UNIT 2:

PLANNING
10.03.2023
 Agenda
1. Essentials of Planning and Managing by Objectives, Strategies:
Corporate level strategies, Business level strategies, Functional
levels strategies
2. Policies, and Planning Premises
3. Decision Making: steps in decision making

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Planning is the fundamental management function, which involves deciding beforehand, what is to be done,
when is it to be done, how it is to be done and who is going to do it. It is an intellectual process which lays
down an organisation’s objectives and develops various courses of action, by which the organisation can
achieve those objectives. It chalks out exactly, how to attain a specific goal.

Planning is nothing but thinking before the action takes place. It helps us to take a peep into the future and
decide in advance the way to deal with the situations, which we are going to encounter in future. It involves
logical thinking and rational decision making.
According to Koontz and O’Donnel, “Planning is deciding in advance what to do, how to do it, when to do it
and who is to do it. It bridges the gap from where we are to where we want to go.”

Planning is the continuous managerial process of anticipating and forecasting the future. environment of the
business organization, the formulation of the long term and short term goals. to be achieved and selecting the
strategies for their realization.

Planning is also a management process, concerned with defining goals for a company's future direction and
determining the missions and resources to achieve those targets. To meet objectives, managers may develop
plans, such as a business plan or a marketing plan.

The planning process provides the information top management needs to make effective decisions about how
to allocate the resources in a way that will enable the organization to reach its objectives. Productivity is
maximized and resources are not wasted on projects with little chance of success.
3
Importance of Planning
It helps managers to improve future performance, by establishing objectives and selecting a course of

action, for the benefit of the organisation.

 It minimises risk and uncertainty, by looking ahead into the future.

It facilitates the coordination of activities. Thus, reduces overlapping among activities and eliminates

unproductive work.
 It states in advance, what should be done in future, so it provides direction for action.

 It uncovers and identifies future opportunities and threats.

It sets out standards for controlling. It compares actual performance with the standard performance and

efforts are made to correct the same.

Planning is present in all types of organisations, households, sectors, economies, etc. We need to plan
because the future is highly uncertain and no one can predict the future with 100% accuracy, as the
conditions can change anytime. Hence, planning is the basic requirement of any organization for the
survival, growth and success.
 Characteristics of Planning
1. Managerial function: Planning is a first and foremost managerial function provides the base for
other functions of the management, i.e. organising, staffing, directing and controlling, as they
are performed within the periphery of the plans made.
2.Goal oriented: It focuses on defining the goals of the organisation, identifying alternative courses
of
action and deciding the appropriate action plan, which is to be undertaken for reaching the goals.
3.Pervasive: It is pervasive in the sense that it is present in all the segments and is required at all the
levels of the organisation. Although the scope of planning varies at different levels and
departments.
4.Continuous Process: Plans are made for a specific term, say for a month, quarter, year and so
on.
Once that period is over, new plans are drawn, considering the organisation’s present and future
requirements and conditions. Therefore, it is an ongoing process, as the plans are framed, executed
and followed by another plan.
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5.Intellectual Process: It is a mental exercise at it involves the application of mind,
to think, forecast, imagine intelligently and innovate etc.
6.Futuristic: In the process of planning we take a sneak peek of the future. It
encompasses looking into
the future, to analyse and predict it so that the organisation can face future
challenges effectively.
7.Decision making: Decisions are made regarding the choice of alternative courses
of action that can be undertaken to reach the goal. The alternative chosen should
be best among all, with the least number of the negative and highest number of
positive outcomes.
Planning is concerned with setting objectives, targets, and formulating plan to
accomplish them. The activity helps managers analyse the present condition to
identify the ways of attaining the desired position in future. It is both, the need
of the organisation and the responsibility of managers.
 Steps involved in planning

By planning process, an organisation not only gets the insights of the future, but it also helps the
organisation to shape its future. Effective planning involves simplicity of the plan, i.e. the plan should be
clearly stated and easy to understand because if the plan is too much complicated it will create chaos
among the members of the organisation. Further, the plan should fulfill all the requirements of the
organisation.
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 1.Perception of Opportunities (The market, Competition, what
customer wants, Strength and weakness): Although preceding actual
planning and therefore not strictly a part of the planning process, awareness
of an opportunity is the real starting point for planning. It includes a
preliminary look at possible future opportunities and the ability to see them
clearly and completely, knowledge of where we stand in the light of our
strengths and weaknesses, an understanding of why we wish to solve
uncertainties, and a vision of what we expect to gain. Setting realistic
objectives depends on this awareness. Planning requires realistic diagnosis
of the opportunity situation. Defining the present situation includes
measuring success and examining internal capabilities and external threats.

