: alakananda chakraborty, asst. teacher, st. mary’s h.s ... 4 - business...content created by:...

Content created by: Alakananda Chakraborty, Asst. Teacher, St. Mary’s H.S. School.

BUSINESS STUDIES NOTES FOR CLASS XII

UNIT – 4

PLANNING

CREATED IN-

4/1/2020 BY- ALAKANANDA CHAKRABORTY

ASST. TEACHER, ST. MARY’S H.S. SCHOOL, GUWAHATI


MIND-MAP

of the lesson

‘PLANNING’


CLASS 12

BUSINESS STUDIES NOTES

CHAPTER – 4

PLANNING

----------------------------------------------------------------------------------------------------------------------------- ----------------

“Planning is an intellectual process, conscious determination of course of action, the basing of

decision on purpose, facts and considered estimates.”. - Koontz and O‘Donnell

MEANING

Planning is a thinking process which involves deciding in advance what to do and how to do a

specific task and also when, where and by whom the work is to be done to achieve a pre-defined

goal. It involves setting objectives and developing appropriate courses of action to achieve these

objectives.

It is one of the basic managerial functions.

A plan is a blueprint of the future courses of

actions to be taken to achieve the objectives.

The plan that is developed has to have a given

time frame but time is a limited resource.

Planning is the process of identifying the

probable developments needed in an area and then deciding on its best possible execution. Hence,

the gap identified in between the present actual stage and the future desired stage can be bridged

through establishing a plan.

SETTING

OBJECTIVES

ACHIEVING

OBJECTIVES

What to do

How to do

When to doWhere to

do

By whom to be done PLANNING

is

DECIDING


FEATURES OF PLANNING:

1. Objective/Goal oriented process:

Planning focuses on achieving objectives.

After the goals and objectives are set, the

planning is to be done to decide on the

performance of activities to achieve the

objectives. Hence, planning is directed

or oriented towards the set objectives.

2. Planning is a primary function of management: Planning lays down the base for other

functions of management. Management is a process of

achieving the goals and after setting the goals, the

next task is to plan out the prospective activities.

Hence, planning is the primary function of management.

3. Planning is pervasive: Planning is required at all levels of management as well as in all

departments of the organization. Since, it is a function of management and management is

universal in nature, therefore planning is also pervasive and every manager in any position, any

kind of organization anywhere in the world needs to plan in order to manage. However, the

scope of planning is different at different levels and for different departments. At the senior

levels, the intensity of planning is more in managerial duties as compared to the same of

subordinating level-managers.

4. Planning is continuous: Continuity of planning is related with the planning cycle. It means that

after a plan is framed, it is implemented and reviewed. This process is followed by either a

rectification plan or a newly-defined objective-oriented plan. It means one plan is followed by

another plan, and so on. Hence, planning is continuous as long as the organization is existing.

5. Planning is futuristic: Planning can’t be done for the past.

It is essential to review and take reference from past

experiences and situations, based on which an estimation

about the future is made which is called forecasting.

FEATURES

Goal Oriented

Primary Function

Pervasive

Continuous

Futuristic

Involves Decision Making

Mental Exercise

PLANNING

EXECUTION

CONTROL


Based on the forecast made and situations predicted, future risks and opportunities are

ascertained. In the basis of the estimated future events, plans are made to keep prepared to face

the future challenges and opportunities. The purpose of planning is to meet future events

effectively by forecasting future events and conditions and drafting the plans accordingly.

6. Planning involves decision making: Planning essentially

involves choice from among various alternative activities.

During planning stage, different possible alternative

courses of actions are identified and evaluated. After

giving due emphasis upon the future risks and gains

associated with each of the options, the best

possible alternative is selected, which is

expected to deliver utmost benefit amongst all.

7. Planning is a mental exercise: Planning requires application of the mind involving foresight,

prediction, estimation, evaluation, decision and conviction about the selected alternative.

Planning is an intellectual activity, which requires logical and systematic thinking rather than

guess work.


IMPORTANCE OF PLANNING:

1. Planning provides directions: By stating in advance,

how the work is to be done planning provides

direction for action. Planning ensures that objectives

are clearly stated in order to develop appropriate

course of action. If the plans are set, the department

and individuals can work in coordination, knowing

clearly their own set of works and there is no confusion.

