BUSINESS STUDIES PLANNING

Planning
Topics Covered
Concept of planning
Characteristics and importance of planning
Limitation of planning
Planning process
Plan and its types

Concept of Planning

 An organisation, either private or public, needs proper planning to acquire success, high profit and
increase in sales.
 Planning implies to state in advance where to go and in which direction to move in order to
achieve a target.
 It is a psychological process of thinking and deciding in advance about 'what is to be done' and
'how it is to be done’.
 It is a mental activity in which the manager decides about the goals to be achieved and the actions
through which they are to be accomplished.
 Being a continuous process which helps in reducing the risk of uncertainty, planning provides the
rationale for undertaking policies in the direction of achieving goals.
 It is based on anticipating the future course of action and deciding the best course of action.

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Characteristics of Planning
1) Focus on  Planning starts when an objective is set, and proper planning gives a
objectives boost to well-organised and goal-oriented management.
 Plans ensure that the desired objective is attained economically and
quickly if possible.
 Managers must make sure that the plans made are purposeful, specific,
realistic and clear and should adhere to the company’s strategies,
procedures and policies.
 For example, if the sales target is to be achieved, then the plans must be
made in sync with this objective.

2) Acts as a stepping  A goal is achieved through planning, organising, staffing, directing and
stone controlling.
 Planning thus serves as the stepping stone for all other functions of
an organisation.
 The rest of the functions are conducted within the framework of the
plans drawn, i.e. the other functions are interrelated and interdependent
on planning.
 Thus, planning acts as the primary function for all organisations.

3) Pervasiveness  Planning must be done at all levels of management and in all

departments of the organisation.
 However, its scope differs along the various dimensions of business
levels.
 For example, top level managers have to chalk out policies regarding the
overall management, whereas middle level managers plan out the
authority to be assigned to subordinates or are involved in departmental
planning.

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 On the other hand, lower level managers have to perform day-to-day

operational planning and make out small targets.

4) Continuity  After an objective or goal is achieved, the plan drawn for it does not cease
to exist but goes on to become a never ending strategy because of the
dynamic nature of the business environment.
 It is a continuous process as after or within the plan period, a need
arises for the formulation or modification of another plan, keeping in view
the new objectives and circumstances.
It is a continuous process all along the life of a business enterprise.

5) Futuristic  Being an intellectual process, planning seeks to bridge the gap between
where we are and where we want to go; it is a trap to capture the future,
i.e. it is futuristic in nature.
 Planning should be done so as to prepare the organisation to deal with
future events or to achieve goals in the future.
 Managers must also be able to anticipate the probable situations and
plan so as to cope with them in a better manner.

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6) Decision making  After coming up with all possible alternatives and their outcomes,
managers need to evaluate them.
 This evaluation is based on the utility and the consequences of the
options and a performance study of various actions.
 Various factors are weighed against each other as the pros and cons of
each alternative must be assessed.

For example, planners have to evaluate the 4 methods of the production

process and select the most appropriate method from the organisation’s
point of view.

7) Mental exercise  Planning is a mental process which requires application of thinking skills
and intelligently arriving at a rational conclusion.
 Basically, it involves making of assumptions and predictions regarding
the future through scanning the environment with a higher level of
intelligence.
 The last step is evaluation of various alternatives and selecting the
most suitable one.

Importance of Planning
 Being an intellectual process, planning seeks to bridge the gap between where we are and where
we want to go; it is a trap to capture the future.
 It involves analysis, research and scientific calculations bearing huge costs. Companies thus need to
hire professionals to carry out this process.
 Despite being an expensive function, it is a very basic and essential function of an organisation.
Following are some of the factors highlighting planning because of which we can say that it is a very
significant action despite the huge costs:
1) Renders direction
 Planning clearly states the predetermined course of action, guides managers about things to be
done, what route to take and how the objectives are to be achieved and provides a direction to
the actions of different departments of the organisation.
 Planning also ensures that various departments of the organisation work in a coordinated manner
towards the achievement of the desired objectives.
 In absence of planning, employees would work in different directions and it would be
impossible to achieve the desired goals.
2) Subdued risk of uncertainties