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2. Establish Goals and Objectives (Where we want to be and what we want to
accomplish and when): The second step in planning is to establish goals and identify
objectives that contribute to the attainment of goals. (Goals are broader than objectives,
whereas objectives function as smaller goals that support the bigger goals.)
The first step in planning is to establish objectives for the entire enterprise and then for each
subordinate unit. Objectives specifying the results expected indicate the end points of what is
to be done, where the primary emphasis is to be placed, and what is to be accomplished by
the network of strategies, policies, procedures, rules, budgets and programs. Enterprise
objectives should give direction to the nature of all major plans which, by reflecting these
objectives, define
the objectives of major departments. Major department objectives, in turn, control the
objectives of subordinate departments, and so on down the line. The objectives of lesser
departments will be better framed, however, if subdivision managers understand the overall
enterprise objectives and the implied derivative goals and if they are given an opportunity to
contribute their ideas to them and to the setting of their own goals.
3.Considering the Planning Premises (Analyze the Environment to
Forecast Aids and Barriers to Goals and Objectives): As an extension of
defining the present situation, the manager or other planner attempts to
predict which internal and external factors will foster or hinder attainment
of the desired ends. These are forecast data of a factual nature, applicable
basic policies, and existing company plans. Premises, then, are planning
assumptions – in other words, the expected environment of plans in
operation. This step leads to one of the major principles of planning.
Planning premises include far more than the usual basic forecasts of
population, prices, costs, production, markets, and similar matters. Because
the future environment of plans is so complex, it would not be profitable or
realistic to make assumptions about every detail of the future environment
of a plan.
 Limitations of Planning

(i) Planning leads to rigidity

(ii) Planning may not work in a dynamic
environment
(iii) Planning reduces creativity
(iv) Planning involves huge costs
(v) Planning is a time-consuming process
(vi) Planning does not guarantee success

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 Types of Planning

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A.Strategic planning establishes master plans that shape the destiny of the firm. An example of strategic planning is when the
executive team at Harley-Davidson Inc. planned how to deal with the demographic shift of their customer base becoming much older.
Strategic plans set broad, comprehensive, and longer-term action directions for the entire organization.

• It is the process of deciding on Long-term objectives of the organization.

• It encompasses all the functional areas of business
• It decides major goals and policies of allocation of resources to achieve these goals.
• Done at higher levels of management
• Less detailed because it is not involved with the day to day operations of the organization

B.Tactical planning translates strategic plans into specific goals and plans that are most relevant to a particular organizational unit. The
tactical plans also provide details of how the company or business unit will compete within its chosen business area. Middle level
managers have the primary responsibility for formulating and executing tactical plans. These plans are based on marketplace realities
when developed for a business. Conditions can change rapidly in competitive fields such as a Korean company suddenly developing a
substantially lower-price sports bike.

 It involves conversion of detailed and specific plans into detailed and specification plans.

 It is the blue print for current action and it supports the strategic plans.
 C. Operational planning identifies the specific procedures and actions required at lower levels in the organization. If Harley-
Davidson wants to revamp an assembly line to produce more sports bikes, operational plans would have to be drawn. In practice,
the distinction between tactical planning and operational planning is not clear-cut. However, both tactical plans and operational
plans must support the strategic plan such as revamping manufacturing and marketing to capture a larger group of young cyclists..

• It is short term
• It is more detailed because it is involves with day to day operations of the organization.
• Done at lower level of management
• Define what needs to be done in specific areas to implement strategic plans.
– Production plans
– Financial plans
– Facilities plans
– Marketing plans
– Human resource plans

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 • Intermediate term/ Midterm planning
 Time frame between two and five years. Medium Term Plans: >1 yr but <5yrs
 It is designed to implement long term plans.

