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One of the essential and often overlooked steps in effective and coordinated planning is Premising.
• Planning Premises are the anticipated environments in which the plans are expected to operate.
Planning premises include assumptions or forecasts of the future and known conditions that will affect the course of the plans.
• Premising is recognition that plans operate in an environment both internal and external to the enterprise. • It thus emphasizes the long known fact that management is an opensystem approach. • It is not enough-for the Manager to be responsive to the present environment.
As Plans operate in the future an effective manager should anticipate the environment in which his plan will operate and forecast those elements in the environment, which will affect his plans. E.g.: Changes in Technology, Social conditions, Political factors etc.
• It is sometimes said, the successful manager is not one who just responds to changes as they occur, but one who will rather forecast change. • It is often also said that a successful manager is not one who dances to others tunes, but makes others to dance to his tunes by his ability to foresee changes in the environment much before they occur. • This does not mean that everything can be predicted. • There are in addition short and long range, Economic, Technological, Social and Political and even ethical changes that will affect what will or can be done in the near or far future.
Planning Premises depending on the degree of Predictability
E.g. September ll Attack on WTC, War on Iraq Etc.
E.g.: Population Growth, E.g.: Price Levels, Gross National Product changes Population Shift and Certain Technological
Types of Planning Premises: External Premises
Internal Premises are those, which are absolutely under the control of management like investment in plant and machinery, inventory etc.
Tangible Which can be quantified
Intangible which cannot be quantified and seen or felt.
Degree of controllability
Uncontrollable Semi Controllable Controllable E.g.: Growth of Population E.g.: Firm Assumptions of Largely decided Future price levels, Political the share of the market. By company Environment, BusinessCycles Type of Labour Turnover, Management. Types of Forecasting Economic Forecasting: • Fairly reliable economic, premises can be obtained from the forecasts of employment, productivity, national income, and gross national income that are available to the planners. • Most, economic forecasts are derived from calculating gross national product. • Gross national product is calculated by forecasting population, productivity increases, and unemployment percentage and average workweek available. • But problems occur in estimating such components of GNP and government purchases, personal consumption expenditures, business fixed and inventory investments, residential construction and other investments. • After studying broad forecasts of national and regional economic trends, a company should translate them into their impact on its industry and on itself. • This requires two basic estimating procedures. One is the ‘Top-Down procedure’ and the other is the ‘Bottom-Up Procedure’.
Technological Forecasting: • One of the more interesting aspects of premising in the recent years is the keen interest being shown on the Technological Forecasting.
Since the pace of Technological changes are so rapid and drastically affecting the products and processes of several firms, the firms are emphasizing more on regular and complete Technological forecasts affecting their industry. E.g.: Rate of product obsolesces is very high in software industry and in steel where the cost of production per tonne of steel has drastically come down by raising the appropriate technology.
The Following are some of the commonly used methods for forecasting technological changes:
Opportunity Oriented Techniques:
• This Technique looks at the future and raises the question as to whether a certain product may be made obsolete by a new development.
If yes, is there any Technological breakthrough that might be expected which would solve a problem seen to exist in the development of a certain product. E.g.: VCR has become obsolete with the advent of VCD and DVD. Similarly traditional cameras are on decline with the advent of Digital Cameras. • One might forecast when it would be possible to economically desalinate the seawater to overcome the drinking water problem. Goal Oriented Technique:
In this case a decision is made to reach a certain goal and then analysis is made to identify the technological needs required to achieve the goal. E.g.: The US deciding to put the man onto the moon in 1970.
Delphi Technique: Social and political Forecasting: • LPG. This has become increasingly relevant and important with the process of
• If McDonald wants to introduce its product in the Muslim countries, it has to think twice about it because the culture doesn't allow the people to consume pork. • Similarly political factors also have a significant impact on the commercial policies like the labor laws, income tax policies etc. Sales Forecast: • One of the major planning premises in the typical business enterprise is the sale forecast. • Sales forecast is very important because it sets the framework on which most internal plans are constructed and it must be regarded as the dominant Planning Premise of an Enterprise. Methods of Sales Forecasting
Jury of Executive Sales Force Opinion Method Composite
Users Expectation Users Projection Statistical Method of Past sales Methods