‘ Or jiscuss the features of orgahisational objectives. Define Organisational objectv. witch all Acres te specific, measurable ends. They are identifiable goals towards ee te ope eee on ee eet Ther the end results of the eal perforate can ee treet eee er sieaeiae standards against which actual performance can be measured, In te context of planning, organisational objectives an be defined as targets or end results that an organisation wishes t achieve, The entire grocess of planning becomes meaningles in the absence of objectives. Objectives guide he planning function of management production target of S000 units every month or profit after fax of £5 lakh every sponthy aré tha specfic and messurable goals or objectives we ae = estimated aid verified. Objectives are the precise end results which an Following are the features of organisational objectives: ( Challenging. Goals. that. are challenging, need ’ innovative and creative organisational members. An organisation with aspiring workforce opts for such ___ challenging goals. Such organisations are not attracted by routine objectives. i) Attainable. Goals, though challenging, should be attainable. People try hard to achieve challenging and innovative goals but goals should be within their abilities and skills. Managers hence should, set goals that can be achieved within the constraints of financial, physical and human resources. Goals can be both tangible as well as intangible. (ii) Specific and measurable. Intangible or qualitative goals involve subjective judgement about whether or not a goal is reached. For example, evaluating manager's performance or ortant goals but.they cannot be easily assessing worker’s morale. They are imp jneasured unless certain quantifiable standards of performance are set. Quantitative goals on the other hand encompass objective numerical standards that are relatively easy to verify and achieve. For example, production target of 1000 units every month is a specific and measurable goal which can be estimated and verified. : (iv) Time limit. Goals must be achieved within a specified time period. Organisational performance should be assessed and reviewed at regular intervals. This helps in achieving the goals within the specified time frame. (v) Supportive. Goals should be supportive in nature. Goals at lower levels should support the higher level goals. Short run goals should support the long run goals. Similarly, goals of different departments should also support each other. For example, if the organisation wants to increase sales by 7%, production department should support this goal by producing 7% more and finance department should release funds for producing and selling more. (vi) Hierarchy. Objectives at different levels of the organisation form an ends-means chain or a hierarchy where objectives at one level provide an end and a means for attaining objectives at the higher level.silv DAS DELHI UNIVERSITY SERIES Jar point of time, an : articulat tid be arranged in the order of Priority. Thy resources over ey objectives. This jg the yin jorities for profit oriented actiy; fe hy many organisations lay priorities ed wera irene activities, It ensures that resources are efficiently utilised’ on sxible. They should be changed viii) Flexible, Objectives should be flexible. 1 ged as (viii) changes in i internal and external environmental varjables of the organic he in case the initial purpose for which the organisation was establisheg™ achieved, there can be additions, / deletions in the existing objectives so that i organisation continues to operate. : e Q. 2. State the importance of setting organit Or ai Discuss the benefits of setting of objectives to the organisation. Or Discuss the importance of objectives in the context of planning and management, Ans. Setting objectives provides the following benefits to the organisation: ' p s is (i) Basis for managerial functions. Objectives provide the basis for all managerial functions. All the functions of management like planning, organising, staffing directing and controlling are directed towards organisational objectives. Clearly i defined objectives help in carrying out all managerial functions effectively. Basis for organisational existence. Objectives act as a foundation stone for a business organisation. They provide legitimacy to the business organisation. An crganisation only comes into existence if it has objectives to achieve. Objectives alow an organisation to. make its profile by’ identifying its strengths and vinesses and relate by identifying opportunities and threats. Thus objective ny Snable an organisation to relate itself with the environment.” oe (Gi) Basis for various types of plans. There are various types of plans like polici Programmes, procedures, strategy etc. All such plans are dlseciods omnes anisational objectives, jecti tpdeatir formulate the plo. Cleary dened eet ee MAMOBETS 0. frame and Prove vision of the future so that the entire onponieden ee panning. They rove: vis e entire organisation moves in the right (iv) Standards of performance. Objecti , . Objectives provide st which actual perforrnance is measured, Perfounance oi ioenanes oe directed towards objectives. Thus objectives act as a basis for yee sation is in actual performance are rectified through corrective wo eontOl: Deviation various sub units, units and departments is synchronised seo ereormance of (®) Unity of action. Objectives provide unity of action. All orean cree direction. to ali departments like production, finance, marketing, haem sstonal activities targeted towards organisational objectives, & Human resource ete, are (i) Motivation. Objectives act as a source of motivation for the organisation, Objectives at one level are a source of inspiration oP oy ees OF the achieve goals at higher levels. Workers try their best to achieve aqrotivation to challenging goals. Rational and realistic objectives motivate the ov ative and perform to the best of their abilities. Organisational goals also help inane, © personal goals. Employees feel motivated to contribute to organisations fos. goals are able to fulfill their personal needs. aoe (ii) Basis for coordination. Objectives help in coordinating the efforts of people in different departments within the organisation, Individual, sectional’ ot departmental goals are coordinated towards organisational goals. They also help in integrating the efforts of individuals with those of the groups and the an organisation can hay, (vii) Priority, Ata p: 8 © multinyg : and therefore, goals sho i optimum allocation of scarce tional objectives. organisation.UNIT I: PLANNING 39 Co otters aceon making.) Tho proceas-of decision making'is goal. orlented, Objectives lay out the areas for discretion within which organisational deciehacs can be made. Cee ates nlenetitos, Debarmenealion, meen of-civiar | delegation, ke ele etentng Ge criecian