Planning-Unit II

Dr. Sucheta Agarwal

Concept of Planning
Planning is the most fundamental function of management.
Planning involves determination of objectives of the business,
formulation of programmes and courses of action for their
attainment, development of schedules and timing of action and
assignment of responsibilities for their implementation.
Its elements are:-
1. What will be done
2. What resources will be required
3. How it will be done
4. Who will do it
5. When it will be done
“ Planning is the
determination of course
of action to achieve the
desired result. It involves
anticipation of future
course of action, events
and choosing the best
course of action.”
 Planning and Plan
• Planning is an activity.
• It can be considered as consisting of a
process, hence various sub activities.
• On the other hand, plan is a commitment to
a particular course of action believed
necessary to achieve specific results.
OBJECTIVES OF PLANNING
Objectives provides a direction and all planning
decisions are directed towards the achievement of
these objectives.

The main objectives are:-

1.Establishing climate for planning.
2. Initiative at top level.
3. Participation in Planning process.
4. Communication of planning elements
5. Integration of long plan and short plan.
6. An Open system Approach
Features of Planning

 Planning is the process rather than behaviour at a

given point of time.
 Planning is primarily concerned with looking into the
future.
 Planning is undertaken at all levels of the organization
 Planning is flexible as commitment is based on
conditions which are always dynamic.
 Planning is a pervasive and continuous managerial
function.
 Nature of Planning
• Planning is goal oriented
• Planning is a primacy function
• Planning is a continuous process
• Planning involves choice
 Planning: A Rational Approach
• Planning is a rational approach for defining
where one stands, where one wants to go in
future, and how to reach there.
 Planning and Decision making
• Decision making is the core of planning.
Decisions can be made
without planning but planning cannot be done
without making decisions. 
• Planning can be defined as the process of
selecting a future course of action. Decision-
making defined as the process of selecting a
course of action from the alternatives.
 To offset
uncertainty &
change

To focus
Primacy of
attention on
planning
objectives

Importance
of
Planning

To increase
To help in
organizational
coordination
effectiveness

To help in
control
 Features of a Good Plan

• It should define objectives

• It should be simple
• It should be clear
•  It should be flexible
• It should be economical
• It should be balanced
• It should be practicable
 Basic Principles of Planning:
• Planning requires scientific thinking and it
should spell out in clear terms the definition of
the purpose, analyse the problem and make a
careful and diligent search for all the facts
bearing upon it. Some principles are
 Principle to contribution to objectives
 Principle of pervasiveness of planning
 Principle of limiting factors
 Principle of flexibility
 Principle of navigational change
 Principle of commitment
 Types of planning
Dimensions Types of planning

Coverage of activities Corporate planning and functional planning

Importance of contents Strategic planning and tactical/operational

planning

Time period involved Long term planning, medium term planning

and short term planning

Approach adopted Proactive planning and reactive planning

Degree of formalization Formal planning and informal planning

 Types of planning
• Corporate planning represents a formal,
structured approach to achieving objectives and
to implementing the corporate strategy of an
organization
• Functional planning is the segmental, and it is
undertaken for each major function of the
organization like production/operation,
marketing, finance etc.
 Types of planning
• Strategic planning is the process of deciding on
objectives of the organization, on changes of these
objectives, on the resources used to attain these
objectives, and on the policies that are govern the
acquisition, use and disposition of these resources
• Operational planning (sometimes also called tactical
planning) is the process of deciding the most effective
use of the resources already allocated and to develop a
control mechanism to assure effective implementation of
the actions so that organizational objectives are achieved
 Types of planning
• Tactical plans are made for short term moves
and necessary for supporting the strategic
plans and achieving firms objectives.
• To meet the challenges of sudden changes in
the environment forces.
 Types of planning
• Long term planning is the strategic nature and
involves more than one year to twenty years.
• Intermediate or medium range planning are
support to long term planning. It usually covers
a period of more than one year but less than
five years (development of new products,
product publicity etc)
• Short term planning also known as operational
or tactical planning, usually covers one year.
Long range planning Medium range planning Short range planning
Time horizon is generally Time horizon is more than Time span is restricted upto
more than 5 years one year but less than 5 one year
years

