Planning
UNIT -II
Definition of Planning
□ “Planning is deciding in advance what is to
be done”.
□ “Planning involves looking ahead,
conceptualizing about future events and
making decisions today which will affect the
future”.
□ According to M.E Harley,” Planning
is deciding in advance what is to be
done. It involves the selection of
objectives, Policies, Procedures and
Programmes from among alternatives
Nature of Planning
□ Contributions to Objectives:
■ Master plan and all relative plans must
contribute to the achievement of common
goals of the organization.
■ Is a medium to concentrate whole organization
towards defined aims, It can only forecast that
which act is more helpful to achieve set goals.
□ Primary Function:
□ Foremost function of management.
□ Other functions are followed after it.
□ Planning sets objectives for collective efforts of
the human resource and prepares policies for the
achievement of these objectives.
□ Pervasive Function:
□ Planning is made at every level of organization and at
every post.
□ Only the area and type of planning vary according to
the positions.
□ Efficiency of Plans:
□ This is based on the assumption that the efficiency of
planning is evaluated by the ratios of input and output.
□ Plans are said efficient only when they produce more
than invested.
□ A Continuous Process:
□ Regular improvement is required.
□ We want to alter, improve and simplify it.
□ Continuous planning requires continuous checking of
events and forecasts of plans to maintain a course
towards a desired goal.
□ Planning is Flexible:
□ The future is uncertain, planning must cope with
changes in future conditions.
IMPORTANCE OF PLANNING
□ Primacy of Planning.:
■ Precedes all managerial functions.
■ Planning establishes the objectives necessary
for all groups effort.
■ All other functions are performed to achieve
the objectives set by the planning process.
□ To Focus in Co-ordination:
■ Planning focuses on organizational objectives
and direction of action for achieving these
objectives.
□ To help in Co-ordination:
■ It is said that co-ordination is essence of
management & planning is the base for it.
□ To help in Control:
■ Plans provide the standards against which
actual performance is compared. Deviation of
actual results from the standards indicate the
nature of corrective action needed.
□ To Increase the Organizational
Effectiveness:
■ Able to achieve its objectives within the given
resources.
PLANNING PROCESS
□ I) Perception of the opportunities:
■ It leads to formulation of plans by providing clue
whether opportunities exists for taking up particular
plan.
■ Look at the possible opportunities and avoid threats.
□ 2) Establishing Objectives:
■ Objectives specify the results expected and indicate the
end points of what is to be done, primary emphasis is to
be placed , and what is to be done accomplished by the
various types of plans.
■ Should specify all Key Result Areas.
□ 3) Planning Premises:
■ Planning involves taking of decisions by the
management on the basis of assumptions of what is
likely to happen in the future. These assumptions may
be referred to as planning premises.
■ Such assumptions are nothing but forecasts about
likely shape of events in future.
■ Planning premises constitute the framework within
which planning is done. They provide the bedrock upon
which the future course of action is based.
□ 4) Identification of the Alternatives:
■ There are several alternatives for any plan. The planner
must try to find out all the possible alternatives.
□ 5) Choice Alternative Plans:
■ Choosing the best alternative plan among the
available.
□ 6) Formulation of Supporting Plans.
□ 7) Establishing Sequence of Activities.
TYPES OF PLANNING
□ Strategic Planning
■ The process of deciding the objectives of the
organization and determining the manner in
which the resources of the enterprise are to be
deployed to realize the objectives in the
uncertain environment.
■ It is the way in which the management
chooses to utilize the organization resources to
reach its objectives.
■ Made by Top Management
Operational Planning
□ Is concerned with the efficient use of the
resources and with the development of a
control mechanism to ensure efficient
operation so that organizational objectives are
achieved.
□ It lays down programmes, budgets, projects,
policies, rules, procedures etc. to implement
the strategic plan.
Tactical Planning
□ Are made for short-term moves and necessary
for supporting the strategic plans and
achieving firm’s objectives.
□ Are required to meet the challenges of sudden
changes in the environmental forces.
■ E.g. Sudden fall in the demand of the firm’s
products.
TIME SPAN OF PLANNING
□ Long-Range Planning:
■ Process of establishing long-term goals.
■ Formulates strategic plans for attaining these
goals.
■ 5yrs to 2Oyrs or even more.
□ Medium-Range Planning:
■ Are made to support long term plans.
■ More than l yrs but less than 5yrs.
□ Short-Range Planning:
■ Relates to a period of up to one year.
■ Made to achieve short-term goals.
■ Step-by-Step approach to short &long term
planning.
FORMAL & INFORMAL PLANNING
□ Formal Planning
■ Specific goals and steps to achieve them.
■ Systematically carried on by management.
□ Informal Planning
■ May become basis of formal planning in future.
Essentials of an Effective Plan:
□ Should be Specific
□ Logical- (facts)
□ Complete
□ Flexible
□ Capable of being controlled
Barriers to Effective Planning:
□ Lack of reliable data.
□ Lack of initiative
■ Planner must take initiative.