ta oe eoetnen ee fuwatdp a common direction, framing attamabie era reatieas objectives, play a key role in this regard. Q.3. Write short notes on the following: (a) Multiplicity of objectives, Ans, (a) Multiplicity of objectives. Usually it is bel business organisation is to make profits.and that of « welfare services. However this i (b) Hierarchy of objectives. lieved that the main objective of any non-profit organisation is to provide s not always true, All organisations have multiple nsuri urvival in the market, No one objective can ensure success of the organisation. Multiple objectives allow a business to jafluence divene atone groups that are in continuous interaction with it Multiple objectives allow an the following manner: Economic objectives: + Profit maximisation + High productivity + Optimum allocation of resources + Customer creation and retention * Innovation Organic objectives: + Effective utilisation of manpower + Development of human resource * Participation in management + Training and motivation Social objectives: + Customer satisfaction + Removing social problems + Fair trade practices 3 * Generating employment opportunities National Objectives: + Development of backward areas * Generation of Trade Surplus (exports) + Providing social justice * Contribution towards Research and Development. (&) Hierarchy of objectives. It indicates that managers at different levels in the hierarchy of the organisation are concerned with different kinds of objectives according to the authority they are delegated with. Objectives form a hierarchy ranging from the broad+ 40 SHIV DAS DELHI UNIVERSITY SERIES aim to specific individual objectives. At the top of the hierarchy are the main goats gy th organisation. The organisation has to fulfill its obligations towards society and the’ towards itself. The organisation has to contribute towards the welfare of Society 5" Offering good quality of goods and services at fair and reasonable prices. The) by Purpose of any business is to offer a specific level of services or a §00d quality of gi The overall objectives of the organisation are indicated at the top level management, The objectives associated with the key areas are also determined at the higher levey Management. The next in hierarchy are the objectives of departments, divisions and units 'ese are set by middle level management. The objectives associated with individuals are decided at the bottom of the hierarchy. Lower level management decides Performance standards of individuals, The following diagram depicts the hierarchy of objéctives: ™ain Top Level Management 4 / Specific Overall Objective Level Management of Key Areas 5// Division Objectives Department and Unit Objectives Individual Objectives of perforthance and Personal development experts suggest that one should not rely entirely on one appe, : should be utilised wisely for better outcomes,” 'PProach. Both the approaches Q 4. Discuss the types of objectives in the context of planning. Or Give the classification of various organisational objectives in the context of strategic planning. Ans, Organisational objectives in the context of planning are as follows: — Primary objectives. These are objectives for which an organiection has been formed. Every business organisation aims at earning more and more profile set Of its operations, Primary objectives are related to the entire organisation and not to the individuals. Earning profits by providing goods mtr wenn ns ae customers is the primary objective of a company. The goods and services are provided as per the needs and wants of the customers. Thus a business organisation aims at earning profits by satisfying its customers.era +4 UNIT I: PLANNING. 41 dary objectives, 5 Organisations identify {These objectives help in achieving primary objectives. to increase efficiency anc reduction targets and tremendous efforte are made concerned with analysing gcgonoryy in the performance and work. The goals directed by primary SbeceevieS, and interpretation provide support to goals The primary goal of earning prc Secondary objectives are impersonal in nature. if there is a plan to add me, PrOllls by providing goods and services is achieved a Thus the goal of a ate innovative products in the market at regular helps in achieving the primary pad new products is a secondary goal that = Individual objectives. ive. individual members of n the name suggests, these goals are concerned with i aim at achieving various 5 cae one Individual members in the organisation objectives come under Pee en daily, weekly, monthly or annual basis. These achievable as subox mines Kategory of individual objectives, These objectives are can be economic, psychological oe and Secondary goals. Individual objectives members in the ore Biel OF non-financial rewards that the indi idual and skill. An individual ion try to achieve by using resources of efforts, time organisation and working in it ten gene his needs and desires by joining an Jobs to the Dest of earn 8 In order to'motivate individuals to perform their non-financial objectives, ity, organisations offer different kinds of financial and — Social obj : anenal ane are concerned with the goals of an organisation towards Seni acee eae the obligations of thé organisations towards the bringing social, phy ae agencies etc. Such. goals usually aim at business should be pee eee cultural improvement in the society. Every Pratie for the ate eer eroraible sBusties should spend a: part of its Cece to the eR ER EPG. BUsinane should. ofer quality goods and x m ir and reasonable prices. Thi ial objecti concerned with offering benefits'to the society. 2 es relay cmcrreraem 22 TYPES OF PLAN/AN OVERVIEW. Q. 5. Discuss the various types of plans. What are single use and standing plans. Or Give a comparative analysis among the various types of plans. Ans. Types of Plans: Plans may be:-1. Single Use Plans or 1. Single Use Plans are used for a These include programmes, strategies, again and again. These are meant for non-repetitive prol problems. These can be classified as: () Budget. A budget may be defined as a periodic Plan, in which activities to be performed are mentioned in terms of quantity and amounts. It provides a very al control, It sets the standards for actual operations useful basis for manageri: and deviations therefrom can easily be measured. : (i) Programme. A programme is an explicit statement of steps to be taken to achieve an objective. The development of a programme reqs that the programmer anticipates “what, who, how and when” ‘of action. It provides practical guidelines to managerial activities and the way resources of the enterprise should be utilised. (iit) Strategy. Strategy prov order to beat down one’s com] 2, Standing Plans. specific period or for a particular objective only. budgets etc. These are required to be formulated blems and cover only short period i i de in ides an opportunity for growth. A plan of action = petitors is called a ‘Strategy’. Strategy may bea RSITY SERS ed plan designed to ASsuy © 1, Formation of strays that iit UNIVER suv DAS DI ive and integral a henal ol, et omprel yen % “sleve ofined av a unified & ae See oni objectives an ee a agement Inthe Modern eying Yb organs reaponsibilily of the in the light of changes in exten! Nal primarily the y Iv made ‘of competitive | environment. 