Focussed on external Focussed on long range Main focus is internal

environment of business plans and internal environment of business.
environment of business Linkage between various
elements of business is
realty emphasized

Uncertainty is very high Uncertainty is moderate Uncertainty is low

The actions are less specified The actions are specified but The actions are highly
details are lacking specified and detailed

Strategies and long term Policies, procedures, Methods, rules, budget,

policies are formulated programmes and projects schedules etc., are employed
are quite often used
 Types of planning
• Proactive planning involves designing suitable
courses of action in anticipation of likely
changes in the environment
• In reactive planning, organizations’ responses
come after the environmental changes take
place.
 Types of planning
• In formal planning one or several institutions produce
official or semi-official documents describing main goals,
actions, roles, locations and time-frames for a
reintroduction program. These documents serve as explicit
guides for both program implementation and evaluation.
• Informal planning includes all management decisions
affecting the program that are not included in institutional
strategic documents.
• Generally for smaller organizations
• Based on manager’s memory of events, intuition and gut
feeling
 Barriers to effective planning
• Sometimes, planning fails to achieve the expected
results. Some reasons are:
• Lack of reliable data
• Lack of initiative
• Costly process
• Rigidity in organizational working
• Non-acceptability of change
• External limitations
• Psychological barriers
Measures for making planning effective

• Establishing climate for planning

• Initiative at top level
• Participation in planning process
• Communication of planning elements
• Integration of long term and short term plans
• An Open system approach
 Planning premises.
• Planning premises constitute the framework within
which planning is done.
• According to Koontz O’Donnell
• “Planning premises are the anticipated environment
in which plans are expected to operate. They include
assumptions or forecasts of the future and known
conditions that will affect the course of plans such as
prevailing policies and existing company plans that
controls the basic nature of supporting plans.”
 (a) Internal and External Premises:
• Internal premises are those which exist
within the business enterprise. This may
include men, material, money and
methods..
• External premises centre round the markets
and derived from the external environment
surrounding the business. Examples:
Product market, money market, population
growth, government policies, business
cycles technological changes.
(b) Tangible and Intangible Premises:
• Tangible premises are those which can be
measured quantitatively. They may be
quantified in terms of money and units of
production.
• Intangible premises are those which cannot
be measured quantitatively. Examples are:
Reputation of the business, Public relations,
employee morale, motivation etc.
(c) Controllable, Semi-Controllable and Uncontrollable
Premises:

• Controllable premises: There are certain factors which are well

within the control of the management to a great extent
(materials, money and machines, policies, procedures, rules
and strategies )
• Semi-controllable premises are those assumptions about
future which are under the partial control of a business.
Examples of such premises are demand for the product, Trade
union relations.
• Non-controllable premises are entirety beyond the scope of
business like government policy, international trade
agreements, wars, natural calamities new discoveries and
inventions etc.
• All intangible premises also fall in this category as human
behaviour also cannot be predicted accurately.
(d) Constant and Variable Premises:
• Constant premises are those which behave in
similar fashion irrespective of action taken. The
behaviour of constant premises is not subject to
changes these are ignored in planning. Such factors
are men, machine and money.
• Variable premises are those which vary in relation
to the course of action.
• For example, sales volume of the enterprise can be
partly controlled by the management. There are
certain other factors which affect the sales volume
of the enterprise but are quite uncontrollable.
 Process of Planning Premises:

• Wrong premises can lead to failure of plans.

Steps are

1. Selection of the premises

2. Development of alternative premises
3. Verification of premises
4. Communication of premises (ETOP)
 Significance of planning premises
• It providing a background on which the
planning process is based
• The effectiveness of planning will be
determined by the quality of premises.
• If the premises are properly assessed, it will be
possible to develop reliable plans to future
 Example: Cement industry

• Internal premises: capital investment, sale forecasts,

scope for expansion
• External premises: product market location,
availability of raw materials
• Tangible premises: production capacity, scope for
expansion
• Semi controllable premises: labour policy, share of the
firm in the market
• Uncontrollable premises: government policy, tax
structure
 Decision making
• Every action of a manager is generally an
outcome of a decision.

