MODERN BUSINESS

PRACTICES

Prepared by DEEPALI MITTAL (SDJIC)

 UNIT 2: PLANNING,
STRATEGIC PLANNING AND
DECISION MAKING(20%)
 Meaning
A basic management function involving formulation of one or more
detailed plans to achieve optimum balance of needs or demands with
the available resources.

The planning process:

1. Identifies the goals or objectives to be achieved.

2. Formulates strategies to achieve them.

3. Arranges or creates the means required.

4. Implements, directs, and monitors all steps in their proper sequence.

 Characteristics of Planning
• All Pervasive.-Universal

• Primary Function of Management.-first, have to start with planning

• Continuous Process.-not an one time job

• Conscious & intellectual Activity.-have to use your mind/brain

• Flexible.-not rigid, prefer to change

• Forecasting is the Essence.- somewhere planning includes the anticipation

of future
Accuracy is essential.- must be correct
Intellectual process.-mental process
Choice of alternative.-making decision, choose the best option in the form
of planning
Concerns future activity.- peeping into the future
Object oriented activity.-final result will be our goal, everyone wants to
achieve
Decision making is essential.-have to choose the one
 IMPORTANCE OF PLANNING
All activities become purposeful and orderly:
Planning gives direction and purpose to all organizational activities. It helps
employees understand their roles and how their efforts contribute to the
achievement of organizational goals.

It helps in economizing by reducing wastage:

Effective planning helps identify and eliminate wasteful activities, resources,
or processes, leading to cost savings.
Example: A retail store analyzes sales data and plans inventory accordingly,
reducing overstocking and understocking. This planning approach minimizes
wastage of shelf space and excess inventory, resulting in cost savings.
Useful in facing future changes and uncertainties:
Planning involves considering different scenarios and preparing for
contingencies. It helps organizations adapt to changes and uncertainties in
the business environment.

Focuses attention on the objective of the unit:

Planning keeps everyone aligned with the organization's goals and
objectives, ensuring that efforts are directed towards achieving these
objectives.

Planning imparts accuracy:

Planning involves setting specific goals and objectives, which provides a
basis for measuring performance accurately.
Planning helps other functions of management:
Planning is the foundation upon which other management functions like
organizing, staffing, directing, and controlling are built. Effective planning
informs and supports these functions.

Planning facilitates control:

Planning sets benchmarks and standards against which actual performance
can be compared. This comparison allows for control and adjustments when
necessary.

Planning helps visualize a clear and complete picture of the business:

Planning requires a thorough analysis of the organization's current state and
desired future state. This process helps create a comprehensive
understanding of the business.
Secures cooperation from employees:
When employees understand the organization's goals and how their roles
contribute to them, they are more likely to cooperate and work towards
these goals.

Maintains a balance between various activities:

Planning helps allocate resources and efforts in a balanced manner across
different aspects of the organization, preventing overemphasis on one area
at the expense of others.
 Criticism of planning
1. Uncertainty the base of planning
2. Long and expensive process
3. Planning makes management rigid
4. Planning is unnecessary
5. Inflexibility of external forces
6. Inaccurate and inadequate data
7. Planning curtails the freedom of employees
8. Use of defective methods
Uncertainty as the base of planning: Planning is often based on predictions
and assumptions about the future. However, the future is inherently uncertain,
making it challenging to accurately predict all possible scenarios.
Example: A tech company planning a new product launch may estimate market
demand, but unexpected shifts in consumer preferences or unforeseen
industry developments can drastically impact the success of the product.

Long and expensive process: Planning can be time-consuming and costly,

especially for complex and large-scale projects or organizations. The extensive
data collection, analysis, and consultations involved can lead to delays and
increased costs.
Example: A multinational corporation planning a global expansion might spend
months or even years conducting market research, legal assessments, and
financial projections before finalizing the expansion strategy.
Planning makes management rigid: Over-reliance on a rigid plan can suppress
adaptability. Strict adherence to a plan may prevent management from
responding effectively to changing circumstances or seizing unforeseen
opportunities.

Planning is unnecessary: In rapidly changing and highly uncertain

environments, some argue that planning extensively for the future is
unnecessary, as circumstances may shift before the plan can be fully
implemented.

Inflexibility of external forces: External factors like economic changes, policy

shifts, or natural disasters can render a well-planned strategy ineffective or
outdated, highlighting the inflexibility of plans in the face of external forces.
Example: A travel agency's growth plan might be severely impacted by sudden
travel restrictions imposed due to a global health crisis.
Inaccurate and inadequate data: Planning relies on data for informed decision-
making. However, if the available data is inaccurate, outdated, or insufficient, it
can lead to flawed planning and incorrect assumptions.
Example: A food delivery service planning to expand into a new market might
make wrong assumptions about consumer preferences if they rely on outdated
or inaccurate market research data.

Planning curtails the freedom of employees: Excessive planning can create a

rigid environment, limiting employees' ability to make impromptu decisions and
stifling creativity and innovation.