2, Standing Plans are rn situations that occur T peatedly. ‘Th rules, procedures ete. These ar a perman hese are of a perm sed time and n wi vistons pdates. u gain with revisions and up : BI » management Is manag ' : () Objectives: Elec ve rig towards which all manngerial eorts ang Objectives are the end Fr red. They,serve as guide for overall business results ; i organisational activites a " ‘ i planning, They should be clear, specific and unambiguou: * Objectives are set by the top management. * Objectives may be for a short term. ; They must cover both economic and social objectives. 2 They must be measurable and should, therefore, be expressed In quantitative terms, fa busi (ii) Policies. Policies are a part of the general standing plans of a busines A policy is a verbal, written or implied overall guiding statement setting up “boundaries that contain the general limits and direction in which managerial action will take place. “Policies are general statements or understandings that guide thinking in decision making.” Harold Koontz (iii) Procedure. A procedure is a series of ‘related tasks that makes up the chronological sequence and establishes a way of performing the work to be accomplished, An effective procedure should be simple, easy to understand, economical and coy Sample cluding all ts essential steps iv) Method. A method is also a standing plan more specific i ict 4 ann pln mone specie im scope than a pier of accomplishing one step of a procedure. a (0)' Rule, Rule is the statement of precisely what is t is TF net a et doe ot don) in th sae lemanding strict obedience without any discreti : ce sonacton S without any discretion. Rules are specific, definite and rigid. Difference between Objectives and Policies business, a atrales, Jor again because they focus on OFRANIAAtion ihe development of policies, strate! cs, and ov ‘These plans are made once These f Once ang wwe lead to ent nature. ‘used over Basis. Objectives ENE Policies 1. Meaning Objectives are “the ends | Policies are maigop wards which all the | achieving Sidelines for activities of an organi-sation | objectives, Predetermined are directed. ‘ 2. Purpose ‘Objectives determine what | Poli what | Polick i work is to be done. work is oe how the b jone. 3: Need No organisation can be | Policies may or nm formed without objectives, _| formulated. ate Botte) 4. Determination | Objectives are determined by | Policies are formal the top management of the | every level of managated, at organisation. : anesUNIT I: PLANNING Points of Difference between Policies and Procedures | 43 Basis Policies Procedures 1, Meaning Policies are the guidelines for [A procedure provides a achieving’ pre-determined | sequence of steps _ to be ves. jectives undertaken to enforce a Polley “end 10, achieve the objectives. 2, Nature Policies a ‘olicies are broad and | Procedures are detailed and general in nature. specific. 3, Advantages Policies help in achieving the objectives of the organisation, Procedures help in proper implementation of policies. 4, Range Managers enjoy some discretion regarding policies. Procedures are rigid, having no scope for discretion. Policies are flexible. A procedure is less flexible. 5, Flexibility Difference between Strategies and Policies ‘on how to carry out day-to- day activities. 7 Basis: | Strategies ERPOnnea ee 1. Meaning 7 strategy is a| Policies are guidelines to - comprehensive plan | achieve the pre-determined designed . to achieve . the | . objectives. , organisational objectives: 2. Purpose Strategies counter the threats |’ Policies deal with repetitive of. ‘changing business | problems. environment and ° capitalise on_.opportunities. 3, Nature of A strategy is a single use ‘A policy is a type ofistanding Plan plan. plan. ‘4, Scope Tt is concerned with the | It is generally concerned with business organisation as a a particular department. whole. Difference between Procedures and Methods é Basis "Procedures. Methods: 1. Meaning Procedures are routine steps | A method is a systematic or clearly defined way of accomplishing a step of a procedure. 2. Explanation Under a procedure only sequence of activities is determined. Tt explains in detail how a particular activity willbe completed. 3, Advantages Procedures help in imple- mentation of policies. Tt helps in bringing effici- ency .in performance of ies and thus reduces 4. Example Procedure for _giving admission in school or giving contract to out-siders. Method of valuation of stock or method of production.ad 1. Meaning SHIV Difference between Procedures are routine steps DAS DELHI UNIVERSITY SERIES Procedures and Rules Rules ee them viti i hat is to be activities. | stating w! done on how to carry out not to be done in a 9, situation. : are specific. 2 Nature Procedures are broad and —_| Rules general ly, there i i x » i Generally, € 1S a Provision, 3. Penalty There is no penalty, if a : lure is violated. of penalty, if a rule is violateg Difference between Policies and Rules Basis Policies Rales 1. Meaning Policies are guidelines to| Rules are specific instructions achieve pre-determined | stating what is to be done or objectives. not to be done in a given cal situation. 2 Nature Policies are broad and| A rule is a specific statement. _general. 3. Guide Guide to decision making. Guide to behaviour. 4. Discretion Discretion is possible during | Rules are rigid and provide implementation of policies. no scope for discretion. Difference between Methods and Rules Basis Methods Rules 1. Meaning A method is a systematic or] Rules are specific instructions clearly | defined way of | stating what is to be done or accomplishing a step of a| not to be done in a given procedure. situation. 2 Based on Methods are based on Rules are based on common scientific research and | sense and past i analysis. Past experiences. 3. Objectives Methods aim to increase | Rules are followed to ensure efficiency of operations. discipline. 4. Nature Methods are regarded as| Rules are regarded as official logical or rational. and authoritative. 