• Short term planning

 Time frame of one year or less. Short term Plans: Upto one year
 It provide basis for day to day operations.
 Meet a particular objective in the near future
 Cover a limited area of training
 Answer the question: Are we doing things right?
 Should fit well within and contribute to long-range plans

Some examples:
• Plans for basic training sessions for new leaders who have just been recruited
• Plans for a den chief training conference

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II.On the basis of time period
• Long term planning
 Time frame beyond five years. Long term Plans: >5yrs
 It specifies what the organization wants to become in long run.
 It involves great deal of uncertainty.
 Higher management levels focus on longer time horizons.
 Cover a longer time
 May include a variety of different types of training
Some examples Long term Plans:
• An annual plan, including Fast Start and basic training
• Makeup training sessions
• Den chief training
• Regular monthly roundtables
• Supplemental training
• Personal coaching
• Self-study
We should not overlook the importance of long-range plans in providing a total leadership growth and development program for leaders.

16
INSTRUMENTS OF
PLANNING
1. Mission or purpose
2. Objectives or goals
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
1.Mission or Purpose: The mission, or purpose (the terms are often used interchangeably), identifies
the basic purpose or function or tasks of an enterprise or agency or any part of it. Every kind of
organized operation has, or at least should have if it is to be meaningful, a mission or purpose.
For example, the purpose of a business generally is the production and distribution of goods and
services. The purpose of a state highway department is the design, building, and operation of a

system of state highways.

The mission of an oil company, like Exxon, is to search for oil and to produce, refine, and. market
petroleum and petroleum products, from diesel fuel to chemicals.

2. Objectives or Goals: Objectives, or goals (the terms are used interchangeably),are the ends
toward which activity is aimed. They represent not only the end point of planning but also the end
toward which organizing, staffing, leading, and controlling are aimed.

3. Strategies: For years, the military used the word strategies to mean grand plans made in light
of what it was believed an adversary might or might not do. While the term still usually has a
competitive implication, managers increasingly use it to reflect broad areas of an enterprise's operation.
Here the term, strategy is defined as the determination of the basic long-term objectives of an
enterprise and the adoption of courses of action and allocation of resources necessary to achieve these
goals.
4.Policies: Policies also are plans in that they are general statements or understandings that
guide or channel thinking in decision making. Not all policies are "statements"; they are
often merely implied from the actions of managers. The president of a company, for example,
may strictly follow-perhaps for convenience rather than as policy-the practice of promoting
from within; the practice may then be interpreted as policy and carefully followed by
subordinates. In fact, one of the problems of managers is to make sure that subordinates do
not interpret as policy minor managerial decisions that are not intended to serve as patterns.
Policies define an area within which a decision is to be made and ensure that the decision
will be consistent with, and contribute to, an objective. Policies help decide issues before
they become problems, make it unnecessary to analyze the same situation every time it
comes up, and unify other plans, thus permitting managers to delegate authority and still
maintain control over what their subordinates do. There are many types of policies.
Examples include policies of hiring only university - trained engineers, encouraging
employee suggestions for improved cooperation, promoting from within, conforming strictly
to a high standard of business ethics, setting competitive prices, and insisting on fixed, rather
than cost - plus pricing
5.Procedures: Procedures are plans that establish a required method of handling future activities. They
are chronological sequences of required actions. They are guides to action, rather than to thinking, and
they detail the exact manner in which certain activities must be

accomplished.
For example; Case Western University outlines three steps for its appraisal process: (1) setting
performance objectives, (2) performing a mid-year review of the objectives, and (3) conducting a
performance discussion at the end of the period.’ Procedures often cut across departmental lines.
For example, in a manufacturing company, the procedure for handling orders may involve the sales
department (for the original order), the finance department (for acknowledgment of receipt of funds and
for customer credit approval), the accounting department (for recording the transaction), the production
department (for the order to produce the goods or the authority to release them from stock), and the
shipping department (for determination of shipping means and route).
A few examples illustrate the relationship between procedures and policies. Company policy may grant
employees vacations; procedures established to implement this policy will provide for scheduling
vacations to avoid disruption of work, setting rates of vacation pay and methods for calculating them,
maintaining records to ensure each employee of a vacation, and spelling out the means for applying for
leave.
6.Rules: Rules spell out specific required actions or non actions, allowing no discretion.
They are usually the simplest type of plan. "No smoking" is a rule that allows no deviation
from a stated course of action. The essence of rule is that it reflects a managerial decision
that a certain action must- or must not-be taken. Rules are different from policies in that
policies are meant to guide decision making by marking off areas in which managers can
use their discretion, while rules allow no discretion in their application.

