07-10-2017

UNIT _III

CONCEPTS OF PLANNING

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Planning, Staffing, Directing, coordination
controlling and budgeting are the major
functions of management
Of all these, Planning and controlling are
referred to as Principle of Systems
management.
PLAN is predetermined course of action and
control is the activity , which can monitor the
deviation of planned performances and
initiates corrective actions.

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CONCEPT OF PLANNING
Planning is a continuous process
It is applied to develop and execute:
Operational
Managerial
Strategic activities of the organisation
Basically its a structure to all functions of the organisation in
terms of How to do? What to do? When to do? Where to do?
Whom ? Why to do ?
PLANS in any organisation can be found in two forms:
Informal Organisational Plans
Formal Organisational Plans

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Informal Plans:
Inconsistent, Unscheduled

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Appears during crisis & hasty decision making situations
Formal Plans:

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Focus on Organisational activities and objectives
To achieve in a stipulated period of time

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Characteristics of Planning:

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1. It is cognitive activity
1. Means it is a mental work.

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2. Every movement in the planning activity is more of
a mental activity than a physical activity.
2. Guide to managerial performance
1. Plans are internal to help the managers in their
routine activities.
3. Brings-out uniformity in action
1. Designed to bring uniformity in the managerial
performances, practically in multi - location setting
of an organisation.

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Characteristics of Planning:

4. Creates and sustains good conduct and character

among employees at different levels in
organisation.
5. Provides carefulness to managers
since plans are guidelines to managers, they also
provide certain amount of carefulness to the managers.

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Planning process
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STEP-1
Identify the
opportunity
and strength
STEP-2
Establish
objectives
and goals
STEP-3

Develop the
premises
STEP-4

Develop the
alternatives

STEP-5 STEP-6 STEP-7 STEP-8

Select the Formulate the
Evaluate the
best derivative Budgeting
alternatives plans
alternatives

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Identify opportunities and strengths

As a first step, the analysis and planning team should
scan the both environments, which are internal and
external.
Find the related opportunities and strengths to
develop the Information System.
Establish the objectives and goals
System has to Frame its own objectives and goals.
Before planning and trying to do, the team should
figure out and understand the objectives clearly.
Determine alternative course of action

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The planning team should figure out alternative ways
or methods to reach the objectives.

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Evaluate the alternatives
Each of the alternative methods has to be analysed in

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terms of strengths and weaknesses.
Apply the feasibility test to all available alternatives.
Select the best alternative
It is processing of selection of best plans to perform
the stipulated objectives & goals.
Formulate the derivative Plans
After finalising the main plans, prepare it for smooth
implementation.
Budget
It is the final step to convert plans into real action.
Budget provides clear direction in numerical terms.

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Computational support for planning

Every plan should adopt the scientific method to
generate and implement.
While preparing the plans the planer has to :
Collect the required input data,
Analyse through suitable model of analysis
Find appropriate methods to implement them in effective way.
Therefore, to face all these activities we need
computational support for planning.
There are four types of computational methods for
planning:


Historical data analysis
Forecasting data analysis

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Internal data analysis, and
Output of result analysis

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Historical data analysis
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One of the main technique to find the pattern and
relationship among various input variables of the
planning process.

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Different techniques are involved:
1. Time trend o growth rate technique
In this rate of change or growth over a period of time
is computed.
For ex: for a particular period of time what is the sales
growth.
2. Data smoothing
The raw data cannot provide needed information
It goes through various techniques such as, Exponential
smoothing and moving average methods.

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3. Seasonal analysis
There different seasons a year, in each season there is
specific characteristics and business opportunities.
In historical data calculations, such seasonal variables are
also considered.
4. Correlation analysis
Through this technique the common variables are tested
How it relates and associate with the main components of
plan.
5. Cross correlation analysis
The degree of association between two sets of data is
calculated .
For ex: size of population and sales potential.
6. Data description and Analysis
Applied to measure the Mean, Medium , mode intervals

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and standard deviations.

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Forecasting Data Analysis

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To trend future outlook, there are certain techniques:

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Trend projection technique
It is like time series analysis or growth rate analysis techniques.


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This method uses the past data and analysis the future scenario.
For ex: the sales growth of a company for the last five years is 10%,
So the coming next one, two or three years there will be same
growth rate unless it is modifies with some other factors.
Regression analysis technique
Also uses past data for calculating future prospect.
Used to identify the relationship among the variables ( dependent &
independent variables.)
Interpolation or mid-value
Also considers past data.
For ex: sales of a company for the year 2016 is 20,000 and for the
year 2017 is 18,000, then the sales foe the year 2018 can be
interpolated as to be around 16,000 approximately.