5. Penalty There is no penalty for Generally, there is a Provision violation of a method. of penalty, if a rule is violated. Difference between Objectives and Strategies z = Objectives Strategies Objectives are the end results | A strategy is a comprehensive to be achieved. plan to achieve the objectives, ‘Objectives are the aims only. Strategies always have a Proper course of action.UNIT II: PLANNING 45 3. Allocation Objectives have ‘of resources do with ve nothing to | Strategies include allocation resources, allocation” of | of resources necessary to achieve the objectives, the light of the plans of the competito a competitive environment. They are i ise thinki: and action. A perfect strategy fa be buil foe ailing enterprise thinking others in the industry. This may be der is ing itself i oe ata Had oe y to can’ by the management of a firm putting itself in the Characteristics of Strategy: : * It is the right combination + It relates the business orgar + It is an action to-meet a attain desired objectives, Strategy is a méans to.an end and not an end in itself. It is formulated at the top management level, It involves assumption of certain calculated risks, Strategic Planning Process/Strategic Formulation Process: 1. Input to the Organization. Various Inputs (People, Capital, Management and Technical. skills, others) including 7 E ‘ i goals input of claimants (Employees, Consumers, Suppliers, Stockholders, Government, Community and others) need to be elaborated. 2. Industry Analysis. Formulation of strategy requires the evaluation of the attractiveness of an industry by analyzing the external environment. The focus should be on the kind of compaction 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. 3. 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. 4. 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. They set the organizational climate, and they determine the direction of the firm though their vision. Consequently, their values, their preferences, and their attitudes toward risk have to be carefully examined because they have an impact on the strategy. 6 hh 3 5. Mission (Purpose), Major Objectives, and Strategic Intent. Mission or Purpose is the answer to the question: What is our business? The major Objectives are the end points towards which the activities of the enterprise are directed. Strategic intent is the commitment (obsession) to win in the competitive environment, not only at the top-level but also thr ut nization. 6. Pea a pace External Environment. The present and future external environment must be assessed in terms of threats and opportunities. of different factors. nization to the environment. | Particular challenge; to solve particular problems or to1 UNIVERSITY SERIES stv DAS DEF 1 should be audited and evaty, environment § aa Altiateg vironment. Internal in and strengths in research and deve ‘ith 7, Internal En’ and its weakest x and products and services, Other inter’ arketing, 6 a8 well as the company ji to its resources ANE Te, my c reinction, operation, procuremen’ i inancial resource d control system, "Be, Pr a ning and ¢ 'ystem, and elation, res Factors includ, human FeSO the plan he organization structure 4 : . : with ctr. sve strates. Sirategc alternatives ate Uevloped ong, §. Development of err nd internal environment. StraleBies May be speciatig basis of an analysis of the ex! "firm may diversify, extending th ; Pps cration 2 Rew ang or concentrate. ee of possible strategies are join » and strategie table markets. Other A r some firms. ' profitablc thich may be an appropriate eee choices must be considered in the 9. Evaluation and Choice of Stralegit® rr some profitable opportunities may nop light ofthe risk involved in a particular decision aris ntruptcy of the fine be pursued because a failure in a risky ve is timing. Even the best product may fail jg Another critical element in choosing a cee ae it is introduced to the market at an inapproprial 7 sh Reengineerin, 10. MediunyShort Range Planning, Implementation through Hicngineering the Organization Structure, Leadership and Control. Implementation of the Strategy often requires reengineering the organization, staffing the organization structure and providing i installed monitoring performance against plans. leadership. Controls must also be ring ee eae eae 11. Consistency Testing and Contingency Planning. The last key ae lena planning process is the testing for consistency and Preparitigafor con tingency plans. “ ain its main features. Q.7. Define ‘corporate strategy’ and expl es cee oe 46 Ans. Concept of corporate strategy. Strategy is a term which is normally used in the battlefields for planning a military movement, handling of troops, etc. : In modem times, the word ‘Strategy’ has found its way into the management field. In the context of a business concern, strategy indicates a specific programme of action for achieving the organisation’s objectives by eniploying the firm's resources efficiently and economically. It involves preparing oneself in advance for meeting unforeseen factors. It is also concerned with meeting the challenges posed by the policies and actions of other competitors in the market. A.D.Chandler defines strategy as “the determination of the basic long-term goals and objectives of an enterprise and the adoption of course and the allocation of resources to carry out these goals.” According to R.N.Anthony, “strategy is the process of defining the objectives of the organisation, on change in their objectives, on the resources used to attain these objectives, and on the policies that are to govern the acquisition, use and disposition of these resources.” These definitions reveal that strategy like other plans flows from the objectives of an organisation and is related to acquisition, mobilisation and utilisation of resources for achieving changed objectives. The above definitions reveal the following important characteristics of strategy: (@ It provides guidelines to the enterprise for thinking and action. (#) It involves finding out a judicious combination of human and other resources to achieve the objectives of the organisation. (ii) Its formulation involves taking into consideration external environment (opportunities and challenges) “and internal environment (organisation's resources and capabilities). (iv) Strategies: are usually drawn for a long period but these have short-term implications also. : (2) As a strategy depends on both external and internal factors which are not static, it has to be adjusted to the changing circumstances. Hence, strategy is pot static but dynamic.