7.Programs: Programs are a complex of goals, policies, procedures, rules, task assignments,
steps to be taken, resources to be employed, and other elements necessary to carry out a
given course of action; they are ordinarily supported by budgets. They may be as major as
an airline’s program to acquire a $400 million fleet of jets or a five-year program to improve
the status and quality of its thousands of supervisors. Or they may be as minor as a program
formulated by a single supervisor to improve the morale of workers in the parts
manufacturing department of a farm machinery company.
8.Budgets: A budget is a statement of expected results expressed in
numerical terms. It may be called a "quantified" plan. In fact, the
financial operating budget is often called a profit plan. A budget may
be expressed in financial terms; in terms of labor-hours, units of
product, or machine-hours; or in any other numerically measurable
terms. It may deal with operation, as the expense budget does; it may
reflect capital outlays, as the capital expenditure budget does; or it
may show cash flow, as the cash budget does.
 Managing by objective(MBO)
• MBO was first popularized by Peter Drucker in 1954 in his book 'The practice of Management’.

• MBO (Management by objectives) as a comprehensive managerial system that integrates many key managerial
activities in a systematic manner and is consciously directed toward the effective and efficient achievement of
organizational and individual objectives.

“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
• 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.
• MBO focuses attention on appropriate goals and plans.
• MBO facilitates control through the periodic development and subsequent evaluation of individual goals and
plans.

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 Process of MBO
• Setting of organizational purpose& objectives (long term objectives)
• Planning premises (certain assumptions about future happenings.
• Fixing Key result areas (it indicates the strength of the organization)
• Setting superior’s objectives (long term &short term objective).
• Superior’s recommendations for subordinate’s objectives.
• Subordinates statement of his objective.
• Matching of goals& resources.
• Subordinate’s agreed objectives
• Setting standard for subordinate performance
• Periodic review and appraisal of performance.

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 Benefits of MOB
• Better managing of organizational resources and activities.
• Clarity in organizational action& objectives.
• MBO provides greatest oppourtunity for personal satisfaction (for managers)
• MBO provides a basis for organizational change and provide a framework and also it provide
guideline for planned change ,enabling the top mgt to initiate, plan , direct and control the
direction , speed and change.
• MBO helps the manager to understand their role in the total organization involvement.
• Commitment and hardwork by managers as they are involved in setting the objectives.
(participating in the mgt
• MBO helps in evaluating the performance systematically.
• MBO motivates the workers &make the job meaningful.
• Mgt takes the decision very quickly as the workers know the purpose of taking decisions
• Improvement of managing through results-oriented planning
• Clarification of organizational roles and structures as well as delegation of authority
according to the results expected of the people occupying the roles
• Encouragement of commitment to personal and organizational goals
• Development of effective controls that measure results and lead to corrective actions
Limitations of MBO
• Time consuming process: requires large amt of time of the senior managers
and cost high due to paper work and other resources which are scarce.
• Fail to teach philosophy: managers fail to teach MBO philosophy of
managing an organization.
• Variable objective: Setting of variable objectives difficult at least in time
areas.
• Much emphasis for short term objectives at the cost of long term
objectives.
• Danger on inflexibility
• Difficulty of setting goals
 “Business opportunities are like
buses. There's always another one

”
coming.
Richard Branson

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Three Levels of Strategy
Strategy is at the foundation of every decision that has to be made
within an organization. If the strategy is poorly chosen and formulated
by top management, it has a major impact on the effectiveness of
employees in pretty much every department within the organization.
In our previous article on ‘What is Strategy?!‘ we have already tried to
define and explain what business strategy refers to and what is NOT
considered to be part of strategy. In this article, we will dissect strategy
in three different components or ‘Levels of Strategy‘. These three levels
are: Corporate-level strategy, Business-level strategy and Functional-
level strategy. Together, these three levels of strategy can be illustrated
in a so called ‘Strategy Pyramid’. Corporate strategy is different from
Business strategy and Functional strategy. Even though Corporate-level
strategy is at the top of the pyramid, we start this article by explaining
Business-level strategy first.