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Formula or relation:
Derived by the computation mostly uses the
formula
For ex: ROI ( return on investment) may be
determined by the formula and we can find the
return on investment in near future.

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Hierarchy of Planning

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The hierarchy represents top to bottom planning order.

There are four conceptual levels of planning in the
organisation.
Each level has identified with different plans.
And each plan has taken up by the respective organisational
level.
These levels of organisation are:
Strategic planning level
address a time frame of five to ten years, may be vague, and are
developed at the organizational, board, or executive level
Tactical planning level
plans address a 12 month time frame, have a high level of detail,

Operation planning level

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and are developed at the unit or department head level.

Scheduling & budgetary level

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may address only a one to four week time frame, are very
detailed, and may be developed at the supervisory level.

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1. Mission: It is the theme of the organization. It clears what the
organization want to provide to the society.

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1. An organizations mission is the purpose and philosophy
that will drive it over a longer period of time, usually five to

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2. A mission defines organizations business and also serves
as the basis for all planning.
2. Goals: It refers to the planned results to be achieved. It
specifies who and whom should accomplish it. It must be within
the mission of the organization.
3. Strategies: It is a master plan defining how will an
organization achieve its mission and goals. It identifies basic long
term objectives of organization and adopts course of action and
allocation of resources for fulfilling goals.
4. Policies: Policy is comprehensive guideline for decision
making. Policy makes Links formulation of strategy with its
implementation. It supports the mission, goals, and strategies.

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5. Procedures: It describes the step to be taken for performing a

task in detail. It indicates how a policy is to be implement like a
guide.
6. Rules: Rules are strict guides that are to be obeyed by all
members of the organization. It is essential tool to operate an
organization in an orderly way. It establishes discipline and
uniformity in work.
7. Programs: It is statement of all essential activities to
accomplish a single plan. It consists of complex set of goals,
procedures, rules, resource flow in aggregate that are designed to
accomplish.

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8. Budget: It is a short-term financial plan. It is the basis of
measuring actual performance achieved with that of standard. It is

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designed to allocate the resources of the organization.

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Control Process and Nature of control in

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Control: a procedure to determine the change from the

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plan.
An identification of deviation from plans and initiating
corrective measures /action.
It is required in the organisational system to prevent
the disturbances and correct the system, so that actual
results are expected.
For example: disturbances in business system like entry
of a powerful competitors into the market, &
unexpected raise in the labour costs, etc. deviates the
main output of the organisation.

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Control is dependent on the report and processing of

information.
In any organisation processing of information is relied
upon:
Formal sources within the organisational(designed system)
Information sources within the organisation.
Formal sources outside the organisation(environment).
Informally from environment sources.

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Control in System: there are three types of

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organisational system that is:
Open loop system

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Closed loop system
Feedback loop system
Open Loop System
A system where control is exercised regardless of the
output produced by the system.
These controls are exercised or driven by external
interventions.

Inputs SYSTEM Outputs

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Closed Loop System:

A system with part of the output and feedback back to
the input, so that the output can initiate control action to
change either the activities of the system or the system
input.
Feedback Control System
Feedback is the return part of the systems output to
improve the quality or correction of error.

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closed loop system.
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So, a feedback system or a feedback loop is therefore, a

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A business organisation system uses feedback for control,
has therefore a closed loop control system

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There are two types of feedback system :
1. Negative feedback
It is information which indicates that the system is
deviating from its planned or presented course, and that
some re-adjustment is required to bring it back to course.
Here control actions would seek to reverse the direction
or movement of the system back towards its planned
standard.
For example: if the budgeted sales of the company for
January to February were Rs 5,00,000 in each month, but
the actual sales in January was recorded only Rs 3,00,000.
This negative feedback will indicate that control action was
necessary to raise the sales in February to Rs 5,00,000 in
order to get back on the planned course.

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PLANNED COURSE

Actua l Course of
Action NEGATIVE FEEDBACK

FIG: NEGATIVE FEEDBACK

Positive Feedback
It results in control action which causes actual results
to maintain or increase their path of deviation from
planned result.
Much positive feedback is considered harmful because
deviation from the plans is usually adverse and
undesirable.
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The E-Commerce

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The process of selling and buying of goods and
services through internet is called E-Commerce.
It is a systematic and organised network for the
exchange of goods between producers and
consumers.
E-commerce is a subset and branch of e-business.