* practict UNIT /ANNING a7 (vi) Becaune of the Importance of strategy to the buslr ca Imp © 18 concern, the fop management and not delegated downward in eerganbaien es (vi) Sirateny le at developing, mobilen, and utilising limited resources for mn chance of achieving objectives In the eve How in a atrategy formulated? Thaptain Seis oreo eeagy 200%, 2003 Process of atrategy formulation, Main steps In the strategy formulation process (i) Surveillance of the changing (Internal and ext ( In a external) et ent: « Kentiication of the opportunites to be mpolied taal date To be avoided; (iii) Assessment of the strengths and weaknesse 7 heii importance In formulation nl evaluating siategiag Ne SOMPARY ane ele in) Formulating missions and objectives; ne (o) Identifying strategies (6 achleve company’s (b1 i r t usin 3 (wi) Evaluating the strategies and choosing eee which eal be implemented, pii ng and me q essi zi - (vii) Hepiomentea. ‘oniloring processes to make sure that strategies are properly 1t may be noted that cach of these processes contain: note ie eae! s \s many sub-processes. The term * “Strategy” owes its origin to the war. In business it is used to include in itself the broad overall of i ives and also the policies. It means‘a general programme of action and deployment of a available resources so as to attain the objectives of the business. In a DST oe ion, the strategy, means coordinating the resources and skills with all the risks. It also means unified plan designed or aimed at achieving the objectives of the enterprise. It is a planned course of action of the enterprise. Q.9. What is corporate planning? Explain briefly the objectives and importance of corporate planning. [2002 ‘Ans. Corporate planning. Corporate planning is a sophisticated planning tool. It has been introduced into the corporate world recently; first in USA and later in all advanced industrial countries. A humble beginning has been made in India also. For example, BHEL es corporate planning vigorously. In simple words, corporate: planning is the ination of the long-term goals of a company as a whole and then developing plans determi fo achieve these goals giving due weightage to environmental changes. It is planning for overall organisational performance. Hussey defines corporate planning as, “the formal process of developing objectives for the corporation and its component parts, evolving alternative strategies to achieve these and doing this against a background. of systematic appraisal of internal strengths and weaknesses and external eerironmental changes, the process of translating strategy into detailed operational plans and seeing that these plans are carried out.” This is a comprehensive definition of corporate planning which includes deterministic, motivational and directional clements of corporate planning. In the words of Steiner, “Corporate planning is the process of determining ‘the major objectives of an organisation and the policies and strategies that will govern the acquisition, use and disposition of resources to achieve. these objectives.” ‘According to. Drucker, “Corporate planning is the continu entrepreneurial (risk-taking) decisions systematically and with the best possible knowledge of their futurty, organising systematically the efforts needed fo carry out these decisions: and measuring the results of these decisions against the expectatioiis through organised systematic feedback ‘As per Drucker’s view, “Corporate pl to taking strategic decisions in lanning is not confined " i the light of future conditions but is also concert mentation of these decisions in ied with the imple? e ‘ the’ best possible way and undertaking periodic review of these decisions in the light of new development.” fous process of making presentWV DAS DELHI UNIVERSITY SERIES sui hensive as it inclu a8 Rear) ides: Corporate planning 1S quite 1, Strategic planning: 2, Operational plannin Project planning: : Chameteristics of Corporate planning: () Corporate planning is formal and system: Gi) Ie is a rational: process. It requires imagin judgement and other mental facilities. |» ; (iii) Corporate planning is a continuous process. It is a dynamic exercise that : throughout the company’s life. Oks g, (ie) Corporate planning has a long-term perspective. (©) Corporate planning provides ary integrated framework within which each functional and departmental plans are tied together. i OF the (©) Corporate planning is basically ‘concerned withthe future impact of decisions. Preseny Ce ee ous planning: bed Lorange has given four specific objectives rate pla which are given below: of @ Allocation of scarce resources like funds, managerial talent and technologicy | eeeeasen Reed among product/market alternatives will decide i . ection of the firm. - e (i) Assisting t i in : : eon nt a aed ene opportunities and threats. Such 2 mpany’s cess idit 7 ag BEEBE ft with environment ipany’s success by providing an effective | “oordinating strategic activiti : g and Rica | potivities $0 2518, reflect the firm’s own internal strengths | (i) Instilling systemati chieve efficient operations. i Ruling systematic approach of management development through le Importance of Corporate i Past strategic decisions. arning (® It helps in finding purse planning has the following advantages: changed environment could be aes inthe @nvironsent aris. A __ action is taken to counter th a threat unless it is forecast in advance (i) It improves communication rea ee ae promotes bett a ween various specialists i coca (iii) Under corpatate planwiite oe among them. in the organisation and year span instead of th ee are forced to think in terms of a five (or t acquire a broad vision instead of a ore actions, snap judgement, ad hocism all see yoo ‘haphazard minimum. The quality of decisions, as ieeuly oie ee oF wediiced: to ae (iv) It prepares the organisati Ns, as a result, also improv. ee Q.20. Discuss the typer of growth en Proves. Ans. Growth strategit strategies. gies may be divided is A. Internal growth strategy. ‘ded into two broad categories: B. External growth strate Growth strategies strategy. Se [Reet a ee Exteriial compre! ng and atic process. ation, foresight, reflective fe kin growth strategies ‘ growth strategies + Intensive growth + Diversification * Integrative growth * Modernisation + Joint venture, or q merger, or take overUNIT I: PLANNING bd A. Internal growth strategy. Internal increasing the sales revenue, profits and 1 services. It is a widely used growth strate; high growth product or market seginent, share. oo The firm gradually expands its product a marke wth strategy. This can be done in the following wayst pen eee 8 Increas ne the sates i existing products in unexpected sections of the society. ( i a Ncouraging new uses of the existing product. Gi) Increasing sales volume by introducing minor modifications in the product. (iv) Increasing sales i f : : (i) earaadt ‘8 sales in new geographic areas within the country or in markets (2) Increasing sales volume through a (i) Market penetration. This implies to an increas? in the sales of existin n 1g products -in the present markets through better promotional efforts. vii) Product development. It impli 0 . (7 Bie in the Present each otnPlies to developing new and improved products for Advantages. The main advantages of internal " () Growth is natural and is easier internal growth strategy are: 7 ao growth can be financed internally through ploughing back of profits. (ii) The strategy involves an extension of the work. that has already been done and therefore, no. major