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 Business-level strategy
The Business-level strategy is what most people are familiar with and is about the question
“How do we compete?”, “How do we gain (a sustainable) competitive advantage over rivals?”. In
order to answer these questions it is important to first have a good understanding of a
business and its external environment. At this level, we can use internal analysis frameworks
like the Value Chain Analysis and the VRIO Model and external analysis frameworks like 
Porter’s Five Forces and PESTEL Analysis. When good strategic analysis has been done, top
management can move on to strategy formulation by using frameworks as the Value Disciplines
, Blue Ocean Strategy and Porter’s Generic Strategies. In the end, the business-level strategy is aimed
at gaining a competitive advantage by offering true value for customers while being a unique
and hard-to-imitate player within the competitive landscape.

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 Functional-level strategy
Functional-level strategy is concerned with the question “How do we support the business-
level strategy within functional departments, such as Marketing, HR, Production and R&D?”.
These strategies are often aimed at improving the effectiveness of a company’s operations
within departments. Within these department, workers often refer to their ‘Marketing
Strategy’, ‘Human Resource Strategy’ or ‘R&D Strategy’. The goal is to align these strategies as
much as possible with the greater business strategy. If the business strategy is for example
aimed at offering products to students and young adults, the marketing department should
target these people as accurately as possible through their marketing campaigns by choosing
the right (social) media channels. Technically, these decisions are very operational in nature
and are therefore NOT part of strategy. As a consequence, it is better to call them tactics
instead of strategies.

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 Corporate-level strategy
At the corporate level strategy however, management must not only consider how to gain a
competitive advantage in each of the line of businesses the firm is operating in, but also which
businesses they should be in in the first place. It is about selecting an optimal set of businesses
and determining how they should be integrated into a corporate whole: a portfolio. Typically,
major investment and divestment decisions are made at this level by top management. Mergers
and Acquisitions (M&A) is also an important part of corporate strategy. This level of strategy is
only necessary when the company operates in two or more business areas through different
business units with different business-level strategies that need to be aligned to form an
internally consistent corporate-level strategy. That is why corporate strategy is often not seen in
small-medium enterprises (SME’s), but in multinational enterprises (MNE’s) or conglomerates.

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Decision Making
Decision making is the process of making choices by identifying a decision,
gathering information, and assessing alternative resolutions. Using a step-by-
step decision-making process can help you make more
deliberate, thoughtful decisions by organizing relevant information and
defining alternatives.

Decision-making is perhaps the most important component of a manager's activities. It plays the
most important role in the planning process. When the managers plan, they decide on many matters
as what goals their organisation will pursue, what resources they will use, and who will perform
each required task. According to Andrew Smilagyi, “Decision making is a process involving
information, choice of alternative actions, implementations, and evaluation that is directed to the
achievement of certain stated goals.”
Decision making is described as the essence of a manager's job because it is utilized in all four
managerial functions of planning, organizing, leading and controlling. Decisions, both large and small,
are made every day by managers and they have the potential to affect others.
 Characteristics of Decision Making
The following are the characteristics of decision making:
• Decision making is a selection process.
• Decision making is the end process. It is preceded by detailed discussion and selection of
alternatives.
• Decision making is the application of intellectual abilities to a great extent.
• Decision making is a dynamic process.
• Decision making is situational.
• A decision may be either negative or positive.
• Decision making involves the evaluation of available alternatives through critical appraisal
methods.
• Decision is taken to achieve the objectives of an organisation.