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Designing Steps of E-commerce system

Defi ne the Sel ect

Da ta paths
bus iness La nguage

Sel ect
Sel ect
technology Da ta Base
currenci es
i nfrastructure

Impl ement Determine

Bus iness s hi pping Softwa re
Sol utions cos t

Shopping Ca rt
Des ign the

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s tore Securi ty
Ca talogue
forma t

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Define the Business
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Identify the potential business opportunities in the first
step of the designing of e-commerce system within the
kind of technology available, & also the business

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process , and the potential customers etc.
Selection of technology infrastructure
E-commerce encompasses with several technologies
tools and assistance. For ex; PCs, telecommunication &
other infrastructure such as hardware, software's etc.
Implementation of E-Business Solution:
E-Business solutions are associated with so many
technologies. Unless and until all the such technologies
are compiled, the perfection of the e-commerce cannot
be expected.

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Shopping Cart:
Allows the customers to chose the item, add, remove ,
calculate etc., before the products are committed for
purchase.
Selection of Language:
If possible use & develop the system useful for majority of
the peoples linguistics.
Selection of currency:
Like language, currency also changes from country to
country. So its advisable to accept more then one type of
currency.
Shipping Cost:

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Taking order is not being a issue to the online seller, but

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distributing them is more challenging & hence need
appropriate methods for the calculation to transport costs.

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Data Paths

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Data path is extremely required for effective E-

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commerce system. Data path means the orders of the
customers need to extracted properly without any

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missing or hidings.
Database:
The E-Commerce system is hugely dependent on the
database for future analysis and plans.
Software:
Appropriate selection of the software for the UI to run
the e-shopping system.
Security:
Above all security is the crucial thing. Unsecured
system destructs the customers loyalty & troubles the
organisations services.

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Information System through Outsourcing

If the organisations are unable to develop their own
information system by any cost, they approach to an
outside organizations.
Or
If the firm does not want to use its own internal
resources to build and operate information system, it
hires external organisation which are specialized in
providing such services to do the work.
Categories of these outsourcing may differ from context
to context.
In terms of Information System model it may be

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classified into four categories. But,

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Classifications have been made based on two criterions:

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Degree of risk involved with outsourcing an IS
Efficiency and effectiveness of information system.

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SRATEGIC
OUTSOURCING
Degree of Risk Involving

DESIRED
OUTSOURCING
LOW

HIGH

Efficiency &
effectiveness of
Information system.
TEMPORARY NOMINAL
LOW
OUTSOURCING OUTSOURCING

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1. Strategic Outsourcing
Need and efficiency of the information system is more
from the outsourcing process.
In this both the effectiveness and the risk from the
sourcing organisation are to high.
Majority of the organisation uses this kind of outsourcing
for there is development.
2. Desired Outsourcing
The risk from outsourcing organisation is less and high in
effectiveness of IS.
3. Temporary Outsourcing
Organisation cannot retain long term relationship with
such outsourcing facility in the information system.
Its a temporarily agreed outsourcing approach.
4. Nominal Outsourcing
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least in efficiency and least in Risks.

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However very rarely preferred by organisations.

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Benefits of Outsourcing

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Cost effective
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At times it is possible to reduce 15 to 30 percent of the cost
from the total expenditure of IS development cost by

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outsourcing the product.
Qualitative services
Since they will be a specialized and dedicative team to handle,
will provide us qualitative services.
Also we can train our staff as and when needed..
Flexibility
Very dominant feature of outsourcing. Higher the flexibility ,
easier to adopt the changes.
Run the organisation with less HR
Since instead of engaging more number of employees in
development of IS, relying totally on third party vendors helps
reducing the cost & valuable Human resources.

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Problems of outsourcing
Loss of control
Since all the important aspects in reference to the organisation
for developing the information system is shred with the third
party vendor, that dilutes the control of the host organisation.
Trade secrets cant be guarded properly.
All the information is handled by the third party vendor so, the
complete trading secrets of the organisation gets compromised
with the world.
Making it most vulnerable to competition threat.
Dependency

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The firm becomes dependent on the viability of the vendor.

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A vendor with financial problems or deteriorating services may
create service problems for clients.
Ex: ?

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