NCERT Business studies class 12| Planning chapter 4

                 

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                                      Chapter 4- Planning

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1.Explain the concept of planning. 

• Planning is defined as setting objectives for a given time period, formulating various courses of action to achieve them, and then selecting the best possible alternative from among the various courses of action available.
• Planning is deciding in advance what to do and how to do. 
• The manager must formulate an idea of how to work on a particular task and set objectives
•  Planning is what managers at all levels do.  
• Thus planning, involves setting objectives and developing appropriate courses of action to achieve these objectives. 
• Objectives provide direction for all managerial decisions and actions. 
• Planning  need to work towards achieving organisational goals. 
• Therefore, planning means setting objectives and targets and formulating an action plan to achieve them within a time frame  judiciously. 

2.Describe the importance of planning. 

Planning is certainly important as it tells us where to go, it provides direction and reduces the risk of uncertainty by preparing forecasts. The major benefits of planning are given below: 

(i) Planning provides directions: 

• Planning provides direction for action by stating in advance how work is to be done 
• Planning  act as a guide for deciding what action should be taken and in which direction. 
• With well defined goals , employees are aware of what the organisation has to do and what they must do to achieve those goals. 
• Departments and  individuals in the organisation are able to work in coordination. 

(ii) Planning reduces the risks of uncertainty: 

• Planning enables a manager to look ahead and anticipate changes. 
• As the tasks to be performed are decided in advance, planning shows the way to deal with changes and uncertain events. 
• Thus it reduces the risk of uncertainty

(iii) Planning reduces overlapping and wasteful activities: 

• Planning serves as the basis of coordinating the activities and efforts of different divisions, departments and individuals. 
• It helps in avoiding confusion and misunderstanding. 
• planning ensures clarity in thought and action so work is carried on smoothly. 
• Useless and redundant activities are minimised or eliminated. 

(iv) Planning promotes innovative ideas: 

• Planning is the first function of management so  new ideas can take the shape of concrete plans.
• It guides all future actions leading to growth and prosperity of the business and hence is the most challenging activity for the management

 (v) Planning facilitates decision making: 

• Planning helps the manager to look into the future and make a choice from various courses of action. 
• He has to evaluate each alternative and select the most viable proposition. 
• Planning  helps in taking rational decisions. 

(vi) Planning establishes standards for controlling: 

• Planning provides the  goals or standards against which actual performance is measured. 
• By comparing actual performance with some standard, managers can know whether they have actually been able to attain the goals and any deviation  can be corrected. 
• So planning is a prerequisite for controlling. 
• The nature of corrective action required depends upon the extent of deviations from the standard. Therefore, planning provides the basis of control.

 

3.Explain the limitations of planning.

The major limitations of planning are given below: 

(i) Planning leads to rigidity: 

• In an organisation, a well-defined plan with specific goals decide the future course of action and managers may not be in a position to change it. 
• This  rigidity in plans may create difficulty. 
• Managers need to be given some flexibility to be able to cope with the changed circumstances. 

 (ii) Planning may not work in a dynamic environment: 

• The business environment is dynamic and the organisation has to constantly adapt itself to changes. 
•  Modification of economic policies or political conditions or if there is a natural calamity or competition in the market can all upset financial plans.
• Planning cannot foresee everything and thus, there may be obstacles to effective planning. 

(iii) Planning reduces creativity: 

• Planning is an activity which is done by the top management and middle management and other decision makers are not permitted to act on their own. 
• Thus, much of the creativity inherent in them also gets lost or reduced. 
• The employees only carry out orders. Thus, planning in a way reduces creativity since people tend to think along the same lines as others. 

(iv) Planning involves huge costs: 

• When plans are drawn up huge costs are involved in their formulation like expenses on boardroom meetings, discussions with professional experts and preliminary investigations to find out the viability of the plan. 
• The costs incurred sometimes may not justify the benefits derived from the plans. 

 (v) 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.

(vi) Planning does not guarantee success: 

• The success of an enterprise is possible only when plans are translated into action or else it becomes meaningless. 
• Managers have a tendency to rely on previously tried and tested successful plans. 
• Just because a plan has worked before does not mean it will work again as  there are so many other unknown factors to be considered. 
• This kind of false sense of security may actually lead to failure instead of success. 

4.Describe the steps in the process of planning.

(i) Setting Objective

• Objectives may be set for the entire organisation and each department or unit within the organisation. 
• Objectives specify what the organisation wants to achieve  and must be stated clearly for all departments, units and employees. 
• They give direction to all departments. 
• Objectives have to percolate down to each unit and employees at all levels. 
• Managers must contribute ideas and participate in the objective setting process. 

(ii) Developing Premises: 

Planning is concerned with the future Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises. 

Assumptions are the base material upon which plans are to be drawn.  The premises or assumptions must be the same for all and there should be total agreement on them. All managers should be familiar with and use the same assumptions. 

 (iii) Identifying alternative courses of action: 

• Once objectives are set, there may be many ways to act and achieve objectives. 
• All the alternative courses of action should be identified and  could be either routine or innovative. 
• An innovative course may be adopted by involving more people and sharing their ideas. 