• Decision-making is the selection based on

some criteria from two or more possible
alternatives. “-—George R.Terry
• A decision can be defined as a course of action
consciously chosen from available alternatives
for the purpose of desired result —J.L. Massie
 Types of Managerial Decision 

1. Organizational and Personal Decision

• When a person takes a decision in the organization
as an executive, it will be an organizational decision
(delegate from the superior to subordinate.)
• An executive can also take the decisions about
himself. Such decisions are known as personal
decisions. These generally affect the personal life of
the decision makers. The power to fable such
decision cannot be delegated to anybody else.
2. Routine and Strategic Decision  
• Routine decisions/Tactical decisions are
repetitively following certain established rules,
policies, etc. These are taken in the content of
the day to day.
• Strategic decisions are very important and are
taken at top level management. They relate to
policy matters and need the development and
analysis of alternatives.
3. Programmed and Non-Programmed Decision
• Programmed decisions are of a routine nature and
taken within the specified procedure.
• The decisions to grant, make routine purchases,
allow trade discount etc. are programmed decisions.
• Non-Programmed decisions are non-repetitive
decisions. The need for such decision arises due to
specific circumstances. These decisions are at the
top level management. The openings of the branch,
introducing a new product, purchase of new
machinery are some examples of the non-
programmed decisions.
4. Policy and Operative Decision
• Policy decisions determine the basic policies of
the organization are taken at top level
management. These policies are decided at the
top level management and they become the basic
for operative decisions. Now decision can beyond
the policy frame work of the organization.
• Operative decisions on the hand are less
important and related with day to day operation of
the business. Middle and lower level management
take these decisions since those involve actual
execution and supervision.
5. Individual and Group Decision
• This classification is based on the number of
person involved in the decision making. If the
decision is taken by one person it is known
as individual decision. In small concern only the
owner takes all the important decisions.
• Group decisions are taken by the group persons.
The decisions based on the directors of committees
come under this category. These are generally
important decision and relate to policy matters.
The decisions are taken after a though discussion
among the persons who are assigned this work.
 Importance of decision-making
 Implementation of managerial function
  Pervasiveness of decision making
 Evaluation of managerial performance
 Successful; operation of business
 Helpful in planning and policies
Example: Initiation of a business (plant location,
raw materials, technology etc)
 KIA Motors
• Kia Motors India is a subsidiary of Kia Motors Corporation, the
South Korean Automobile manufacturer – the 8th largest in the
world. 
• According to the company, “India is the only market that they
had not explored.” And now, with their entry in India, the
company aims to become the third largest car manufacturer in
the world by 2020. Kia Motors has manufacturing facilities in the
strategic markets of China, Europe, USA and Mexico. 
• The Indian market is growing rapidly and is forecast to be the
world’s third largest market shortly. The idea behind setting up a
plant here is to produce 3 lakh cars per annum for the domestic
market. This will enable us to be one of the top players in India. .
• Kia’s India debut at the Auto Expo created a lot of
curiosity about the brand. We are building awareness
through our experiential car drives and marketing
campaigns.
• Kia are also leveraging our global tie-ups with
international sports properties such as FIFA World Cup
and Australian Open. For example, just ran the Official
Match Ball Carrier campaign during FIFA World Cup.
• Kia will keep engaging with the Indian consumers via a
host of other similar interactive marketing initiatives.
• Globally, Kia will continue to expand its range of
environment-friendly cars in the coming years. We plan
to offer a total of 16 electrified vehicles by 2025,
including a fuel-cell electric vehicle (FCEV) in 2020.
 Decision making techniques
• Quantitative Techniques
• Non Quantitative Techniques
 Non Quantitative Techniques
1. Intuition
2. Facts
3. Experience
4. Considered Opinions
5. Brainstorming is a group creativity technique by which efforts
are made to find a conclusion for a specific problem by
gathering a list of ideas spontaneously contributed by its
members.
Originally applied by Osborn in 1938in an American Company
 Go for quantity
 Withhold criticism
 Welcome wild ideas
 Combine and improve ideas (1+1=3)
6. Nominal Group Technique (NGT)
• Definition: The Nominal Group Technique is a form of brainstorming,
wherein a structured meeting is held among the group members where they
are required to find solutions to the problem identified for the discussion.
• steps:
• First of all, the facilitator welcomes all the participants and then briefs about
the problem requiring decision.
• The participants are given time to pen down their ideas (silently without
discussion)
• Once all the members have written, their ideas are required to share them in
front of all the group members.
• Once the key points are written on the chart, the members are asked to
discuss the points which hey feel requires an explanation
• Once all points are explained, the members are asked to give vote or rank
various ideas by prioritizing these in relation to the basic problem, for which
the meeting is held.
7. Delphi technique 
• The Delphi Technique refers to the systematic forecasting method
used to gather opinions of the panel of experts on the problem
being encountered, through the questionnaires, often sent through
mail. 
• The experts are required to give their opinion every time the
questionnaire is received, and this process continues until the issues
are narrowed, responses are focused, and the consensus is reached.
• In a Delphi technique, the identity of the group members is not
revealed, and they are not even required to gather for a physical
meeting. 
• Example: Trend fashion in the next year
8. Consensus Mapping
• Group decision making tries to pool the ideas
generated by several task subgroups to arrive
at a decision (project groups)
 Quantitative Techniques