changes are required in,organisational structure and management system. (i2) The existing resources of the firm are fully utilised; (2) Economies of large scale operations are activated. Disadvantages. The disadvantages of internal growth strategy are as under: (i It takes a long time to achieve the target rate of th and iti filers 8 growth and it.is a very slow (i) -The business firm may not be in a position to exploit present opportunities in the market if it is to grow gradually. (ii) The scope for expansion of products and market may be limited. B. External growth strategy. It is a strategy of growth by combination. Two or more firms may. decide to combine or merge to form a big enterprise. It is also called “Integrative growth strategy”. The alternatives of integrative growth strategy are as follows: () Horizontal integration or merger. It takes place by merging of units engaged in manufacturing similar products or rendering similar services. (i) Backward integration or merger. A company engaged in production of a product may integrate backwards upto the source of raw material. This would ensure continuous supply of raw material for production. (ii) Forward integration or merger. A company may decide to grow: through forward integration with the distribution channels of its products. (i») Conglomerative merger. A company is said to. follow the conglomerative growth strategy if it acquires another firm which is engaged in altogether different lines of business and is using different trade channels. Advantages. The merits of integrative growth strategy are as under: (i) Growth is very fast or quick. (ii) The firm gets running business units. (ii) Wasteful competition can be eliminated. s (iv) Acquisition of established market channels facilitates the marketability of the products. ~ : Browth or expansion strategy consists of market share of the existing product line or ‘BY. It involves concentration of resources in a 1Uis better suited to a firm with a small market new pricing policy.NIVERSITY SERIES ¢ growth strategy are as under: re required to take over runnin, nisational structure and man, SHIV DAS DELHI U! tions of integrativ' | resources al din the orga! 50 Disadvantages. Th () Large amou! (ii) Drastic changes are the firm. 1 (ii) Co-ordination and control Q. 11. What is a joint ver sce ire d i tances a joint ven! F venture. Under what tren {WO 2 joint independent firms mutually dec ‘Ans. Joint venture, When Tr create a new organisation by participating in es participate in a business ven cate a new OB ntry as well as firms in dig) capital, it is known as a joint venture. Firms wi aed differen countries may participate in a joint venture: There are several examples of joint Venture in India. Birla Yamaha Ltd. is a joint venture of Tungabhadra Industries Ltd. of India ang Yamaha Motor Company Ltd. of Japan: Eicher Motor Ltd. is a joint venture of Eich, Goodearth Ltd. of India and Mitsubishi Motor Corporation of Japan. Tata Informatio, System Ltd. was promoted as’a result of tie-up between Tata Industries Ltd. and Ipy World Trade Corporation. Hindustan Computers Ltd. and Hewlett-Packard of Us, | formed HCL-HP Ltd., a joint venture company. | ‘Asa growth strategy, joint ventures may be regarded as a cross between internal ang | external growth. k Joint ventures between firms of two countries are regarded as-an important means to expand business or to enter into new areas of business. Advantages. Joint ventures are set uP for the following reasons: (@ A joint venture between two or more companies of the same country will check _ competition between them. (i) Risks of joint ventures are shared among the partners. (iii) High risks involved. in ‘new: ventures can be reduced through joint ‘Bemen, Ma | he lit nt of financia require: of integrated units become very difficult, Discuss advantages and disadvantages of . , is more appropriate? ii ventures. : (je) Small firms joining hands may compete with the larger firms. (©) The foreign pariner in a joint venture can provide advanced technology and \ow-how not i ithi jaj i technical know jot available within the country, for example, Bajaj Allianz (vi) The amount of capital outlay for the joi i i 1 joint venture is shared bj i concerned. The problem of foreign exchange is solved through a 7 oat chert ___ the foreign pariner brings latest machines and equipment from hive (vii) Increased sales through joint venture help in reducin; sauces distribution costs. g,, Predation" and Disadvantages. The main problems of joint ventures are as follows: (i) Each partner desires to have majority stake i the” joi The project may not take off ifthe parties to a joint venture do not reconcile thelr claims. (ii) There are legal issues at times which cause a hurdle becau i secre (ars gntcompaniés do not make joint venture agreements with Indian ith Indian companies. (ii) Difference in culture and stages of economic developmen ; which the parties belong often create problems. ;Pment of the countries to (iv) Joint ventures between unequal partners offen tantamounts to quasi me and may attract si mergers () There may be lac This may hamper t Under the following circumstances, jo! () When the risk of business has to firms. anti-monopoly regulations. i of proper co-ordination between the parties to joint vei he efficient functioning of the joint venture. Cy tut ventures are likely to be more appropriate: be shared and reduced for the participating.UNIT I: Pr Mi: PLANNING i (i) When an activity is uneconomic é 3 When the distingtive compelaras ok hee an P (i) When setting up of sweeten we OF tore firme can be broughi together. quotas, tariffs, nationalistic politieal interest ete: ne ares such as Import Joint venture is an effective growth stratepy when devel risks are to be spread out and expertise has to be combined to mrcke eifecthee tae of Sane s combined to make effective use of Guidelines for effectiveness of joint ventures: () Objectives. The rae ee ; clearly. ¢ joint venture should be spelled out ii) Choice of partner. Choi @ sincerity and capably (onan) Patines cae be based on the intention, partner in carrying out te on eechntcal and managerial) of the concemed (ii) Shareholding. The pattern of shareholdi peradtenmided jing to be held by each partner rust be io) Management. The joi (2). oT Dae Faeroe Hel autonomous, The composition of the : pariners, shareholding pattem ot tial stage in the light of choice of Q.12. What is diversification? ‘l i i sitoation’ a fiers tnay choase the centers various types of See Under what Ans. Diversification. After a certain point, it is no longer possible for a firm to expand in the basic product market. It is not able to grow any moré through market enetration. Therefore, the firm must add new products or markets to its existing business line. This way fowards growth is known as diversification, Diversification