MBA management

Planning Topics:

What is Planning

Planning is decidingvin advance what is to be done. It involves the selection of objectives, policies and programmes from among alternatives.

What should a plan be?

A plan should be a realistic view of the expectations. Depending upon the activites, a plan can be long range, intermediate range or short range. It is the framework within which it must operate. For management seeking external support, the plan is the most important document and key to growth. Preparation of a comprehensive plan will not gurantee success, but lack of a sound plan will almost certainly ensure failure.

Purpose of Plan

Just as no two organizations are alike, so also their plans. It is therefore important to prepare a plan keeping in view the necessities of the enterprise. A plan is an important aspect of business. It serves the following three critical functions: Helps management to clarify, focus, and research their businesses or project's development and prospects. Provides a considered and logical framework within which a business can develop and pursue business strategies over the next three to five years. Offers a benchmark against which actual performance can be measured and reviewed.

Importance of the Planning Process

A plain can play a vital role in helping to avoid mistakes or recognize hidden oppurtunities. Preparing a satisfactory plan of the organization is essential. The planning process enables management to understand more clearly what they want to achieve, and how and when they can do it.

A well-prepared business plan demonstrates that the managers know the business and that they have thought through its development in terms of products, management, finances, and most importantly, markets and competition.

Planning helps in forecasting the future, makes the future visible to some extent. It bridges between where we are and where we want to go. Planning is looking ahead.

Planning basics

Essentials of planning is not don off hand. It is prepared after careful and extensive research. For a comprehensive business plan, management has to

1. Clearly define the target/goal in writing.
    i. It should be set by a person having authority.
    ii. The goal should be realistic.
    iii. It should be specific.
    iv. Acceptable
    v. Easily measurable

2. Identify all the main issues which ned to be addressed.

3. Review past performance.

4. Decide budgetary requirement.

5. Focus on matters of strategic importance.

6. What are requirements and how will they be met?

7. What will be the likely length of the plan and its structure?

8. Identify shortcomings in the concept and gaps.

9. Strategies for implementation.

10. Review periodically.

Limitations of Planning

Planning is not a substitute for executive judgement but merely an aid to it. It suffers from the following limitations:

1. Inaccuracy: Planning is based on forecasts which are never cent per cent accurate. The accuracy and reliability of forecasting dimnishes as the forecasting period increases. If reliable forecast and data are not available, planning becomes unrealistic.

2. Time - consuming: Planning is a time-consuming and expensive process. Time, effort and money are required in the collection and analysis of data and in the formulation and revision of plants. Planning is useful only when the expected gains from it exceed its costs. By the time plans are prepared, conditions might change rendering the entire efforts irrelevant.

3. Rigidity: Planning may may result in internal inflexibilities and procedural rigidities which curb initiative and individual freedom. Sometimes, planning may cause delay in decision-making. A manager may be bogged down by rules and procedures when there is need for quick decision.

4. Resistance: Planning often requires some change in the existing set-up. Unless the required change is forthcoming, planning may be ineffective. Resistance to change is an important obstacle in planning. Planning also requires a forward - looking attitude. But very often, people have a greater regard for the present as future is uncertain.

5. False Security: Planning may create a false sense of security in the organisation. A manager may feel that all problems will be solved once the plans are put into operation. In reality, management has to continously revise the plans and regularly check on their execution.

6. Pressure-tactics: Powerful people and other vested interests may exert pressure to ensure that the plans serve their own interests. Moreover, the planners may be unduly influenced by the 'pet projects' of the 'big boss' and may not make an objective analysis of the available alternatives. It is very difficult to measure accurately the effectiveness of planning.

7. External Constraints: The effectiveness of planning may be affected by external forces which are beyond the control of those responsible for preparing plans. Government control, natural calamities and other unforseen events may create hurdles in the implementation of plans. It is very difficult to predict and provide for such external constraints.

Principles of Planning

Over the years, a number of fundamental principles have been developed to guide the efforts of managers in preparing effective plans. These principles relate to the nature, purpose, process and structure of planning. A brief description of planning principles is given below

1. Principle of contribution to objectives - every major and derivative plan should contribute positively towards the accomplishment of enterprise objectives. This principle is derived from the raison d’etre of the enterprise.