2. Planning reduces the risk of uncertainty: Planning is an activity, which enables a manager to

look ahead and anticipate changes. Changes or

events cannot be eliminated but future risks

can be predicted and making plans in advance

managers can prepare the organization to

face the future uncertainties and if required,

can adjust the plans according to the situation.

3. Planning reduces overlapping activities: Planning serves as the basis of coordinating the

activities and efforts of different divisions departments and individuals. Since the tasks are

planned and assigned properly beforehand, which ensures clarity in thought and action, every

employee knows about his own duties. This reduces the chances of overlapping of tasks,

avoiding confusion and misunderstanding.


4. Planning reduces wasteful activities: Since the tasks are planned and by whom these tasks are

to be done are also decided, useless and redundant activities are removed and optimum

utilization of available human resources is possible through proper allotment of tasks to the

employees, keeping in mind manpower is neither over-burdened with heavy loads nor stay

unutilized.

5. Planning promotes innovative ideas: Planning is

the first function of management. Managers get

the opportunity to develop new ideas and new

ideas can take the shape of concrete plans.

It guides all future action leading to growth and

prosperity of the business.

5. Planning facilitates decision making: Planning helps in taking rational decisions by

evaluating alternative courses of action and thus selecting the best option from the available

ones.

6. Planning establishes standards for controlling: Planning provides the standards or

parameters against which the actual performance is

measured. Planning paves the foundation

for controlling by defining the criteria for

measurement.

LIMITATIONS OF PLANNING:

One plan can match with one particular situation

only for which it was made, and not suitable for

other situations until and unless modified.

Same plan doesn’t

become applicable in

changing environment.

Following a plan indicates working

by following pre-defined steps and

guidelines, which prevents creative

thinking during execution.

Expenditures involved in remunerating highly capable

staffs to plan, collection of

past data and records.

Collecting facts, analyzing

and decision-making involve lot of time. Also,

arranging the necessary

resources for planning need time.

Making plans doesn’t eliminate risks, but help in dealing with

them. So, success is predicted

but not guaranteed.


1. Planning leads to rigidity: In an organization, a well-defined plan is drawn up for achieving

specific goals within a specific time. Due to the lack of time, resources and also caused by

positional restrictive authority, managers may not be in a position to change the plan.

Therefore, the plans might become rigid and non-flexible. A plan, made keeping in mind a

specific situation, might not be suitable to

other situations, and this plans can be termed

as single-use plans. This is the rigidity of a

plan. As the business environment is dynamic,

the managers need to be given some flexibility

to cope up with the changed circumstances

and should have the due authority to modify

the plans as per the needs and circumstances.

2. Planning may not work in dynamic environment: A plan that is made considering a

particular situation, may not be equally effective in a different situation. Since, environment

keeps changing, the scope of application of the same plan decreases. Planning is based on

anticipation of future happenings and since future is uncertain and dynamic so the organization

needs to adapt itself to changes and change the plan accordingly.

3. Planning reduces creativity: Top management does planning and middle management does

implementation of plan but they are not allowed to deviate from plan and thus creativity of

these managers get reduced. In centralized work-environment seniors possess the authorities

and once the plans are made by them, subordinates are not authorized to alter the same.

PLAN 1

PLAN 2

SITUATION 1

SITUATION 2

Centralization

at the top

level

Decentralization

at the middle

level

Makes

Plans

Execute

Plans

More

creativity

Less

creativity


4. Planning involves huge costs: Huge costs are involved in the formulation of the plan. Detailed

plans require scientific calculations to a ascertain data. Appointment of high-quality

professionals involves higher cost in terms of high salary. Collection and analysis of data needs

cost involvement. Sometimes costs incurred on planning don’t justify the benefits derived, also

after spending so much of money and time on planning, the success is not certain.

5. Planning is a time consuming: Many aspects need to be considered while formulating a plan.

Appointing quality-professionals, collection and analysis of facts, decision-making etc. involve

time-consumption.

6. Planning does not guarantee success: Even after making so much of efforts in planning and

executing the plan, sometimes, success can’t be achieved due to some environment-related

challenges. Plans can predict and prepare for dealing with a future risk or problem, but doesn’t

guarantee success. Managers tend to apply the previously tried and tested plans but a plan

successful before may not be successful for all situations. Plan may or may not work in a

situation.

