Com 3004

Business Planning
Tut-2

Planning is deciding in advance what to do, how to do, when to do and who has to do it. Thus, it involves
setting objectives and developing an appropriate course of action to achieve those objectives.

Features of Planning

 Planning focuses on achieving objectives by deciding upon the activities to be undertaken.

 Planning is a primary function as it precedes all functions of management i.e. organising, staffing,
directing& controlling.
 Planning is pervasive as it is required at all the levels of management but its scope may vary.
 Planning is continuous as plans need to be made on a continuous basis till an organisation exists.
 Planning is futuristic as it seeks to meet future events effectively to the best advantage of an
organisation. Planning is, therefore, called a forward looking function.
 Planning involves decision-making as it involves rational thinking to choose the best alternative
among the various available alternatives in order to achieve the desired goals efficiently and
effectively.
 Planning is a mental exercise as it is based on intellectual thinking involving foresight,
visualisation and judgement rather than guess work.

Importance of Planning

 Planning provides direction as it acts as a guide for deciding what course of action should be taken
to attain the organisational goals.
 Planning reduces the risk of uncertainty arising due to the dynamic nature of business
environment as it enables a manager to anticipate and meet changes effectively.
 Planning reduces overlapping & wasteful activities as it serves as the basis for coordinating the
activities and efforts of different divisions and individuals.
 Planning promotes innovation as it encourages new ideas that can take shape of concrete plans.
 Planning facilitates decision making as it enables a manager to choose the best alternative course
‘of action among the various available alternatives in light of present and future conditions.
 Planning establishes standards for controlling. Planning provides standards against which the
actual performance is measured and timely corrective actions the taken.

TYPES OF PLANNING
On the basis of use and duration

 Single use plans are the ones that are formulated to deal with new or non-repetitive situations that
may arise in an organisation from time-to-time. For example- programmes, budgets and projects.
 Standing plans refer to the another type of plans which once formulated may be used for a long
period of time in similar or repetitive situations that may prevail in an organisation. For example—
objectives, strategies, policies, methods, procedures and rules.

On th basis of what a plan seeks to achieve

 Objectives are the end results of the activities that an organisation seeks to achieve through its
existence.
 A strategy is a comprehensive plan for achieving the objectives of the organisation.
 Policy is a set of general guidelines that help in managerial decision making and action.
 Method refers to the prescribed ways or manner in which a task has to be performed considering the
objective.
 Procedure refers to a series of specific steps to be performed in a chronological order to carry out
the routine activities.
  Budget refers to a financial plan that is expressed in numerical terms.
 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.
 Programme is a comprehensive plan that contains detailed statements about a project which outlines
the objectives, policies, procedures, rules and method and the budget to implement any course of
action.

Steps Involved in the Planning Process

 Setting clear, specific and measurable objectives for the entire organisation and each department or
unit within the organisation.
 Developing Premises which reflect the assumptions about the future that the manager is
required to make since the future is uncertain.
 Identifying alternative courses of action through which the desired goals can be achieved.
 Evaluating alternative courses to analyse the relative pros and cons of each alternative in light of
their feasibility and consequences.
 Selecting an alternative or a combination of plans which appears to be most feasible.
 Implement the plan with the help of a strategy.
 Follow up action in order to monitor the plans to ensure that the desired objectives are achieved
efficiently and effectively.

Limitations of Planning

 Planning leads to rigidity as plans are drawn in advance and managers may not be in a position to
change them in the light of changed conditions.
 Planning may not work ina dynamic environment as through planning, everything cannot be
foreseen.
 Planning reduces creativity as the top management undertakes planning of various activities
whereas the middle managers are neither allowed to deviate from plans nor are they permitted to act
on their own.
 Planning involves huge costs in terms of time and money required to undertake scientific
calculations and sometimes it may not justify the benefits derived from it.
 Planning is a time consuming process and sometimes there is not much time left for
implementation of the plans.
 Planning does not guarantee success because it is not always essential that if a plan has worked
before, it will work again, as things may change. This kind of complacency and false sense of
security may actually lead to failure instead of success of a business.