does not add variety to a product-line but introduces entirely different types of products. Products added may be complementary, i.e, they fit‘in the same product mix. Such an expansion is [new as concentric diversification. It permits greater utilisation of special talents and know-how, of common overheads, of market efforts, of the research programme and staff, the brand name or other facilities. It may be also possible that the new product is in no way related to the existing product line. Such type of growth is called conglomerate diversification. For example, a cement manufacturer may enter into the production of sugar or petro-chemicals. A firm may choose the strategy of diversification under the following situations: () When diversification promises a greater profitability than expansion. (ii) When the firm cannot meet its growth target by the strategy of intensive growth only. (ii) When the firm has huge funds at its disposal which could be utilised for expansion of products and market. Several companies and business houses, both in private and public sectors have adopted diversification. For example, ITC Ltd., originally a ‘cigarette company, has diversified into hotels, daily use products, finance, paper and deep-sea fishing. Similaily, Larsen and Toubro, an engineering company, diversified into cement bridge making. In the Public Sector, LIC, an insurance company, diversified into mutual funds. SBI diversified into merchant banking and mutual funds and so on. Q.13. Explain the advantages and disadvantages of diversification. Ans. Advantages of diversification: () Diversification enables an enterpris greater scope for growth and prot strategy. (i) Because of diversification, the business risks are scattered, New products are added. Less in one product can be compensated by the profit of other products. .e to make better use of its resources. It offers fitability as compared to intensive growthERIES SHIV DAS DELHI UNIVERSITY SERI : . ts can absorb the (ii) The firm producing a large number of products Mocs g iii) The : business cycles. i hich improves the competitiveness ofa a {) adds to the sie ae does nt affect the normal fanetonng of he e ate 3 be te oly meas of growth when Government regulations have bi wi) It ma growth in existing business. Limitations of diversification: Pe ' i) Huge funds are required for di . thet, The catie é Diversification may involve new technology and Sa ting stafy may experience problems A adapting to ti grow h Pi ii) Difficulty in co-ordinating diverse businesses. : a Diversifcaton may tead to unfamiliar products;and;markets leading to greater degree of risk. ott 5 10" Q. 14. Explain in brief the concept of modernisation. “ Ans, ven Modemnisatic basically. involves upgradation of technology to increase productivity, efficiency and product quality and to reduce wastages and cost of Production in the long-run. The worn-out and obsolete machines and equipment are teplaced by the modern machines and equipment to reap the benefits of latest technology, Modemisation plans.can have the following implications: ( A firm may resort to modernisation to maintain its position in the market. (#) Modernisation may be pursued: with full vigour to stimulate internal growth, Thus, it is used as an internal growth strategy. Advantages: () Modernisation increases the Productivity and efficiency of the firm, (i) It helps in making better products available to the convince (i) Profitability of the firm goes up due te ineresset efficiency and reduced Limitations: © The internal sources’ of funds of the business ici i modernisation of plant and machinery. ty Bet Re sufficient to finance fi) The existing staff may face problems while adopt a 5 staff ¢ e dopting new technology. (ii) The responsibilities of top executives would increase due to new technique andUNIT I: PLANNING 53 foreseeable period ahead. Forecasting provides a logical basis for determining in advance the nature of future business operations and basis for managerial decisions about the material, personne] and other requirements, Forecasting is the basis of planning. When a business enterprise tries to look into the future, it may discover certain aspects of ite operations requiring immediate. attention, Forecasting helps in identifying such areas, Forecasting also involves element of guesswork. Thus managers cannot remain relaxed about predicting the future as accuratel, available, including historical data and kno. the forecasts. Forecasting is concerned wi educated predictions about the future h, collecting (both past and present)’ and d; techniques and methods. However it j amount of guessing and observatio determine how to allocate their budget ly as possible, given all of the information wedge of any future events thiat might impact ith the ability to see into the future and make ‘appenings. Forecasting involves a lot of data lata analysis. There is also the use of scientific is, not an exact science. There is always some ns invelved. Businesses utilise forecasting to } > et ts or plan for anticipated expenses for an upcomins period of time. It is a decision making tool used by many businesses to help in budgeting. planning and estimating future growth. In simple words, it is an attempt to predict future outcomes based on past events and management insight. It helps the management to cope with uncertainty of the future, relying mainly on data from past and present analysis of trends. Following are some important definitions of forecasting in the context of business, management and planning: Forecasting is a systematic attempt to prove the future by inference from known facts. The purpose is to provide management with information on which it can base planning decisions. —Allen Forecasting is the calculation of reasonable probabilities about the future, based on the analysis of all the latest relevant information by tested and: logically sound statistical econometric techniques as interpreted, modified and applied in terms of an executive's personal judgement and social knowledge of his own business and his own industry or trade. . —Leo Barnes Forecasting is the calculation of probable events, to provide against the future. It, therefore involves a ‘look ahead’ in business and an idea of predetermination of events and their financial implications as in the case of budgeting. -CE, Sultan Forecasting is the research procedure to discover those economic, social and financial influences governing business activity, so as to predict or estimate current and future trends or forces which may have a bearing on company policies or future financial, production and marketing operations. — John.Glover Following are the features of forecasting: — Forecasting is concerned with future events. — Forecasting is the basis of planning process as it devises future course of action. — It defines the probability of happening