PLANNING PROCESS

Setting up of the objectives

Developing Premises

Listing various alternatives

Evaluation of the alternatives

Selecting the best alternative

Implement the plan

Follow-up

GOAL SETTING

ARRANGEMENT & ASSUMPTION

IDENTIFICATION OF ALTERNATIVES

EVALUATION &COMPARISON

DECISION MAKING

EXECUTION

CONTROLLING


1. Setting Objectives:

Plans are needed to achieve certain objectives. Plans define the path and direct the activities

which lead towards the fulfillment of certain objectives. Hence, the first step in the process of

planning is to decide and define goals and objectives for the entire organization and each

department, unit and employee. Objectives are needed to be set clearly and managers must

contribute ideas and participate in the objective setting process. E.g. Setting sales target, new

product launch, business expansion to new territories.

3. Developing Premises:

These assumptions about the future are called premises, these are the base material upon which

plans are drawn. Planning is a future oriented activity and the future is uncertain therefore the

managers are required to make certain assumptions while drafting plans for the organization.

Accuracy of forecast is necessary for making successful plans, even though there is no

assurance of success, yet having an accurate prediction about future makes the plan more

practical and realistically applicable. This step also involves arranging for all the necessary

resources, setting budgets and deciding the time-frame for making the plan.

3. Identifying Alternative Courses of Action:

Once objectives are set, assumptions are made and then alternative courses of action are

identified and determined. The alternative options are identified out of which is seemed to be

the best is to be selected. For identifying the

alternatives, various information and data are

required to be collected from different sources

which is a time-consuming and a costly process.

4. Evaluating Alternative Courses Of Action:

After the alternative courses of actions are identified, these

are evaluated on their individual merits and demerits.

Evaluation of the pros and cons of each and every

alternative course of action is required to come to a decision

to select or reject an alternative as compared to the others

in the list. The positive & negative aspects of each proposal

are to be evaluated keeping in view the objectives to be

achieved and the best option is selected.


5. Selecting The Best Alternative

After evaluating the available alternatives on their individual pros and cons, the most appropriate

one that is considered to be the most suitable and feasible one amongst all, is selected as a

decision. The selection of the most viable alternative is called decision-making.

Sometimes a combination of plans or more than one alternative may also be selected.

6. Implementing The Plan

This step involves putting plan into action. The managers need to communicate the plan(s) that

have been selected to all the employees involved in the process of implementation at different

levels of management and even at the non-managerial level. Knowledge and proper

interpretation of the plan would help in removal of all doubts, confusions and prevent

unnecessary delays in operations caused by these factors.

Less delay in performance ensures effectiveness. Planning involves systematic and accurate

resource procurement and allotment which ensures reduction of wastages of resources and leads

to efficiency.

Managers start organizing & assembling resources for implementing the plans. The resources

have already been planned for and started getting arranged in the second step i.e. Developing

premises. In this stage, the resources are finally procured as per the requirement for putting these

resources into function.

7. Follow Up Action

This involves monitoring the implemented plans and ensuring that the activities are being

performed according to the schedule. Continuous monitoring is required to find out deviations

from plans and corrective action has to be taken to achieve organizational objectives. This is the

reviewing process also called controlling.


TYPES OF PLAN

Plans can be classified into several types

depending on the use and the length of

the planning period. These plans can be

classified into single-use plans and

standing plans.

1. SINGLE USE PLAN:

• A single use plans are specific plans which are meant to solve a nonrecurring particular

problem. It was developed for a one-time project or event that has one specific objective.

• Such plan is developed to meet the needs of a unique situation in hand.

• The duration of a single use plan differs depending upon the type of project, as a single event

plan may last for one day while a single project may last for one week or months.

• For example, an outline for an advertising campaign. After the campaign runs its course, the

short term plan will lose its relevance except as a guide for creating future plans.

2. STANDING PLANS:

• Standing plans are used for those activities, which occur regularly over a period of time.

• It is designed once and retain their value over a period of time while undergoing revisions

and updates.

• It is developed once but modified from time to time to meet business needs.

SINGLE-USE PLAN

Single SItuation-based

USED ONCE

STANDING PLAN

Different situational usage

USED

REPEATEDLY


VARIOUS TYPES OF PLANS:

I. Objectives:

• Objectives are the end results, which the management seeks to achieve, by its

operations. Objectives should be clear and achievable.