Answer the following question:

1. State any three points of importance of planning function of management.

2. Give the meaning of ‘objectives’ and ‘budget’ as types of plans.
3. State any three limitation of planning.
4. Give the meaning of ‘procedure’ and ‘rule’ as types of plans.
5. State any three features of planning.
6. Give the meaning of ‘policy’ and ‘strategy’ as type of plans.
7. Give the meaning of ‘Strategy’ and ‘Rule’ as types of plans
(CBSE, Delhi 2017)
Answer:
The three points indicating the importance of planning is described below:

1. Reduces the risk of uncertainty: Planning relates to deciding in advance about the tasks to be
performed in future. This enables a manager to anticipate changes and devise the way to deal with
changes and uncertain events effectively.
2. Planning promotes innovative ideas: Planning is one of the basic managerial functions. Before
doing something, the manager must formulate an idea of how to work on a particular task. Thus,
planning is closely connected with creativity and innovation. It is the most challenging activity for
the management as it guides all future actions leading to growth and prosperity of the business.
3. Avoiding overlapping and wasteful activities: Planning ensures clarity in thought and action and
serves as the basis of coordinating the activities and efforts of different individuals and departments.
Therefore, by curtailing useless and redundant activities it helps in smooth working of the
organisations work is without interruptions. Moreover, it makes detection of inefficiencies easier so
that timely corrective measures may be taken to avoid them in future.

Question 2.
Give the meaning of ‘objectives’ and ‘budget’ as types of plans. (CBSE, Delhi 2017)
Answer:

1. 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. Objectives are based on the mission or philosophy of the organisation. Objectives are
determined by top level management. For example, the objectives of a newly started business is to
earn 30% profit gn the amount invested in the first year.
2. Budget: A budget refers to a financial plan that is expressed in numerical terms. For example, the
marketing manager prepared an area wise sales target for different products for the forthcoming
quarter. It is a type of single use plan.

Question 3.
State any three limitation of planning. (CBSE, Delhi 2017)
Answer:
The three limitations of planning are described below:

1. 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 difficult to anticipate all the likely future changes in the environment
with utmost accuracy. Hence, even with planning everything cannot be foreseen.
2. Planning reduces creativity: The top management undertakes planning of various activities
whereas the other members are expected to merely implements these plans. This restricts the
creativity of the middle managers as they are neither allowed to deviate from plans nor are they
permitted to act on their own.
3. 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 4.
Give the meaning of ‘procedure’ and ‘rule’ as types of plans. (CBSE, Delhi 2017)
Answer:
 1. Procedure: A procedure contains a series of specific steps to be performed in a chronological order
to carry out the routine activities. It is determined by lower and middle level management. It is a
specific statement. There is no scope for managerial discretion. Procedure is framed to implement a
policy. It is a type of standing plan.
2. 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. Rules help to maintain discipline. Rules are both specific and rigid. For example, No
smoking, No Parking. It is a type of standing plan.

Question 5.
State any three features of planning. (CBSE, Delhi 2017)
Answer:
The three features of planning are described below:

1. Planning is pervasive: Planning is not an special function, is equally essential at all levels of
management. But the scope of planning varies at different levels and among different departments.
2. 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.
3. Planning is a primary function: Planning precedes all the functions of management i.e. organizing,
staffing, directing and controlling. This refers to primacy of planning. Planning provides basis of all
other functions.

Question 6.
Give the meaning of ‘policy’ and ‘strategy’ as type of plans. (CBSE, Delhi 2017)
Answer:

1. Policy: Policy are general statements that guide managerial decision making. If is determined by top
level management. It is a general statement. It provides scope for managerial discretion. Policies are
framed to achieve the objectives of an organisation. They all guides in implementing the strategy. It
is a type of standing plan.
2. Strategy: A strategy is a comprehensive plan prepared for winning over the given challenge or
problem. A strategy is based on the objectives of the organisation. A strategy may be determined by
top level or middle level management.

Question 7.
Give the meaning of ‘Objective’ and ‘Procedure’ as types of plans. (CBSE, OD 2017)
Answer:

1. 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. Objectives are based on the mission or philosophy of the organisation. Objectives are
determined by top level management. For example, the objectives of a newly started business is to
earn 30% profit on the amount invested in the first year.
2. Procedure: A procedure contains a series of specific steps to be performed in a chronological order
to carry out the routine activities. It is determined by lower and middle level management. It is a
specific statement. There is no scope for managerial discretion. Procedure is framed to implement a
policy. It is a type of standing plan.

Question 8.
Give the meaning of ‘Strategy’ and ‘Rule’ as types of plans. (CBSE, OD 2017)
Answer:
 1. Strategy: A strategy is a comprehensive plan prepared for winning over the given challenge or
problem. It is based on the objectives of the organisation. It may be determined by top level or
middle level management.
2. Rule: Rules are specific statements that tell people what should or should not be done. Violation of
Rules may lead to imposition of penalties. Rules help to maintain discipline. Rules are both specific
and rigid. For example, No smoking, No Parking. It is a type of standing plan.

CBSE Class 12 Case Studies In Business Studies - Planning - CBSE Sample Papers