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 One of the main agendas of planning is to predict or anticipate any future risk or unfortunate
events which can cause major damage to a business.
 Plans are made to overcome uncertainties. Such uncertainties are met by keeping aside some
of the resources.
 Planning shows how to deal with situations which may arise in the due course of management
though it does not fully eliminate problems.
3) Minimised overlapping
 Departmental and organisational plans are made keeping in mind the requirements of the
departments. Managers understand the policies and plans of the organisation resulting in
integration of activities.
 Through minimisation or elimination of useless resources and redundant activities, overlapping of
work is reduced and any wastage of resources because of repetition is reduced.
 Proper planning ensures that there is no confusion and misunderstanding and the work
proceeds smoothly.
4) Encourages innovation
 Through better procedures, ideas and methods, planning serves as a stepping stone of any
organisation’s success and can be termed an intellectual process.
 It includes formulating policies and plans which requires innovation. It is a crucial activity which
demands the best of managers thinking capabilities and creativity.
5) Helps in decision making
 From among the various choices of alternatives, managers are able to make a sound
judgement or decision.
 Thus, following a proper planning process helps managers in taking rational decisions.
6) Essential for controlling
 Planning sets the standards against which performance is evaluated, i.e. a comparison between
the planned and the actual output.
 If deviated from the said objectives, the corrective measures are implemented at the earliest.

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Limitations
Some of the limitations of planning which may result in abandoning or reconsidering organisational
objectives:
1) Rigidness
 In case of any unforeseen circumstances, the changes which can be made to a plan are limited.
 A major change to an already created plan is neither possible nor would do any good in the
interest of an organisation.
 This rigid nature of a plan creates hurdles at times of unforeseen changes. Managers may
sometimes require a certain degree of flexibility so as to cope with the changes in an appropriate
manner.
 Rigidity in plans sometimes causes huge loses to the organisation and creates obstacles in the
completion of the objectives.
2) Unfavourable for a dynamic environment
 Nothing is constant in a business environment; it is dynamic in nature.
 Planning, on the other hand, completely depends on the anticipation of future happenings. As a
result, both do not go hand-in-hand.
 Planning cannot foresee all such changes in the business and is full of uncertainties. This may lead
to failure in the accomplishment of objectives.
 An organisation must adapt its functioning to the changing environment; long-term planning
will make this dynamic environment less effective.
3) Planning reduces creativity:
 Under planning rigid plans are made and blindly followed without taking into consideration the
changes prevailing in the business environment.
 The management does not permit anyone to change or deviate from the plan.
 Hence, this reduces the creativity as people think on the same lines as others and there is no
innovation.
4) Gigantic costs
 Planning involves analysis, research and scientific calculations. These activities incur high cost
and take much time.
 As planning is based on the future or predictions, it also requires a lot of thinking and analysing.
 It involves scientific calculations along with figures and facts, which are to be used in
formulating the course of action.
 Companies thus need to hire professionals to formulate plans. This involves high costs.
 Moreover, sometimes it might happen that benefits derived from planning fall short of the costs
incurred.
5) False security
 Good planning does not guarantee success. The probability of attaining success once the plans
have been put into action is odd.
 Often managers tend to rely on previously tried and tested successful plans. However, the
business environment is dynamic in nature and a pretested plan may or may not work in the
future.
 Managers tend to overthink that planning can prevent problems from occurring. However, they
neglect the fact that planning just provides a base for predicting the future and does not give
solutions to problems straight away.
6) Time consuming
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 Formulating a plan involves analysis, research and scientific calculations which consume too
much time.
 It is a boon while facing a definite situation. However, sudden unforeseen situations cannot be
tackled; there is no short-term planning procedure.
 The time taken to formulate a complete plan may cause delay in the decision-making
process.
7) Lack of accuracy
 Planning is a function of management which is related to the future activities i.e. plans are made
for the tasks to be undertaken.
 In case of planning, many assumptions are made about the future which may or may not be
accurate.
 Incase these assumptions do not hold true in present or in future, the whole planning will fail until
the required changes are made.

Planning Process

Planning involves a few logical steps as follows:

1) Setting objectives  Objectives are set and all plans are made to achieve those objectives.
 Can be set for entire organisation or for different departments/units
within the organisation.
 Goals clearly specify the things the organisation wants to achieve and
should be clearly stated and communicated to the employees.
 Managers at all levels must contribute ideas and participate in setting
objectives to understand how their actions contribute to the
achievement of objectives.

