CHAPTER-04

PLANNING
 Introduction

 Planning is essential in every walk of life. Each and

every person has to frame a plan to recede in his
activities. The plan period may be short or long.
Planning is the first and foremost function of
management.

 Effective planning facilitates early achievement of

objectives, which depends upon the efficiency of the
planner. A planner can develop his efficiency by
preparing himself to face the functional
developments.
 Meaning of Planning

 Planning is an intellectual process of thinking

resorted to deicide a course of action which
helps achieve the predetermined objectives of
the organization future.
 Separate plans are prepared for various
departments, and then the top executives of
the organization take steps to co ordinate the
various departmental plans.
 Definition
Koontz & O'Donnell, “Planning is deciding in advance
what to do, how to do and who is to do it. Planning
bridges the gap between where we are to, where we
want to go. It makes possible things to occur which
would not otherwise occur”.

Terry “Planning is the selecting and relating of facts and

the making and using of assumptions regarding the
futurein the visualization and formulations of proposed
activities believed necessary to achieve desired results
Planning Vs. Forecasting

 Remember planning is not forecasting.

 Forecasting is prediction or estimates of

future changes.
 Planning is deciding in advance what is to be
done in future.
Features /Nature /Characteristics of Planning

Amazon’s mission statement is “We strive to offer our

customers the lowest possible prices, the best available
selection, and the utmost convenience.”

 Planning focuses on objectives

 It is primary function of management
 All pervasive
 An intellectual process
 A continuous process
 dynamic (flexible)
 Facilitates decision making
 Establishes standards for controlling
 Focuses attention on objectives of company
Characteristics of Planning

 Primacy of Planning
 Contributes to the goals
 Intellectual activity
 Higher efficiency
 Flexibility
 Consistency.
Characteristics of Planning
 It is done for a specific period.

 It not only selects the objectives but also develops

Policies, programs and procedures to achieve the
objectives.

 It is required at all levels of management.

 It is an interdependent process which co ordinates the

various business activities.

 It directs the members of the organization.

 Growth and prosperity of any organization depends upon

planning.
 Nature of Planning

 Planning is flexible

 unity and consistency

 Planning is common to all

 Basis for all managerial functions

 Getting coordination

 Considering limiting factors

Objectives of Planning

Reduce
Anticipate uncertainty Bring
unpredictable cooperation
contingencies and
coordination
PLANNING
Economy in Reduce
operation competition
Achieving the
predetermined
goals
As a managerial function, planning is important for the following
reasons:
 Steps of planning
 Analyzing the Business
environment
 Establishing the objectives
 Setting planning premises
 Identifying the alternatives
 Selecting the best alternative
 Formulating the secondary
plans
 Implementing the plan and
reviewing of results
 Identifying goal.
 Selecting strategies to
achieve the goal.
 Arranging required
resources.
 Create a timeline.
 Determine assessment
and tracking method.
 Finalize a plan.
 Distribute the task among
involved people.
 Implement and monitor
all steps carefully
Elements of Planning
•Objectives
•Forecasting
•Policies
•Procedures
•Rules
•Programs
•Budgets
•Projects
•strategies
Objectives are the goals towards which all managerial activities are aimed at.

Business forecasting refers to analysing the statistical data and other economic,
political and market information for the purpose of reducing the risks involved in
making business decisions and long range plans.
Policies are statements or principles that guide and direct different managers at
various levels in making decisions.
Procedures are the methods by means of which policies are enforced.
Rules specifies necessary course of action in a particular situation.
Programs are precise plans of action followed in proper sequence in accordance
with the objectives, policies and procedures.
Budget means an estimate of men, money, materials and equipment in
numerical terms required for implementation
A project is a single-use plan which is a part of a general program
Strategies are the devices formulated and adopted from the competitive
standpoint
TYPES Of PLANNING
4 types of plans that managers create and apply to
direct business operations, monitor and control
organizational activities for achieving set goals.