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 Steps in Decision Making
The decision-making process is spreads out in three stages: identifying phase (opportunities, problem, and
crises are recognized and relevant information is collected and problems are more clearly identified),
development phase (alternative solutions to problems are generated and modified) and selection phase
(alternative solutions to problems are generated and modified) and seven steps. The seven steps followed by
the author (Litherland, N., 2013) are: defining the problem, identifying and limiting the factors, development
of potential solutions, analysis of the alternatives, selecting the best alternative, implementing the decision
and establishing a control and evaluation system.

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 I.Identify the problem
The first step in the decision-making process is identifying the problem. To make a decision, you must first
identify the problem you need to solve. The manager should consider critical or strategic factors in defining
the problem. These factors are, in fact, obstacles in the way of finding proper solution. These are also known
as limiting factors. This process must, as a minimum, identify root causes, limiting assumptions, system and
organizational boundaries and interfaces. First of all, managers must identify the problem. The problem has to
be found and defined. Symptoms are identified and problems should be judged, symptoms are not problems.
They are warning signs of problems. So, managers should search for symptoms for identification of problems.
The first step needed in taking a decision is to have detected a difference between the current situation and
the desired situation. This discrepancy, or problem, exerts pressure on the managing director, forcing him/her
to take action, whether it is in such fields as company policy, deadlines, financial recession, or concerning
future job evaluations, among other possibilities.

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 II.Collect relevant information

Once you have identified your decision, it‘s time to gather the information relevant to that
choice. After defining and analyzing the problem, the next step is to develop alternative
solutions. The main aim of developing alternative solutions is to have the best possible decision
out of the available alternative courses of action. In developing alternative solutions the
manager comes across creative or original solutions to the problems.
III.Identify the alternatives
With relevant information now at your fingertips, identify possible solutions to your problem.
There is usually more than one option to consider when trying meeting a goal—for example, if
your company is
trying to gain more engagement on social media, your alternatives could include paid social
advertisements, a change in your organic social media strategy, or a combination of the two.

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 IV.Developing alternative solutions
After defining and analyzing the problem, the next step is to develop alternative solutions. The
main aim of developing alternative solutions is to have the best possible decision out of the
available alternative courses of action. In developing alternative solutions the manager comes
across creative or original solutions to the problems. In modern times, the techniques of
operations research and computer applications are immensely helpful in the development of
alternative courses of action. Once you have identified multiple alternatives, weigh the evidence
for or against said alternatives. See what companies have done in the past to succeed in these
areas, and take a good hard look at your own organization‘s wins and losses. Identify potential
pitfalls for each of your alternatives, and weigh those against the possible rewards.

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 V.Implementation of the decision
To gathered all relevant information, and developed and considered the potential paths to take. You are
perfectly prepared to choose. After you‘ve ranked your options, you must choose the one that you think has
the strongest chance of achieving your goal. In some instances, you can combine several options, but in most
cases, there will be a clear-cut direction you want to take.
VI.Take action

Once you‘ve made your decision, act on it! Develop a plan to make your decision tangible and achievable.
Use Lucidchart diagrams to plan the projects related to your decision, and then set the team
loose on their tasks once the plan is in place.
VII.Review decision
Last and important step in the decision making process is evaluating your decision for effectiveness.
Follow- up enables to identify the shortcoming or negatives consequences of the decision. It provides valuable
feed- back on which the decision may be reviewed or reconsidered.

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Policies
Policies are guides to thinking in decision making. They
reflect and interpret objectives and guide decisions to to
achieve the objectives. They establish the framework for
planning programs. They establish limits or boundaries
to plans whereas planning premises provide the
operational background.
 Policies themselves are plans. They are also the result of planning and decision making. Policies
also have levels. A policy can be a major as that of financing growth through retained profits.

Policies can be categorized as originated policy, appealed policy, implied policy, and externally
imposed policy.

The most logical way of policy setting is that originated by managers at a certain level for the
express purpose of guiding their decisions and the decisions of their subordinates in the
operation of business.

The decisions made by superiors in the on problems referred to them can develop into policies
and such policies are termed as appealed policy.

Many times policies develop from the actions that people see about them. If a company talks of
high quality in speeches and slogans, but is frequently producing and selling shoddy goods,
people working in the company assume that poor quality is the policy of the company. Implied
policy emerges from instances where stated policy is not enforced.