(iv) Evaluating alternative courses: 

• The next step is to weigh the pros and cons of each alternative. 
• The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved. 
• Alternatives are evaluated in the light of their feasibility and consequences. 

(v) Selecting an alternative: 

• The best plan has to be adopted and implemented and  would be the most feasible, profitable and with least negative consequences. 
• in selecting the most viable alternative, subjectivity and the manager’s experience, judgement and intuition play an important part.
•  Sometimes, a combination of plans may be selected instead of one best course. 
• The manager will have to apply permutations and combinations and select the best possible course of action.

 (vi) Implementing the plan: 

• The step is concerned with putting the plan into action, i.e., doing what is required. 
• For example, if there is a plan to increase production then more labour, more machinery will be required. 
• This step would also involve organising for labour and purchase of machinery. 

(vii) Follow-up action: 

• To see whether plans are being implemented and activities are performed according to schedule is also part of the planning process. 
• Monitoring the plans is equally important to ensure that objectives are achieved.

5.Develop an understanding of single use and standing plans 

Single-use Plan: 

• A single-use plan is developed for a one-time event or project and is not likely to be repeated in future, i.e., they are for non-recurring situations. 
• The duration of this plan may span a week or a month depending upon the type of the project. 
• A project may  be of only one day, such as, organising an event or a seminar or conference. These plans include budgets, programmes and projects. 
• They consist of details, including the names of employees who are responsible for doing the work and contributing to the single-use plan. 

Standing Plan: 

• A standing plan is used for activities that occur regularly over a period of time to ensure that internal operations of an organisation run smoothly.
• It enhances efficiency in routine decision-making. 
• It is developed once but is modified from time to time to meet needs as required. 
• It include policies, procedures, methods and rules. 
• Policies specifies the organisations response to a certain situation ,procedures describe steps to be followed in particular circumstances ,methods provide the manner in which a task has to be performed and rules are very clearly stated as to exactly what has to be done
• Single-use and standing plans are part of the operational planning process. 

6.Describe objectives, policies, strategy, procedure, method, rule, budget and programme as types of plans. 

Based on what the plans seek to achieve, plans can be classified as Objectives, Strategy, Policy, Procedure, Method, Rule, Programme, Budget

Objectives

• Objectives are  defined as ends which the management seeks to achieve by its operations. 
• Therefore, an objective simply stated is what you would like to achieve,
• They define the future state of affairs which the organisation strives to realise. 
• They serve as a guide for overall business planning. 
• Different departments or units in the organisation may have their own objectives. 
• Objectives  should be measurable in quantitative terms, in the form of a written statement of desired results to be achieved within a given time period. 

Strategy

•  A strategy is a comprehensive plan for accomplishing an organisation objectives. 
• This comprehensive plan will include three dimensions, 

                 (i) determining long term objectives,
                 (ii) adopting a particular course of action, and 
                 (iii) allocating resources necessary to achieve the objective. 

• Whenever a strategy is formulated, the changes like economic, political, social, legal and technological in the   business environment needs to be taken into consideration. The changes in the environment will affect an organisation’s strategy. 

 Policy 

• Policies are general statements that guide thinking  energies towards a particular direction. 
• Policies provide a basis for interpreting strategy which is usually stated in general terms. 
• They are guides to managerial action and decisions in the implementation of strategy. For example, the company may have a recruitment policy, pricing policy within which objectives are set and decisions are made. 
•  There are policies for all levels and departments in the organisation ranging from major company policies to minor policies. Major company policies are for all to know i.e., customers, clients, competitors etc., whereas minor polices are applicable to insiders and contain minute details of information vital to the employees of an organisation.  

Procedure 

• Procedures are routine steps on how to carry out activities. 
• They detail the exact manner in which any work is to be performed. They are specified in a chronological order. 
• For example, there may be a procedure for requisitioning supplies before production. 
• They are generally meant for insiders to follow. 
• Policies and procedures are interlinked with each other. Procedures are steps to be carried out within a broad policy framework. 

Method 

• Methods provide the  manner in which a task has to be performed considering the objective. 
• It deals with a task comprising one step of a procedure and specifies how this step is to be performed. The method may vary from task to task. 
• Selection of proper method saves time, money and effort and increases efficiency. . 

Rule 

• Rules are specific statements that inform what is to be done. 
• They do not allow for any flexibility or discretion.
•  It reflects a managerial decision that a certain action must or must not be taken. 
• They are usually the simplest type of plans because there is no compromise or change unless a policy decision is taken. 

Programme

•  Programmes are 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. 
• Programmes will include the entire gamut of activities as well as the organisation’s policy and how it will contribute to the overall business plan. 
• The minutest details are worked out i.e., procedures, rules, budgets, within the broad policy framework. 

Budget 

• A budget is a statement of expected results expressed in numerical terms. 
• For example, a sales budget may forecast the sales of different products in each area for a particular month. 
•  making a budget involves forecasting, therefore, it clearly comes under planning. 
• For example take the case of Cash Budget. 
• The cash budget is a basic tool in the management of cash and  helps the management to plan and control the use of cash. 
• It is a statement showing the estimated cash inflows and cash outflows over a given period.  
• The management has to hold adequate cash balances for various purposes and must also  avoid excess balance of cash since it gives little or no return. 

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