Use of defective methods: If the planning methods employed are flawed or

inadequate, the resulting plan will also be faulty, leading to ineffective
strategies and suboptimal outcomes.
 Types of Planning by Stuart Thomson
Stuart Thomson, the head of the research department of American Management
Association, has classified Planning as follows:

ON THE BASIS OF OBJECTIVES:

• Planning of existing business-day to day planning
• Reform oriented planning-planning to change into improved condition
• Developmental planning-for development of business; sales, production

ON THE BASIS OF TIME:

• Long range planning-5 year or more
• Short range planning-1 year or less
ON THE BASIS OF FUNCTIONAL AREA:
• Production planning-where to produce, what is the method, cost, raw material
to be used, etc.
• Product planning-quality, texture, changes you make in product, etc.
• Financial planning-requirement, sources & utilization
• Human resource planning-recruitment, selection, test, interview, training, offer
letter, appointment, promotion, demotion, transfer, retrenchment, etc.
• Profit planning-margin, how to be set as profit part, it is included in all type of
planning.
 Types of Planning according to Stephen P.
Robbins & Mary Coulter
ACCORDING TO BREADTH:
• Strategic Planning - detail plan to achieve overall goal of organization
• Operational Planning - day to day , weekly, monthly plan, just as a part of way to
achieve objectives.

ACCORDING TO TIME:
• Short term-1 year or less
• Long term-5 year or more
ACCORDING TO SPECIFICITY:
• Directional planning- general guidelines, don’t lock the managers into certain
course of action.
• Specific planning- no ambiguity, no misunderstanding

FREQUENCY OF USE:
• Single use planning - cannot be used for purpose other than what it is meant for.
• Standing plan - use repeatedly in similar situation
 STRATEGIC PLANNING
• What is a strategy?
A plan of action designed to achieve a long-term or overall aim i.e. the
mission & vision of the organization.

• Strategic Planning: It is a process in which long term objectives are

determined & programs are specified to achieve them. It is the function of
top level management.
 Characteristics of STRATEGIC PLANNING

• Long Term Planning

• Deals With Basic Questions
• Function Of Top Level Management
• Base For Detailed Plans
• Focuses On Energies & Resources
• Analysis Of The Environment
 OPERATIONAL PLANNING
• An Operational Plan is a highly detailed plan that provides a
clear picture of the actions taken a team, section or
department to contribute to the strategic objectives and plans
of top level management.
Point of difference Strategic Planning Operational Planning

Long run goal, which is centre

Object detailed plan, short term
of all activities, vision

Duration Long term Short term

Planners Top management Middle & lower

Degree of risk higher lower

Less chances of Unexpected
Variable/forces unknown
risk
To run smoothly, whatever is
Core aspect productivity
existing

Expensive more Less

 Introduction
In the course of managing an organization, the manager is confronted with
several problems which require immediate and appropriate solutions. Hardly a
day passes without making some decisions.
According to Harold Koontz, “Decision making is
defined as the selection of a course of action
among various alternatives; it is the core of
planning”.

According to Peter F.Drucker, a decision is a

judgement. It is a choice between alternatives.
It is rarely a choice between right and wrong.
It is a best choice between “almost right” and
“probably wrong”.
 CHARACTERISTICS OF DECISION MAKING

 Managerial function

 Based on alternatives

 An element of planning

 Intellectual process

 Process of rational thinking

 Decisions may be positive or negative

 IMPORTANCE OF DECISION MAKING
• Decisions making is all pervasive. It takes place at every level of
management.
• Decision making is a key to managerial functions which comes to life due to
decision making.
• Decisions are the yard sticks to measure the efficiency of management.
• Decision-making is essential for solving the problems of business.
• Decision making is necessary for the successful realization of business
objectives.
 TYPES OF DECISIONS
 Basic decisions & Routine decisions
 Organizational decisions & Personal decisions
 Programmed & Non-programmed decisions
 Planned decisions & Off-The-Cuff decisions
 Policy decisions & Operative decisions
 Tactical decisions & Strategic decisions
 Individual decisions & Group decisions
 BASIC AND ROUTINE DECISIONS

BASIC DECISIONS:
• Example: Plant Location, Distribution etc.
• Basic decisions are genuine decisions according to him.
• Basic decisions are made once for all and hence they are more important as
compared to routine decisions.
• Even a minor error in basic decisions can disrupt the whole organization severely.
• Decisions about location of the plant layout, finance and expansion or
modernization are the examples of basic decisions.
• As Dalton Macfarland has stated basic decisions require a good deal of study,
discretion and foresight.
ROUTINE DECISIONS:
• Routine decisions are of repetitive nature. They are to be made on a day to day
basis. Hence, they require less discussion as compared to basic decisions.
• They involve the application of the familiar principles to a situation.
• They are short term decisions; and their procedure is predetermined.
• They concern administrative issues such as production, sales, finance, personnel
and office, etc.
• From where to purchase raw materials, what type of packing should be used,
when should employees be promoted and when should they be given training etc.
are the examples of routine decisions.
 ORGANISATIONAL DECISIONS & PERSONAL DECISIONS

