achieve its objectives.
● Evaluating Alternative Courses: After making the list of various alternatives along with the
assumptions supporting them the manager starts evaluating each and every alternative.
● Selecting an Alternative: The best alternative is selected but as such there is no mathematical
formula to select the best alternative. Sometimes instead of selecting one alternative a combination
of different alternatives can also be selected.
● Implementing the Plan: This is the step where other managerial functions also come in to the
picture. The step is concerned with putting the plan into action i.e., doing what is required.
● Follow-up Action: Planning is a continuous process so the manager’s job does not get over simply
by putting the plan into action. The manager monitors the plan carefully while it is implemented.
TYPES OF PLAN
A plan is a commitment to taking a certain course of action to achieve specific goals. Depending on
the use and length of the planning period. Plans can be categorized into many types:
1 Single Use Plan:
A single-use plan is a set of instructions designed to handle a one-time only problem. It was created
for a one-time endeavour or event with a single goal in mind. A plan like this is made to satisfy the
requirements of a certain situation. A single usage plan's duration varies based on the type of
project; for example, a single event plan may last one day, but a single project may last one week or
months. Single-use plans can't be reused because they're no longer useful once they've
accomplished their goal. Budgets, programmes, project reports, and other documents are examples.
Types of Single Use Plan:
● Programme: A programme is a single use plan containing detailed statements about project
outlining the objectives, policies, procedures, rules, tasks, physical and human resources required to
implement any course of action.
● Budget: A budget is a statement of expected result expressed in numerical terms for a definite
period of time in the future.
2. Standing Plans:
Standing plans are used for actions that occur on a regular basis over time. It is created once and
retains its worth over time as it undergoes changes and upgrades. It is created once and then
adjusted as needed to satisfy business requirements. Policies, procedures, methods, and norms are
all part of the standing plans.
Types of Standing Plans:
● Objectives: Objectives are defined as ends for the achievement of which an organization goes on
working. They may be designed as the desired future position that the management would like to
reach. The first and foremost step of the planning process is setting organizational objectives.
Examples increasing sales by 10%, Getting 20% return on Investment etc. Objectives should be clear
and achievable.
● Strategy: Strategies refer to those plans which an organization prepares to face various situations,
threats and opportunities. When the managers of an organization prepare a new strategy for the
business it is called internal strategy and when some strategies are prepared to respond to the
strategies of the competitors, then such strategies are called external strategies. Examples, selection
of the medium of advertisement, selection of the channel of distribution etc.
● Policy: Policies refers to the general guidelines which brings uniformity in decision-making for
achievement of organizational objectives. They provide directions to the managers of an
organization. They are flexible as they may be changed as per requirement. Example, selling goods on
cash basis only, reserving some post for women in the organization.
● Procedure: Procedures are step-by-step instructions that specify how a task should be completed.
They specify which tasks should be completed in which order. In general, the sequence of actions to
be taken is to implement a policy and achieve predetermined goals. For example, a company's
recruitment procedure.
● Rule: Rules are specific statements that specify what should and should not be done in situations.
Rules are rigid and do not allow for flexibility, ensuring organizational discipline. For example,
‘Smoking is prohibited in the office.'
● Method: Methods describe the prescribed ways or manners in which a work can be completed
considering the goal. Choosing the right solution saves time, money, and effort while increasing
efficiency. The methods are adaptable. For example, numerous training methods used by an
organization to train its personnel, such as apprenticeship training, induction programmers, and so
on.
● Programme: A programme may include a complete list of project objectives, policies, processes,
regulations, tasks, and the physical and human resources needed to carry out any course of action.
● Budget: A budget is a numerical description of expected results for a specific time in the future. For
example, a sales budget, a production budget, research and development budget, master budget,
cash budget etc.
CASE STUDIES
Meaning: - Planning is deciding in advance what is to do, when and where is to do, how is to do & by
whom it should be done. It bridges the gap between where we are standing and where we want to
go.
Features of Planning Importance/Significance of Planning
Decision making Planning provides direction
Planning is pervasive Planning reduces the risk of uncertainties
Objective achievement Planning reduces overlapping and wasteful
activities
Planning is Futuristic Planning promotes innovative ideas
Planning is a mental exercise Planning facilitates decision-making
Planning is Primary function Planning establishes standard for controlling.
Planning Process/Steps involved in Planning:-
1. S- Setting Objectives
2. P-Developing Premises
3. I-Identifying alternative courses of Action
4. C-Evaluating alternative Courses
5. S-Selecting an Alternative
6. I-Implementing the Plan
7. F-Follow-up Action.
Limitations of Planning:
(a) No guarantee of success: For achieving success management hasto properly draw and implement
plans. Plans are required to be put into action. There is no guarantee that previously tried and tested
plans will lead to success.
(b) Planning involves huge cost: When plans are drawn, costs are involved in their formation in
terms of effort, time and money. The cost incurred sometimes may not justify the benefits derived
from the plans.
(c) Planning leads to rigidity: The plans are well defined and decide future course of action. Thus
managers may not be in a position to change them. Hence, there is rigidity and blind following of
plans.
(d) Planning may not work in a dynamic environment: Business environment is dynamic and
constantly adopt itself to these changes. It becomes difficult to make plans where policies of a
country and economic conditions are not stable.
(e) Time consuming process: planning is a blessing in facing a definite situation but because of its
long process, it cannot face sudden emergencies. Thus planning is time consuming and it delay
action.
(f) Planning reduces creativity: Middle level managers are not allowed to deviate from plans or act
on their own. They only carry out order which leads to reduction of creativity and new ideas in the
manager.