• Operation Research is a scientific method of

providing executive department with a
quantitative basis of decisions regarding the
operations under their control.
• O.R. is a scientific approach to problem solving
for management.
1. Decision Tree
Some decision involves a series of steps, the second
step depending on the outcome of the first, the
third depending on the outcome of the second,
and so on.
Decision trees area model for solving such a problem
It is graphical method for identifying alternative
actions, estimating probabilities and indicating
the resulting expected pay off
2. Linear programming
It is the technique used in optimum allocation of resources in the
organization.ie. Money, materials, machines etc.
It is mathematical technique for the purpose of allocation of limited
resources in an optimum manner.

3. Game theory
Helpful in making decisions under competitive situations. Game
represents a conflict between two or more parties. Therefore, game
theory is basically a ‘science of conflict’. It described by its set of
rules
It is not concerned with finding a optimum or winning strategy for a
particular conflict situation but it provide general rules concerning
the logic that underlies strategic behaviour in competitive situation
4. Queuing theory or waiting line theory
It involves the mathematical study of ‘queues’ or ‘waiting lines’.
It helps in arriving at a decision about the provision of
optimum facilities
(railway station, booking window, retail store etc)
5. Marginal cost analysis
Marginal analysis is an examination of the additional benefits of
an activity compared to the additionalcosts incurred by that
same activity. Companies usemarginal analysis as a decision-
making tool to help them maximize their potential profits.
Break even analysis is the modification of this technique which
tells the management the point of production where there is
no profit and no loss
6. Cost benefit analysis
Cost–benefit analysis (CBA), sometimes called benefit costs
analysis (BCA), is a systematic approach to estimating the strengths
and weaknesses of alternatives used to determine options which
provide the best approach to achieving benefits while preserving
savings (for example, in transactions, activities, and functional
business requirements)
7. Network analysis
It is used for planning and controlling the project activities. Under this, a
project is broken down to small operations which are engaged in a
logical cycle. The next step is to decide the sequence of operations to
be performed.
A network diagram maybe drawn to present the relationship between all
the operations involved.
Network techniques: PERT and CPM
 Caselets
• In a public sector company, the workers are
very lazy and do not do their allotted jobs in
the stipulated time. The vice-president calls
the manager and questions him about the
situation. The manger says that the workers
are bored with their jobs and their salary is
not adequate. He is not willing to take a
decision. What should the V.P. do? Who is at
fault? Devise a solution.
 Caselets
• A software company was entering a new area of
MIS. This company had a good reputation in the
software areas. The company won a contract for
MIS for a pharmaceutical company. The project
was scheduled for completion in one year. But
after 8 months a large part of the project was
incomplete. Not completing the project on
schedule will bring loss of face and litigation for
the company. What should be the company do?