 Hierarchical plans,
 Standing plans,
 Single-use plans,
 Contingency plans
Hierarchical plans

 Strategic:
 involves top management level
 defines the organization’s long-term vision
 how the organization intends to make its vision a
reality
Administrative :
 done at the level of middle management.
 allocate organizational resources and coordinate
internal subdivisions
 process of determining the contributions that
sub-units can make with allocated resources.
 Operational:

 process of determining how specific tasks can best be

accomplished on time with available resources.
 done to cover the day-to-day operations of an
organization.
 Many operational plans are designed to govern the
workings of the organization’s technical core.
 Standing Plans

Standing plans are drawn to cover issues that managers

face repeatedly. Most common standing plans:
 Mission or purpose
 strategies
 policies
 procedures
 rules
 Single-use Plans

Single-use plans are prepared for single or unique

situations or problems and are normally discarded or
replaced after one use.

Generally, four types of single-use plans are used.

These are—
objectives/goals,
programs,
projects,
budgets.
 Contingency Plans
Contingency plans are made to deal with situations that
might crop up if these assumptions turn out to be
wrong.
Contingency planning is the development of alternative
courses of action to be taken if events disrupt a planned
course of action.
contingency plan allows management to act
immediately if unforeseen events as strikes, boycotts,
natural disasters or major economic changes render
existing plans inoperable or unsuitable.
 Strategic plans
Strategy is the blueprint of decisions in an organization
that
 shows its objectives and goals,
 reduces the key policies,
 plans for achieving these goals,
 defines the business the company is to carry on, the
type of economic and human organization it wants to
be,
 the contribution it plans to make to its shareholders,
customers and society at large.
Strategy is a well defined roadmap of an organization
 Advantages of Planning

 Better utilization of resources

 Helps in achieving objectives
 Economy in operation
 Minimizes future uncertainties
 Improves competitive strength
 Effective control
 Motivation
 Advantages of Planning

 Cooperation
 Promote growth and improvement
 Develops rationality among management
executives
 Prevents hasty judgment
 Reduces redtapism
 Encourages innovative thought
Advantages of Planning

 Improves ability to cope with change

 Creates forward looking attitude in management

 Development of efficient methods

 Delegation of authority facilitated

 Anticipation of crisis
 Steps of planning process

Analysis of external Determining Formulation of action

Environment secondary programs
plans
Analysis of internal Follow up
environment and Establishing the
evaluation sequence of activities
Determination of Securing
Objectives participation
of employees Selection of the best
Determining planning alternative course of
premises and constraints action

Examination of alternative Weighing alternative course

Courses of action of action
Limitations of Planning

 Inflexibility

 Limitation of forecasts

 Unsuitability

 Time consuming

 Costly

 Mental ability
 Limitations of Planning

 False sense of security

 Delay during emergency period

 Capital Investment

 Political climate

 Trade unions

 Technological changes
 Obstacles of Planning

 Unreliability of forecasts

 Recurrence of same type of problems

 Expensive

 Loss of initiative
OBJECTIVES Of BUSINESS
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 Guess?

Mission statement: We strive to offer our customers the lowest

possible prices, the best available selection, and the utmost
convenience.
Vision statement: To be Earth's most customer-centric company,
where customers can find and discover anything they might want
to buy online.
Mission: To organize the world’s information and make it universally
accessible and useful.
Vision: To provide access to the world’s information in one click.
Mission: To be the world’s favourite destination for discovering great value and unique
selection.
Vision: Our vision for commerce is one that is enabled by people, powered by
technology, and open to everyone.
 OBJECTIVES

 Defined as the goals which an organisation tries to

achieve
 Described as the end- points of planning
 Constitute the purpose of the enterprise and without
them no intelligent planning can take place.
 Are present not only the end-point of planning but also
the end towards which organizing, directing and
controlling are aimed
 Provide direction to various activities
 Serve as the benchmark of measuring the efficiency
and effectiveness
 Planning has no meaning if it is not related to
certain objectives
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Features of Objectives
 The objectives must be predetermined.
 A clearly defined objective provides the clear
direction for managerial effort.
 Objectives must be realistic.
 Objectives must be measurable.
 Objectives must have social sanction.
 All objectives are interconnected and mutually
supportive.
 Objectives may be short-range, medium-range and
long-range.
 Objectives may be constructed into a hierarchy.