□ Costly Process- Time consuming & expensive
■ May delay action in some cases
□ Inflexibility in Organizational Working:
■ Internal inflexibility may compel planners to make rigid
plans.
■ This restricts the mangers to do innovative things.
□ Non- Acceptability of Change:
■ Planners themselves do not like change and
on other occasions thy do not think it is
desirable to bring change as it makes the
planning process ineffective.
□ External Limitations: Beyond the control of
planners.
□ Psychological Barriers
■ Some people consider present more important
than future because present is certain.
DEClSION MAKING
What is Decision Making?
□ The process concerned with searching and
evaluating alternatives to a problem and
selecting the best alternative is known as
decision making.
□ Managerial decision making involves the
entire process of establishing goals, defining
tasks, searching for alternatives and
developing plans in order to find the best
answer to the decision problem.
Characteristics of Decision
Making:
□ It is a process of choosing a course of action from among the
alternative courses of action.
□ It is a human process involving to a great extent the
application of intellectual abilities.
□ It is always related to the environment. A manager may take
one decision in a particular set of circumstances and another
in a different set of circumstances.
□ Involves time dimension.
□ Always have a purpose.
□ It involves all the actions like defining problem analyzing
various alternatives which take place before a final choice is
made.
Types of Decision-Making:
1. Routine and Strategic-Decision:-
□ Routine-Decision:- Made repetitively following
certain established rules, procedures and policies.
■ Neither require collection of new data nor conferring
with people.
■ Taken by middle and lower management.
□ Strategic-Decision:
■ Taken by top managers
■ Relate to policy matters and so require a thorough fact
finding and analysis of the possible alternatives.
2. Policy and operating Decision:
□ Policy decision are of vital importance and are taken by top
management.
□ They effect the entire enterprise.
□ Operating decision are taken by lower management in order
to put action into policy.
3. Organizational and Personal Decisions:-
□ Organization decisions are those which a manager takes in
his official capacity. They can be delegated.
□ Personal decisions relate to the manager as an individual and
not as a member of the organization cannot be delegated.
4. Programmed and Non-Programmed:-
□ Programmed- Routing and repetitive nature
□ Non-Programmed-arise because of unstructured
problems.
□ There is no standard method for handling such
problems.
5. Individual and group decision:-
PLANNING PREMISES
□ Planning premises represent the
framework within which planning is
done.
□ They provide the foundation upon
which the future course of action is
based.
□ In order to have effective planning,
the plans must be based on sound
premises
Types of Planning Premises
□ Internal and external
■ sales forecast, the existing policies and programmes of
the organization, capital investment policies, philosophy
of management, etc. The abilities and skills of the
workers are also significant internal premises
■ The external premises are derived from the
external environment of the business. They
relate to the political, economic, social and
technological forces in which the organization
operates and the conditions which influence the
demand for the organization’s products. These
factors are generally beyond the control of an
organization.
□ Tangible and intangible
■ Factors like materials, money and machines are
controllable to a great extent. In these areas,
management has maximum control over the future
commitments
■ Semi-controllable premises are those assumptions
about future which are under the partial control of a
business like labor relations and marketing
strategy.
■ Non-controllable premises are entirely beyond the
scope of business as, for instance, government
policy, international trade agreements, wars,
natural calamities, innovations, etc
□ Controllable, semi-controllable
and non-controllable
■ Tangible premises are those which are
capable of being expressed in terms of
quantitative units.
■ Intangible premises are not measurable
quantitatively. They include such factors as
goodwill of the business, public relations,
employee attitude and morale, etc
Planning Premises: Some
Illustrations
Cement industry
□ Internal premises: capital investment, scope for
expansion in the future, sales forecasts.
□ External premises: product market, location,
availability of raw materials.
□ Tangible premises: production capacity, scope for
expansion.
□ Semi-controllable premises: labour policy, pricing
policy, share of the firm in’ the market.
□ Uncontrollable premises: government policy
regarding plant location and tax structure.
Sugar Industry
□ Internal premises: capital investment and sales
forecasts.
□ External premises: product market, location and
availability of raw materials.
□ Tangible premises: production capacity, scope for
expansion.
□ Uncontrollable premises: government policy
regarding pricing and distribution.
Liquor Industry
□ Internal premises: capital investment and sales
forecasts.
□ External premises: product market, location and
availability of raw materials.
□ Tangible premises: production capacity, scope for
expansion.
□ Semi-controllable premises existing and future
share of the company in the market.
□ Uncontrollable premises Government licensing
policy; taxation policy and socio-cultural policy.
BUSINESS FORECASTING
□ It is the research procedure to discover that
economic, social and financial influence
governing business activity, so as to predict
or estimate current and future financial,
production and marketing operations. Thus,
forecasting is the process of predicting
future systematically. The result of this
process is known as forecasts.
STEPS IN FORECASTING
□ Understanding the Problem
□ Developing the Groundwork
□ Selecting and Analyzing Data.
□ Estimating Future Events
TECHNIQUE
S
OF
FORECASTIN
G
Panel Regressio
Time
Delphi Consensu n
Series
Method s Analysis
Analysis
Method