of future events. Therefore, the happening of future events can be precise up to a certain extent. ~— Forecasting is done by analysing the past and present factors which are relevant for the functioning of an organisation. : ‘ ~ Forecasting requires the use of statistical and mathematical tools and techniques. Q.16. Discuss the differences between planning and forecasting. Or Distinguish between forecasting and planning.HIV DAS DELHI UNIVERSITY SERIES s T se ning - vetcenForensting and PRN maa Ans, Difrettt ———rorecasting s a iB Tpasis ee concemed with [Planning is @ process of jas. Meaning Forecasting tre performance | ahead and projecting the ji" estimating fut Faering past | course of action for the fig, in entity, © Daa a of al formance and | also for us other mn a ao within it. os i Relevant informationf Fostalations and assumptions, [Relevant imi aay Based on | tat involve a certain degree | a) of guess. ee i ‘imatil vents or | Assessing h Te ay Concerned with | atimating future -e Ares ae > on Fac Facts and expectations. Stresses Responsibility | Different levels of managers oF | Top'level managers. sometimes experts are employed by the management. Q.17. Discuss the fole and importance oe forecasting. r Discuss the relevance of forecasting, > 1 How forecasting helps the managers? Discuss. . “Ans, Following points highlight the importance of forecasting: ' 1. Basis of planning. Forecasting is the basis of planning. It the key to: planning, It generates the planning process. Managers draw plans on the basis of certain assumptions, These are known as planning premises. Forecasting provides the knowledge of planning premises within which the managers can analyse their strengths and weaknesses and can take appropriate actions in advance before actually they are put to use. Thus forecasting provides the knowledge about the nature of future conditions. 2. Helps in achieving organisational objectives. Organisations achieve their objectives by performing certain activities. What activities should be performed depends on the expected outcome of tliese activities. Since expected outcome depends on future events and the manner of performing various activities, forecasting of future events is of great importance in achieving organisational objectives. 3. Facilitating co-ordination and control. Planning is interli i controlling is correlated with coordination. Forecast ing isan raat wos and Thus forecasting indirectly provides the way for effective coordination nd. sneer Forecasting needs information about various factors. Information is collected fneva nnoe internal as well as external sources. Almost all units and departments of a oon Several are involved in this process. It offers interactive opportunities for bere eee coordination in the planning process. In the same manner, forces toy, and relevant information for exercising control. Managers may. come te mowhince weaknesses in the forecasting process an a late cir weak the forecasting process and they can take remedial measures to erence 4. Success in organisation. All business firms take variou move on in their journey. The risk depends on the future harvonines provides help to overcome the problem of uncertainties. Theagh fran accurately predict the future happenings, it provides clues about those rs Cannot When alternative actions should be taken. Managers can prepare foo sy oeSSeSt happenings well in advance with the help of forecasting. They ean face the wnt, future happenings if they know in advance what is going to happen. STEEDS risks while they and forecastingUNIT II: PLANNING 5s, Q. 18. Discuss the steps in the process of forecasting. Briefly discuss the steps in the forccasting, . recas i }. Developing the basis. This is ie eae Hoes the following steps: fature estimates of several business operations are becca on thee he eeesting: The systematic investigation of the products, economy and the induce ened throuBh 2. Estimation of the future operations. This ie the ante forecasting, In this step, managers prone gisele next Step in the process of (abitiss operations act Ge teense quantitative estimates of the future scale of k . is of the data collected through systematic it igatic into the economy and industry. In thi 5 ic investigation zi : ndustry. In this step, managers, take into consideration the planning premises. Planning’premises refer to the assumpti the basis of which Penagers draw" plane! ;ptions on the basis of whic fon Réguation Of forecasts. Managers cannot relax after they have formulated business forecs y ‘9 continuously compare the actual operations with the forecasts prepared in order to detect the reasons f deviations from fore i x Pe eevealitis forces fe eae for any deviations from forecasts. This ensures 4, Review of the forecasting process. This is the last step in the process of forecastin, After detecting the deviations of the actual performances toa the | positions forecast by the managers, it is essential to examine the procedures adopted for the purpose so that necessary improvements can be made in the method of forecasting. Q. 19. Discuss the advantages of forecasting. Or State the benefits of forecasting. Ans. Following are the benefits/advantages of forecasting: (® It enables an organisation to commit its resources with greatest assurance to profit over the long term. ) Forecasting facilitates development of new products by identifying future (iii) Forecasting encourages participation of the éntire organisation. Thus it provides opportunities for teamwork and promotes unity and coordination within the organisation. (iv) Forecasting is an essential element of planning function of management. It supplies vital facts and information. (e) Forecasting helps in identifying the uncertainties of future events. Effective forecasting helps in overcoming the uncertainties of the future. Hence it helps in the success of an organisation. (vi) An organised effort to probe the future by inference from known facts helps integrate all management planning so that unified overall plans can be formulated into which divisional and departmental plans can be merged. j . (vii) Forecasting helps in better control and coordination. It requires information regarding various external and internal factors. The information is gathered from various internal sources. Hence, all units and departments get involved in the process of forecasting, In this Forecasting offers interactive opportunities for better unity and coordination in the process of planning. In the same manner, forecasting can provide necessary information for exercising control. Managers can detect the weaknesses in the forecasting process and they can take remedial measures to overcome them. ae (vii) The making of forecasts and their review by managers generates pa fore 7 looking approach with in the organisation. It is essential for organisation. 1G Process,”