Government, trade associations and trade unions impose certain policies on the organizations.

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 Guidelines for Effective Policies

Policies should reflect objectives and plans.

Policies should be consistent.

Policies should be flexible

Policies should be distinguished from rules and procedures.

Policies should be in writing.

Policies should be taught.

Policies should be controlled

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 Policies in Various Functional Areas of Business

In the following functional areas, policies are announced generally to guide decision making.

Product selection and development

Pricing

Sales promotion

Distribution channels

Production and inventory

Finance

Personnel selection and training

Compensation

Employee benefits

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 Planning Premises
A planning premise is a set of assumptions that are derived from forecasting the future. It
is a logical and systematic estimate of the future factors that can affect planning. Planning
premises provide a background against which the estimated events take place. These are
the events that affect planning. Establishing planning premises is a critical element in the
planning phase, which ensures that all managers in the organisation are in sync with each
other. To explain planning premises, let us consider a few examples from business and
government planning:
•In the budget, there is an announcement of even changes in the tax laws. These are
known conditions on which planning is based.

•A competitor might enter the same market as yours with the same kind of product. This
is an anticipated event; the possibility of that happening is not particular.

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 Importance of Planning Premises

The premise of planning is the framework on which planning is based. Amid uncertainty
surrounding business and management, it is these planning premises that imply not just
assumptions about the future but also predictions. They are the bedrock on which
managers plan the future course of action. Without proper planning premises, the
planning does not have a solid foundation. If panning premises change, the plans need to
change as well. Here are the primary reasons for establishing planning premises:
•They help in well-organised planning.

•The risk of uncertainty is reduced considerably.

•There is a reduction in the risk of flexibility.

•Managers can do effective coordination.

•It also increases profitability.

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 Types of Planning Premises

Planning premises in management are vital in making important decisions that are based on certain
predictions about the future. Managers build the superstructure of planning based on their ability to
identify the crucial, strategic, or limiting factors that allow them to select the proper planning premises.
Planning premises in business management can be classified based on many factors, as described below:
Internal and External Premises 
•The premises which exist within the boundaries of the business are internal premises. Some of the internal
premises are men, money, material, and methods. Your planning would be based on how competent is
your workforce and how much money you have at your disposal. 

•External premises are derived from the environment that surrounds the business. They are centred
around the market like money market, product market, government policies, growth in population, etc.
Tangible and Intangible Premises 
•Any premise which can be quantitatively measured is a tangible premise. These premises can be
quantified in terms of time, money, and units of production. 

•On the other hand, intangible premises cannot be quantified. Some of the intangible premises are public
relations, business reputation, the morale of employees, etc. 
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 Controllable, Semi-Controllable, and Uncontrollable Premises 
•Those premises which can be controlled by the management to a large extent come under
controllable premises. Management has a lot of control over their future commitments when it
comes to material, machines, and money.

•The business can partially control some premises or assumptions about the future. These fall under
semi-controllable premises. Few examples of such planning premises are trade union relations,
product demand, etc.

•Those premises which can not be controlled by the management of an organisation come under
uncontrollable planning premises. Some examples are weather conditions, natural disasters, etc.
Constant and Variable Premises
•These premises which do not change irrespective of actions taken are constant premises like men,
money, etc. These premises behave similarly under all circumstances.

•Based on the course of action taken, some premises change which is termed as Variable premises.
These premises cannot be controlled or predicted, for example, the sales volume of a firm, union and
management relations, etc.
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 Establishment of Planning Premises

Developing Planning Premises needs the planners to do realistic forecasting. Determining planning
premises involves 
•Calculating the probability of events.

•Analysing changes in consumer behaviour, technology, government policies, etc.

•Implementing systematic investigation to develop the basis for planning.

Predicting future events is a complex process; hence, premises must consider limited assumptions
that are most critical for the plant. A typical process of developing premises in planning is:
•Selecting the Premise - Not all the factors in the environment affect the operations of the business.
The management must list down those premises which directly influence the development of
organisational plans.

•Reviewing Limitations - Several practical factors limit the abilities of an organisation to achieve its
goals. Such limitations should be anticipated and provided for. A few examples of such limitations are
power, labour, money, and material.

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