Chapter 4 - Planning

Define Planning? – 1 mark

Planning means

• making decisions with regards to goals to be achieved and
• the methods to be adopted to achieve those goals.

Explain briefly 6 steps in PLANNING PROCESS OR in FORMULATION OF A PLAN – 6

1. Defining objectives 1st step-of the management is to develop a plan and set some clear and specific objectives, which should stipulate the areas where organized planning must occur.
2. Choosing alternatives: 2nd step - the manager should ascertain as many available alternatives as possible for reaching those objectives and he should explore all those alternatives without going into the merits and demerits of those alternatives.
3. Developing planning premises: 3rd step - the manager should list all the premises (assumptions) for each alternative and then determine the feasibility of using any one alternative to reach its objectives.
4. Choosing the best alternative: 4th step - the manager should evaluate all the alternatives + the premises on which the alternatives are based so that the unreasonable alternatives can be eliminated from further consideration and the best alternative can be decided to achieve the objectives of the organization.
5. Forming supportive (derivative) plans: (Explain the meaning of supporting plans with the help of a suitable example? After forming the main plan, secondary plans are derived in order to support and expedite the achievement of the main plan. These secondary plans are known as derivative or supportive plans.

   For example – once the production plan is prepared, secondary plan would be to buy equipment, raw material, recruit and train staff, develop new product, etc. These derivative plans are formed on the basis of the main plan and therefore support it.

6. Putting the plan into action: Once plans are developed, they are ready to be put into action. The organization does not benefit from the planning process until this step is carried out.

   For example – if the firm decides to promote sales through advertising, then the company should engage an advertising agency to go ahead with the advertising otherwise the company will not achieve its desired results.

7. Following up: Once the plan is put into action, it should be monitored because in the course of implementing the plan, many adjustments may be required in order to achieve the given objective.

   NOTE: if any additional correct point is added at any relevant stage without violating the sequence, full credit should be given. If sequence is not maintained, 2 marks are deducted

“Planning is not a guarantee of success of a business “. Comment

Or

Why does planning sometimes fail in spite of the best effort of management? – 5 marks

Or

Explain the LIMITATIONS of planning? – 5 marks (First Semester 2003)

Or

Explain “rigidity” as a limitation of planning – 3 marks (Board Exams - 1998, 2004)

Rigidity:

• Planning leads to rigidity. This has an adverse effect on the initiative to be taken by the managers.

  For example – due to a sudden change in the economic environment, a manager may have to change the course of action to achieve the desired result. But the manager may not be able to take the initiative if it is not in the plan in which case rigidity in planning may prove costly to the organization.

• Rigidity may be internal as well as external.

Inaccurate:

Planning is based on the future, which is uncertain and beyond the control of the organization. Predicting the future is difficult. Any plan based on inaccurate information may not be very useful to the organization.

Psychological barriers:

There are some inbuilt psychological barriers. For example-people prefer the present rather than the future, as the future is relatively uncertain. Also planning involves change and adjustment to such changes and people tend to resist change.

Costly:

• Planning is an expensive exercise as it involves time and money to prepare estimates, collect information and evaluate various courses of action.
• Often there may be need to hire the services of experts for the purpose of planning.
• Thus, planning can be beneficial only if the benefits to be derived from it are more than the costs.

Unsuitable:

In planning there are set policies, procedures to be strictly followed under all circumstances. However, this is against the very concept of business. Business is a dynamic activity faced with opportunities and problems. If it follows a set course of action, there may be risks of failure.

Time consuming:

Planning requires time to think, analyze the situation and then design the final plan. In case of emergencies it is necessary to take on the spot decisions. In such situations, time is a precious commodity and any delay caused by planning may deprive the business of a profitable opportunity.

Explain in brief, the meaning of “Goals & Objectives & Rules” as types of plans and give any four examples of each.

Or

Explain the types of plans?

“Goals” are collective ends towards that an organization direct their energies and activities.

Examples:

1. The goal of a car company can be to provide good quality and economically priced automobiles to the public.
2. Improvement in communication system
3. Improvement in customer relationship
4. Improvement in sales of specific product

“Objectives” are the ends towards which activity is aimed. They are the results to be achieved. An objective should meet the following five requirements –

1. It should relate to a single specific topic
2. It should relate to a result and not to an activity to be performed
3. It should be measured in quantitative terms whenever feasible
4. It should have a deadline for achievement

“Rules” are rigid instructions. They are specific statements and guide to behaviour. They indicate what should and should not be done. In rules, there is no scope for discretion.

Explain the term “policy” and procedure” as types of plans and give any four points of distinction between them. – 6 marks

“ Policy” is a general statement of an organization which specifies its intention to respond to a specific problem or situation “.

Example: McDonald has a policy that it will not grant franchise to an individual who already owns another fast food restaurant.

Likewise a school admission office may have a policy that admission will be granted only to those applicants who have secured 60% and above

“Procedure” is a guide to action. It contains steps in chronological order for handling future activities.

Example: McDonald has a procedure that explains exactly how Big Macs are to be cooked, how long they can stay in the warming rack, etc.

Distinguish between (Any four points): 6 marks

POLICIES	PROCEDURES
It is a guide to thinking and steps to decision making	It is a guide to action and contains steps in chronological order to handle future activities
They are general statements	They are specific statements
Flexible	Rigid
Scope for discretion	No scope for discretion
Decided by top level management	Decided by middle & low level management
There may be different policies for different departments	There are same procedures for all departments
They are not dependent on procedures	They are dependent on policies

Marking Scheme – Policies and Rules (Important)

POLICIES	RULES
General statements	Specific statements
Flexible	Rigid
Scope for discretion	No scope for discretion
Guide to decision making	Guide to behaviour
Lay down management attitude	Indicates what should or should not be done
Example : McDonald's has a policy that it will not grant franchise to an individual who already owns another fast food restaurant.	Example: McDonald restaurant has a rule which prohibits customers from using its telephone