• 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.

• Objectives need to be expressed in specific terms i.e., they should be measurable in

quantitative terms, in the form of a written statement of desired results to be achieve

within a given time period. E.g. Getting 20% return on Investment, increase sales

target by 10% etc.

II. Strategy:

• Strategy refers to future decisions defining the direction of movement towards

achieving the objectives.

• Strategies are those detailed plans which an organization prepares to face various

situations, threats and opportunities and are prepared keeping in mind the resources

and capacities of the organization.

• Strategies are prepared to respond to the strategies of the competitors so as to

sustain in the competition in the business environment.

III. Policy:

• Policies are general statements that guide thinking or channelize energies towards a

particular direction. It provides a basis for interpreting strategy.

• Policies define the parameters and scope within which a manager can function.

• They are flexible as they may be changed as per requirement. E.g. selling goods on

cash basis only, purchasing decisions etc.

IV. Rule:

• Rules are specific statement that inform what is to be done and what not to be done

in various circumstances.

Rules are rigid and don’t allow flexibility and thus ensures discipline in the

organization. E.g. ‘No smoking in the office premises’, entry-timings, leave rules.


V. Procedure:

• Procedures are routine steps, detailing the exact manner in which a work is to be

performed.

• They indicate the sequence of doing things or tasks in a chronological order to

complete an assigned work.

• Procedures are directed paths to reach the goals. Eg: Recruitment process of a

company.

VI. Method:

• Methods provide the prescribed ways or manner in which a task can be performed

considering the objective.

• Selection of proper method saves time, money, efforts and increases efficiency.

• Methods act as guides to the peoples working on a specific task and clear all doubts

about how to do a task..

• Methods are included into procedures.

VII. Programme:

• A programme may consist detailed list of project outlining, which means the entire

framework of the plans, policies, systems and tasks included in a project.

• The objectives, policies, procedures, rules, tasks, physical and human resources

required to implement any course of action are specified and arranged

systematically in a programme.

VIII. Budget:

• A budget is a statement of expected results expressed in numerical terms for a

definite period in the future.

• Budgets sets the boundaries or margins of the resources to be used in a task so that

the task can be completed within the limits specified. E.g. sales budget, production

budget.


Differences in between various types of plans:

Policies Procedures

Policies are the systems internal to the organization

to deal with situations.

Procedures are the steps arranged systematically to do a task.

Policies are guided by principles & values. Procedures are influenced by the policies and objectives.

Policies guide in decision-making Procedures are needed for implementing policies

Policies are expresses subjectively and in general

terms

Procedures are expressed in a chronological manner and in

specific terms.

Policies are more rigid. Procedures are less rigid and changes with tasks and objectives.

Procedures Methods

Procedures are sequences of tasks to be done to do a

work.

Methods are the formalized and prescribed ways of doing

routine tasks.

Procedures can be updated and modified. Methods are stable and don’t change.

Procedure comprises methods of doing different tasks. Methods includes individual actions or moves needed to take

up sequentially to complete a specific task.


Rules Methods

Rules are the basic codes of conducts or norms of

actions

Methods are the chronological system of taking

actions to do a task.

Rules are subjective in nature Methods are technical in nature

Rules are rigid and stable for the whole

organization and all its operations

Methods are rigid for a particular task

Rules improve employee’s behaviors Methods improve the quality of performance

Strategies Policies

It is a comprehensive plan involving various

steps

It is a single plan and remain stable for the whole

enterprise over a long time

It is situational, ad-hoc and based on the goals set It is permanent in nature

It considers the strengths, weaknesses of the

organization and opportunities and threats in the

environment.

It considers principles and values.

It allocates resources It uses resources for decision-making.

Policies Objectives

Policies are organization’s own ways to deal with

situations.

Objectives are end results of tasks which are

aimed to be achieved,

Polices state the rules and systems of working. Objectives are the goals and targets to be

achieved,

Policies are guided by principles and values. Objectives are guided by situational needs.

Policies are stable and rigid. Objectives keep changing with the changes in the

external and internal environment.

*****************

: alakananda chakraborty, asst. teacher, st. mary’s h.s ... 4 - business...content created by:...

Documents