2) Developing the  Concerned with making assumptions about the future.

planned premises  Assumptions are the base for planning.
 May consist of forecast made keeping in view the existing plans and
any past information based on what new plans can be drawn.
 Assumptions should be the same throughout the organisation and all
should be in total agreement on them.
 All managers involved in planning should be familiar with the
assumptions and should use the same set of assumptions.
 Examples of assumptions:
o Demand of product
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o Change in policy
o Rate of interest
o Tax rate

3) Identification of  Identification of all probable ways and means to achieve the

alternatives objectives.
 Course of action may be either routine or innovative.
 Innovative courses of action involve more people with more
information sharing.
 More important the project, more alternatives are generated with
more discussion on the subject.

4) Evaluation and  Pros and cons of each alternative is identified.

selection of the best  Alternatives are evaluated in light of feasibility and results.
alternatives  Alternatives with less negative aspects and maximum positive
aspects are selected.
 In the decision making stage, the best alternative will be selected.
 An adopted plan is the ideal plan, i.e. most feasible, profitable and with
least negative consequences.
 Manager’s experience, judgemental power and intuition play a role in
selection of the viable alternative.
 A combination of plans can also be selected.
 Many small plans are made to achieve the main plan, called derivative
plans.
5) Implementation  Putting the plan into action, i.e. doing what is required.
 Other functions of management are also to be performed in order to
implement the plan.
6) Follow-up action  Plans are monitored.
 Monitoring of plans is also essential to achieve goals.
 It is seen whether plans are performed as per the schedule or not.

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Setting
Objectives

Developing
Follow up Action
Premises

Identifying
Implementing the
Plan Alternative
Courses of Action

Selecting an Evaluating
Alternative Alternatives

Types of Plans
On the basis of use and length of planning period
Single Use Plans Standing Plans
 Developed for one-time event/project  Repeated-use plans and are used for
activities which occur regularly over a period
of time
 Designed to achieve a particular goal  Ensures smooth running of internal
operations and efficiency in routine decision
making
 Duration of plan depends on activity or goal  Made once but used again and again by
for which it is made making revisions and updates in the earlier
laid plans
 Examples: Budgets, programmes  Examples: Policies, procedures, rules and
methods
On the basis of what a plan seeks to achieve

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1) Objectives
 Desired future position
 Ends which management seek to achieve through operations
 Represent the end point of planning
 All managerial activities are directed towards the achievement of objectives
 Different departments or units may have their own objectives
 Should be expressed in specific terms, i.e. quantitative terms within a given time period
 Examples:
o Increase in sales by 30% by the end of the month
o To increase profit by 20%

2) Rules
 Specific statements defining actions of employees and the simplest type of plan
 Clearly lays down what is to be done and what is not to be done
 No flexibility—rigid and stringent
 Creates an environment of discipline at work
 Example: No Smoking rule

3) Strategy
 Comprehensive plan for accomplishment of organisation’s objectives
 Provides broad contours of an organisation’s business and is the blueprint of business
 Defines the future decisions regarding organisation’s directions and scope in the long run
 Formulated in consonance with the business environment
 Comprehensive plan/strategy includes:
 Determining long-term objectives
 Adopting a particular course of action
 Allocating necessary resources for the achievement of objectives
 Must be best for the present business environment
 Examples: Production strategy, marketing strategy etc.

4) Programme
 A programme is a detailed outline of a project consisting of goals, policies, procedures and
rules
 Detailed statements which consist of all the activities taken up and the policies of the
organisations for achievement of the overall business plan
 Includes the most minute details related to the project
 Prepared at all levels: Primary programme by the top management and further supportive
programmes at other levels
 Examples: Development of a new product, construction of a shopping mall

5) Policies
 Organisation’s general response towards a particular direction/situation
 Guide implementation of strategy by providing a base for managerial actions and decisions
 Are defined for all levels and all departments in an organisation
 Defines broad parameters within which managers may function
 Example:
o Pricing policy
o Recruitment policy
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6) Method
 Prescribed way or manner of doing work related to the objective to be achieved, which forms
one of the steps of the procedure.
 Proper method leads to savings in terms of time, energy and money, and even increases
sufficiency
 Example: Method for calculation of depreciation on fixed assets

7) Procedures
 Required steps decided in advance to be taken while carrying out activities
 Provides the exact manner in which the activity or work is to be performed
 Generally meant for insiders so as to enforce policies and achieve objectives
 Steps laid are carried out within a broad framework of policies
 Example: Selection procedure

8) Budget
 Statements of expected results in quantitative terms
 Quantifies future facts and figures
 Prepared by managers at all levels
 Works as standard for measuring and comparing actual performance
 Also serves as a controlling technique by keeping a check on deviations
 Examples:
o Cash Budget
o Capital Budget
o Sales Budget

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