2. Principle of efficiency of plants - the efficiency of a plan is measured by the amount its contributes to objectives minus the costs and other undesirable consequences involved in the formulation and operation of the plans. This principle stresses upon economical use of individual efforts to achieve group goals.

3. Principle of primacy of planning - this principle emphasizes that a manager can hardly perform other managerial functions without a road map of plans to guide him. Planning is the primary requisite of other management functions because these functions are designed to support the accomplishment of enterprise objectives.

4. Principle of planning premises - perhaps, the main deficiency of planning arises from poorly structured plans. A coordinated structure of a plan can be developed only when managers thought out the organization understand and agree to utilize consistent planning premises.

5. Principle of policy framework - a consistent and effective framework of enterprise plans can be developed if the basic policies that guide thinking in decisions are expressed clearly and are understood by managers who prepare the plans. The decision which leads to plans can not be accurately focused on enterprise objectives without a framework of policies.

6. Principle of timing - when the plan are structured to provide an appropriately timed, intermeshed network of derivative and supporting programmes, the plan can contribute effectively and efficiently towards the attainment of enterprise objectives. Both premises and policies are useless without proper timing.

7. Principle of alternative - in choosing from among alternatives, the best alternative will be that which contributes most efficiently and effectively to the accomplishment of a desired goal.

8. Principle of limiting factors - while choosing from among alternatives, the planner should focus on those factors which are critical to the attainment of the desired goal. This will help in selecting the most favorable alternatives.

9. Principle of commitment - logical planning should cover a time necessary to forecast the fulfillment of commitment involve in a decision. This is necessary to make reasonably sure of meeting commitments.

10. Principle of flexibility - this principle deals with the ability to change which is built into plans. The risk of loss due to unexpected events can be reduced by building flexibility into the plans. However, the cost of flexibility should be weighed against the dangers of future commitments made.

11. Principle of navigational change - the manager should periodically check on events and expectations and redraw plans to maintain a course toward the desired goal. Unless plans have in- built flexibility, navigational change is difficult or costly. But built-in flexibility should not be an excuse for periodic revision of plans, if circumstances so warrant.

12. Principle of competitive strategies - while formulating plans, a manager should take into account the plans of rivals of competitors. The plans should be chosen in the light of what a competitor will do in the same situation.

Steps in the process of Planning

There is no standard planning process. Each enterprise has to develop its own modus operandi for planning depending on its size, nature and environment. However, the main steps in planning process are as follows.

1. Analyzing the environment - the first step in planning is a thorough analysis of the external and internal environment of the enterprise. Analysis of external environment will help to identify the opportunities and constrains for the enterprise. To be effective, planning must enable the organization to adopt itself to the environmental changes (market conditions, government policies, technological developments, cultural norms, etc) therefore, managers must carefully analyze relevant information as the quality of information determines the quality of planning. Analysis of the internal environment (resources and requirement) will help to identify the strengths and weaknesses of the enterprise.

2. Establishing objectives - plans are formulated to achieve certain objectives. Therefore establishment of organizational objective is an important step in planning. The organizational objectives should be established in the light of perceived opportunities and resources of the organization. They should be clearly specified and measurable as far as possible. They should be spelled in key areas of operations and for different division and department.

3. Determining planning premises - planning is done for future which is uncertain therefore, certain assumption are made in preparing plans. These assumption or condition underlying planning should be clearly defined through scientific forecasting of future events. Planning premises are the limitations that lay down the boundary for planning.

Planning premises can be of several types. Controllable or internal premises are under the control of management, e.g., resources, techniques and policies of the enterprises. On the other hand, uncontrollable or external premises are beyond the control of the enterprises. These relate to rate of population growth, general economic conditions, government policies, political situation, etc.

4. Developing alternative courses of action - these can be several ways of achieving the same objectives. The various available alternative should be identified. For example, in order to increase sale, an enterprise may intensify sales efforts, explore new markets or develop new products, in order to develop all possible alternatives, a manager must have imagination, skills and experience.