External Limitations of Planning
(a) Natural calamity
(b) Change in competitors policies
(c) Change in taste/fashion & trend in the market
(d) Change in technologies
(e) Change in government/ economic policy.
Plans: - Plans is a document that outlines how goals are going to be met. It is a specific action
proposed to help the organization to achieve its objectives.
(i) Single use plan: - These are one time use plan. These are designed to achieve a particular goal
that once achieved will not reoccur in future.
(ii) Standing plan: - These plans are also known as Repeat Use Plans. These plans focus on situations
which occur repeatedly.
Types of plan:-
(a) Objectives: Objectives are the end towards which the activities are directed. They are the end
result of every activity.
(b) Strategy: It is a comprehensive plan to achieve the organizational objectives.
(c) Policy: It can be defined as organization‘s general response to a particular problem or situation. In
simple words, it is the organization‘s own way of handling the problems.
(d) Procedures: Procedures are required steps established in advance to handle future conditions.
(e) Rules: Rules are norms regarding actions and non-actions of employees.
(f) Programme: Programmes are the combination of goals, policies, procedures and rules. All these
plans together form a programme.
(g) Methods: Methods are formalized way of doing routine and repetitive jobs.
(h) Budgets: It is the statement of expected result expressed in numerical terms.
Case Studies:
Question 1.
Super Fine Rice Ltd. has the largest share of 55% in the market. The company‘s policy is to sell only
for cash. In 2015, for the first time company‘s number one position in the industry has been
threatened because other companies started selling rice on credit* also. But the managers of Super
Fine Rice Ltd. continued to rely on its previously tried and tested successful plans which didn‘t work
because the environment is not static. This led to decline in sales of Super Fine Rice Ltd.
The above situation is indicating two limitations of planning which led to decline in it sales. Identify
these limitations.
Answer: The two limitations of planning which led to decline in it sales are:
* Planning does not guarantee success.
* Planning may not work in dynamic environment.
Question 2.
Suhasini, a home science graduate from a reputed college, has recently done a cookery course. She
wished to start her own venture with a goal to provide ‘health food‘ at reasonable prices. She
discussed her idea with her teacher (mentor) who encouraged her. After analysing various options
for starting her business venture, they short listed the option to sell readymade and ‘ready to make’
vegetable shakes and sattu milk shakes. Then, they weighed the pros and cons of both the short
listed options.
1. Name the function of management being discussed above and give any one of its characteristics.
2. Also briefly discuss any three limitations of the function discussed in the case.
Answer:
1. Planning is the function of management which is being discussed above. Planning involves
decision-making: Planning essentially involves application of rational thinking to choose the best
alternative among the various available alternatives in order to achieve the desired goals efficiently
and effectively.
2. The limitations of planning are described below:
(a) Planning may not work in a dynamic environment: The business environment is dynamic in
nature. Every organisation has to constantly adapt itself to changes in its environment in order to
survive and grow. However, it is difficult to anticipate all the likely future changes in the environment
with utmost accuracy. Hence, even with planning, everything cannot be foreseen.
(b) Planning reduces creativity: The top management undertakes planning of various activities
whereas the other members are expected to merely implement these plans. This restricts the
creativity of the middle level managers as they are neither allowed to deviate from plans nor are
they permitted to act on their own.
(c) Planning involves huge costs: The process of planning involves huge cost in terms of time and
money as detailed planning is based on a series of scientific calculations. Moreover, it may include a
number of related costs as well, like expenses on boardroom meetings, discussions with professional
experts and preliminary investigations to find out the viability of the plan. As a result, the expenses
on planning may turn out to be much more than benefits derived from it.
Question 3.
Two years ago, Madhu completed her degree in food technology. She worked for some time in a
company that manufactured chutneys, pickles and murabbas. She was not happy in the company
and decided to have her own organic food processing unit for the same. She set the objectives and
the targets and formulated an action plan to achieve the same.
One of her objectives was to earn 10% profit on the amount invested in the first year. It was decided
that raw materials like fruits, vegetables, spices, etc. will be purchased on three months credit from
farmers cultivating only organic crops.
She also decided to follow the steps required for marketing of the products through her own outlets.
She appointed Mohan as the Production Manager who decided the exact manner in which the
production activities were to be carried out. Mohan also prepared a statement showing the number
of workers that will be required in the factory throughout the year.
Madhu informed Mohan about her area wise sales target for different products for the forthcoming
quarter. While working on the production table, a penalty of? 100 per day for not wearing caps,
gloves and apron was announced. Quoting lines from the above paragraph identify and explain the
different types of plans discussed.
Answer:
The different types of plans discussed above are listed below:
(a) Objectives: Objectives are the end results of the activities that-an organisation seeks to achieve
through its existence. All other activities within the organisation are directed towards achieving these
objectives.
“One of her objectives was to earn 10% profit on the amount invested in the first year.”
(b) Policy: A policy is a set of general guidelines that helps in managerial decision making and action.
“It was decided that the raw materials like fruits, vegetables, spices, etc. will be purchased on three
months credit from farmers cultivating only organic crops.”
(c) Procedure: A procedure contains a series of specific steps to be performed in a chronological
order to carry out the routine activities.
“She also decided to follow the steps required for marketing of the products through her own
outlets.”
“The exact manner in which the production activities are to be carried out.”
(d) Rule: A rule is a specific statement relating to the general norms in terms of Do‘s and Don‘ts that
guide the behaviour of people. It commands strict obedience and a penalty is likely to be imposed on
its violation.
“While working on the production table, a penalty of? 100 per day for not wearing caps, gloves and
aprons were announced.”
(e) Budget: A budget refers to a financial plan that is expressed in numerical terms.
“Mohan also prepared a statement showing the number of workers different products for the
forthcoming quarter.”