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 Advantages of Objectives
 Clear definition of objectives encourages unified planning.

 provide motivation to people in the organization.

 When the work is goal-oriented, unproductive tasks can be avoided.

 provide standards which aid in the control of human efforts in an

organization.

 serve to identify the organization and to link it to the groups upon

which its existence depends.

 act as a sound basis for developing administrative controls.

 contribute to the management process: they influence the purpose of

the organization, policies, personnel, leadership as well as managerial
control
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MANAGEMENT BY OBJECTIVES (MBO)

popularized by Peter Ducker in 1954

“MBO is a process whereby the superior and the

mangers of an organization jointly identify its common
goals, define each individual’s major area of
responsibility in terms of results expected of him, and
use these measures as guides for operating the unit and
assessing the contribution of each of its members.”

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 Features of MBO
 Is concerned with goal setting and planning for
individual managers and their units.
 The essence of MBO is a process of joint goal setting
between a supervisor and a subordinate.
 Managers work with their subordinates to establish
the performance goals that are consistent with their
higher organizational objectives.
 Focuses attention on appropriate goals and plans.
 Facilitates control through the periodic development
and subsequent evaluation of individual goals and
plans.

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 Steps in MBO
The typical MBO process consists of:

 Establishing a clear and precisely defined

statement of objectives for the employee
 Developing an action plan indicating how
these objectives are to be achieved
 Reviewing the performance of the
employees
 Appraising performance based on objective
achievement
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 Advantages
 Motivation – Involving employees in the whole
process of goal setting and increasing employee
empowerment
 Better communication and Coordination
 Clarity of goals
 Subordinates have a higher commitment to objectives
they set themselves than those imposed on them by
another person.
 Managers can ensure that objectives of the
subordinates are linked to the organization's
objectives
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 Limitations
 It over-emphasizes the setting of goals over the
working of a plan as a driver of outcomes.

 It underemphasizes the importance of the

environment or context in which the goals are set.

 That context includes everything from the availability

and quality of resources, to relative buy-in by
leadership and stake-holders

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 STRATEGIES
'Strategy' stands for the war-art of the military general,
compelling the enemy to fight as per our chosen terms
and conditions

A perfect strategy can be built only on perfect

knowledge of the plans of others in the industry.

This may be done by the management of a firm putting

itself in the place of a rival firm and trying to estimate
their plans

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Characteristics of Strategy
 It is the right combination of different factors.
 It relates the business organization to the
environment.
 It is an action to meet a particular challenge, to
solve particular problems or to attain desired
objectives.
 Strategy is a means to an end and not an end in
itself.
 It is formulated at the top management level.
 It involves assumption of certain calculated risks.

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Strategic Planning Process / Strategic
Formulation Process

Input to the Organization: Various Inputs (People, Capital,

Management and Technical skills, others) including goals input of
claimants (Employees, Consumers, Suppliers, Stockholders,
Government, Community and others)need to be elaborated.

Industry Analysis: Formulation of strategy requires the

evaluation of the attractiveness of an industry by analysing the
external environment. The focus should be on the kind of
completion within an industry, the possibility of new firms
entering the market, the availability of substitute products or
services, the bargaining positions of the suppliers, and buyers or
customers.
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Enterprise Profile: Enterprise profile is usually the
starting point for determining where the company is and
where it should go. Top managers determine the basic
purpose of the enterprise and clarify the firm’s
geographic orientation.

Orientation, Values, and Vision of Executives:

The enterprise profile is shaped by people, especially
executives, and their orientation and values are
important for formulation the strategy.

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Mission (Purpose), Major Objectives, and Strategic
Intent:
answer to the question: What is our business?
Present and Future External Environment

Internal Environment: Internal Environment should be audited

and evaluated with respect to its resources and its weaknesses,
and strengths in research and development, production,
operation, procurement, marketing and products and services.
Other internal factors include, human resources and financial
resources as well as the
company image, the organization structure and climate, the
planning and control system, and relations with customers.