5. Evaluating alternatives - the various alternative are compared and weighted in the light of objectives and premises. Each alternative has its merits and demerits but all alternatives can not be equally appropriate or practicable. Each alternatives should be closely examined to determine its suitably. Several statistical and mathematical techniques are used to evaluate alternative course of action.

6. Selecting the best course - after evaluating the various alternatives, the most appropriate alternative is selected. This is the point at which the plan is adopted. Sometimes, the evaluation may suggest that more than one alternative is good. In such a case, a manager may choose several alternatives and combine them in action.

7. Formulating derivative plans - once the basic plan ( policy and strategy ) is decided. Various supporting or subsidiary plans are formulated. These include procedures, programmes, budgets, schedules, etc. such plans are required to implement the basic plan. The sequence of various activities is determined to ensure continuity in operations. Different plans are properly integrated so that they support each other.

Types of Plans

1. Objectives

The first step in planning is setting objectives it is said to be the desired future position that the management would like to reach. They are basic to the organization and they are defined as ends which the management seeks to achieve by its operations. They define the future states of affairs which the organization strives to realize. They serve as a guide for overall business planning objectives need to be expressive in specific terms. They are the end points of planning.

2. Policy

A policy is a general guide to thinking and action rather than a specific course of action. It defines the area or limits within decisions can be made to achieve organizational objectives can be attained. A policy is a continuing decision as it provides answers to problems of recurring nature.

3. Procedure

They are routine steps to carry out activities. They detailed the exact manner in which any work is to be performed. They are specified in a chronological order. It lays down the specific manner in which a particular activity is to be performed.

It is a planned sequence of operations for performing repetitive activities uniformly and consistently. They play an important role in the daily operations of an organization.

4. Rules

They are rigid and definite plans that specify what is to be done or not to be done in given situations. A rule provides no scope for discretion and judgment. It is a prescribed guide to conduct or action. They are usually the simplest type of plans because there is no compromise or change unless a policy decision is taken. They help to regulate behavior and to facilitate communication.

5. Budget

It is a statement of expected results expressed in numerical terms. It is plan which quantities future, facts and figures. They serve as a means of co- ordination and control. They provide clarity, direction and purpose in the activities of an organization by laying down verifiable and measurable goals for a specified period of time. It is expressed in terms of money or physical units. It is a blue print of future course of action and activities. It is prepared in advance, and related to future period.

6. Project

A project is a distinct cluster of functions and facilities for a defined purpose and definite time period. It is designed and executed as a distinct plan. It is integrated into a unit and is designed to achieve stated objectives. It id defined in term of specific objective, interdependence of tasks etc. they help to facilitate co-ordination and control by identifying an integrated work package within a heterogeneous mass of activities and resources.

7. Strategy

The concept of strategy in business has been borrowed from military science and sports where it implies outmaneuvering the opponent. The term strategy began to be used in business with increase in competition and complexity of operations. It may be defined as gamesmanship or as administrative course of action designed to achieve success in the face of difficulties. It is an overall plan prepared for meeting the challenge posed by the activities of competitors and other environment forces ( it is a long term plan as it is designated to achieve the mission of the organization. It is forward looking and is mainly the job of top management).

The term strategy should be differentiated from tactics. It is the basic plan chosen to achieve objectives while are the means of implementing the plan. For e.g if the management anticipates price- cut by competitors, it may decide upon a strategy of launching as advertising campaign to educate the customers and to convince them superiority of its product.
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Review Questions
  • 1. Explain in detail about Strategic Management.
  • 2. Discuss about Matrix Structure.
  • 3. Explain the steps involved in strategic planning. What are the different kinds of growth strategies and defensive strategies.
  • 4. Define Planning.
  • 5. What are the steps involved in planning?
  • 6. What is Planning? Explain in detail the Planning Process.
  • 7. What is planning premises?
  • 8. Explain the different types of planning. What obstacles you are likely face while planning?
  • 9. Portfolio planning - what is it?
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