Organisational Decisions:
▪ How much to produce, How much capital is to be issued, How much materials
is to be purchased, these are some of the examples of organisational decisions.
▪ These decisions are made with a view to promote the interests of the whole
business organisation.
▪ They are of formal nature, rooted in the powers of the executive and influencing
a large number of employees in the organisation.
▪ The decisions made by a manager in the organisation on the basis of the power
delegated to him are organisational decisions.
▪ These decisions are made in consultation with other executives.
Personal Decisions:
▪ A decision that concerns only a single employee in the organisation and is made
in individual capacity for personal matters is known as personal decision.
▪ For instance, if an employees takes decision on resigning or retiring, it is a case of
personal decision
▪ Though these relate to personal matters, they do affect the working of the
organization.
▪ The making of this decision does not require special powers or authority.
▪ Moreover, the results of the decision are to be borne by the person concerned
only.
 PROGRAMMED DECISIONS AND
NON-PROGRAMMED DECISIONS

Programmed decisions: Programmed decisions are basically of a routine type for

which organization has developed specific processes.
▪ These decisions are related to day-to-day problems and are therefore repetitive
in nature.
▪ The decision about inventory is an example of programmed decision.
Non-Programmed decisions: These decisions are non-repetitive. No specific and
long-established procedure is available to take these decisions.
▪ They are handled by non-traditional novel processes.
▪ Example: Covid, lockdown, Salary Deduction
 PLANNED AND OFF-THE-CUFF DECISIONS

• Planned decisions are a part of a definite plan of the business organization and
are handled by a scientific method.
• For ex- Appointing new employee from internal sources only.

• Off-the-cuff decisions arise out of the changing situations of business.

• For ex- Discontinuing the production of a product, fire extinguisher
 POLICY DECISIONS AND OPERATIVE DECISIONS

Policy decisions are concerned with making policies of the business.

• Handled by top management.
• Fundamental decisions and affect the whole business.
• For ex- Promotion policy, dividend policy, credit policy, etc.

Operative decisions are taken to execute policy decisions.

• Concerned with lower/middle level management.
• For ex- decision to declare bonus for the employees.
 TACTICAL DECISIONS AND STRATEGIC DECISIONS

Tactical decisions are comparatively less important and can be taken with less
difficulty.
Strategic decisions are taken to formulate a definite strategy to meet a particular
situation with a fair degree of success.
➢ First affect the external circumstances and then affect the internal situation.
➢ Involve large investment of funds.
➢ For ex- Decisions with regard to price cut in a situation of cut throat
competition.
 INDIVIDUAL DECISIONS AND GROUP DECISIONS

Individual decisions are those which are made by one individual.

➢ Major in small scale business owned by a single individual.
➢ Individual concerned himself takes these decisions on his own.
➢ Authority to take these decisions is not assigned nor any decision is held with
other persons.
Group decisions are taken by a group of the members of organization after
deliberation among themselves.
➢ Such decisions taken by the board of directors, a committee of the experts.
➢ There is exchange of view, opinions and advice in group decisions.
➢ Such decisions are more effective and matured.
 Stages of Decision Making

1. 2.
3.
Defining and Collecting and
Analyzing the
Clarifying the Analyzing
Problem
Problem Information

6. 5. 4.
Implementing Evaluation and Developing
and Follow-up Selection of Alternative
of Decision Alternatives Solution
• DEFINING AND CLARIFYING THE PROBLEM: In this stage, you identify and clearly
define the issue or problem that requires a decision. It's crucial to understand the
problem before proceeding.
Example: A manager at a company notices a decrease in employee
productivity and wants to address the issue. The problem is defined as
"declining employee productivity."
• COLLECTING AND ANALYZING INFORMATION: Once the problem is defined,
gather relevant information and data. This stage helps in understanding the
context and potential causes of the problem.
Example: The manager collects data on employee work hours, feedback from
team members, and recent changes in the workplace.
• ANALYZING THE PROBLEM: In this stage, you break down the problem into its
components and try to understand its root causes. Analyzing helps in identifying
factors contributing to the issue.
Example: The manager realizes that the decline in productivity is primarily due
to a lack of motivation and engagement among employees.
• DEVELOPING ALTERNATIVE SOLUTIONS: Brainstorm and generate multiple
potential solutions or strategies to address the problem. Encourage creativity
and diverse ideas.
Example: The manager comes up with alternatives such as implementing
flexible work hours, organizing team-building activities, or providing training
programs.
• EVALUATION AND SELECTION OF ALTERNATIVES: Assess each alternative based
on specific criteria, such as feasibility, cost, and potential outcomes. Choose the
option that seems most promising.
Example: The manager evaluates the alternatives and decides to implement
flexible work hours because it addresses the motivation issue and is cost-
effective.
• IMPLEMENTING AND FOLLOW-UP OF DECISION: Once a decision is made, put
the chosen solution into action. Establish a plan and timeline for
implementation. Afterward, monitor the results to ensure the decision is
effective.
• Example: The manager communicates the new work hours policy to the
employees, monitors their productivity, and conducts regular check-ins to
assess the impact.
THANK YOU!