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Development of Alternative Strategies: Strategic
alternatives are developed on the basis of an analysis of the
external and internal environment. Strategies may be specialize
or concentrate.

Evaluation and Choice of Strategies: Strategic choices

must be considered in the light of the risk involved in a
particular decision.

Medium/Short Range Planning, Implementation through

Reengineering the Organization Structure, Leadership and
Control
Consistency Testing and Contingency Planning

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 Components

Forecasting related to predicting occurrence of

future events
Decision Making selecting an appropriate
alternative
Planning Vs. Forecasting

 Remember planning is not forecasting.

 Forecasting is prediction or estimates of

future changes.
 Planning is deciding in advance what is to be
done in future.
 Types of forecasting

Qualitative and quantitative forecasting method: Personal

opinion based forecasting is qualitative method: forecasting based
on past numerical data is quantitative forecasting.

Naive forecasting method: last year’s actual are used as present

period’s forecast, without trying to adjust them.

Judgmental forecasting method: based on subjective estimates

and intuition.

Time series forecasting method: In this method, a group of data is

recorded over a specific time period. Most of the time past
patterns repeats in the future. used to make a long term forecast
like 5 years, 10 years, and 15 years.
 Decision Making
Decisions are taken to support organizational growth. The whole fabric of
management, i.e. its day to day operation is rightly built on managerial
decisions.

Discussions and consultations are two main tools that support and eventually
bring out decisions.

Play important roles as they determine both organizational and managerial

activities.

The process is continuous and indispensable component of managing any

organization

Decisions are made to sustain the activities of all business activities and
organizational functioning.
 Process

Process involves the selection of a course of action from among

two or more possible alternatives in order to arrive at a solution
for a given problem
Decision making process can be regarded as check and balance
system that keeps the organization growing both in vertical and
linear directions.

 Defining the problem

 Gathering information and collecting data
 Developing and weighing the options
 Choosing best possible option
 Plan and execute
 Take follow up action
 Techniques
Quantitative Qualitative

 Linear programming  Brainstorming

 Decision tree  Delphi technique
 Queuing theory  Follow the leader
 Investment analysis  Experimentation
 Ratio analysis
 Pert CPM
 Corporate decision making

Corporate decision making happens at various levels in

organizations and can be top down or bottom up.

In any process of corporate decision making, the actual

implementers play a critical role

is also characterized by consensus or the lack of it

often depends on the leader’s charisma or his or her ability and

vision.

Thrives as long as there is a bond in the form of charismatic

leaders or an organizational culture that values coherence and
imposes stability.
 OODA Loop and Decision Making

Proposed by the military strategist and member of the United States Air
Force, Colonel John Boyd.

Mainly concerned about situations that involve split second decision making.
 VUCA
Volatility, Uncertainty, Complexity and Ambiguity (VUCA)
Paradigm
 four components of VUCA mean

Volatility is about the increasing pace of change.

Uncertainty is about the unpredictability of the future.

Complexity is about the interconnected nature of

organizations, industries, markets, and geographies.

Ambiguity is about what the famed military theorist Carl von

Clausewitz called “the fog of war.”
The Cynefin framework is useful.
TYPES OF STRATEGIES
 Cost leadership strategy: This generic strategy calls for being the low cost
producer in an industry for a given level of quality. The firm sells its products
either at average industry prices to earn a profit higher than that of rivals, or
below the average industry prices to gain market share.

 Differentiation strategy: A differentiation strategy calls for the development

of a product or service that offers unique attributes that are valued by
customers and that customers perceive to be better than or different from the
products of the competition.

 Focus strategy: The focus strategy concentrates on a narrow segment and

within that segment attempts to achieve either a cost advantage or
differentiation. The premise is that the needs of the group can be better
serviced by focusing entirely on it. A firm using a focus strategy often
enjoys a high degree of customer loyalty, and this entrenched loyalty
discourages other firms from competing directly.
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