RAAK ARTS AND SCIENCE COLLEGE

(Affiliated to Thiruvalluvar University)

Perambai

Department of Commerce

REGULATION CBCS 2017

Third Year – Fifth Semester

BCM 53 – BUSINESS MANAGEMENT

Unit - 2
BY

A.SUGANTHY, Assistant Professor &

R.DEVAKI, Assistant professor

Department of Commerce

June 2021
 RAAK ARTS & SCIENCE COLLEGE

PREFACE OF THE COURSE FILE

DEPARTMENT OF COMMERCE

Batch : 2019-2022

Branch : COMMERCE

Year & Semester : III Year & V Semester

Regulation : CBCS-2017

Subject code : BCM 53

Name of the subject : BUSINESS MANAGEMENT

Unit : II

Faculty in-charge : A.SUGANTHY & R.DEVAKI

Approved by
Prepared by

HOD VICE - PRINCIPAL

Signature

A.SUGANTHY &
Name R.DEVAKI J.AROKIYANATHAN
R.DEVAKI

Designation ASSISTANT
PROFESSORS

TCF COORDINATOR PRINCIPAL

 BCM53 BUSINESS MANAGEMENT UNIT II

CONTENTS

UNIT - 2
PAGE
SL.NO TOPIC
NO
2 Introduction

2.1 Meaning 1

2.2 Nature of planning 1

2.3 Importance of planning 2

2.4 Advantages of planning 3

2.5 Limitations of planning 4

2.6 Process of planning 5

2.7 Types of plans 6

2.8 MBO-management by objectives 8

2.9 Forecasting 8

2.10 Decision making 9

2.11 Types of decisions 10

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2. INTRODUCTION

Planning is deciding in advance what should be done in future. It helps to work in a

systematic manner. With proper planning of the activities of the enterprise, it is possible to
make an optimum use of available resources.

2.1. MEANING

Planning is based on the theory of “thinking before acting”. Planning is an integral part of our
life. Planning is the most basic and primary function of management. It is an intellectual
process which needs a lot of thinking before a formation of plans. Planning is to set goals and
to make certain guidelines achieve the goals.

2.2 NATURE OF PLANNING

Planning is deciding in advance what to do, how to do, when to do, and who is to do. Essential
nature of planning can be described by four major aspects:

1. Contribution to objectives (Plans must have effectiveness):

Every major plan and its supporting plans should contribute to the accomplishment of the
purpose and objectives of the enterprise. It means plans have to be effective.
2. Primacy among the manager's tasks:
Managerial operations of organizing, staffing, leading and controlling are done to
accomplish the objectives through plans. Planning is primary task of managers.

3. Pervasiveness:
All managers from the first line supervisor to the chief executive officer of a company are to
do planning. At lower levels we may term it as operational planning and at higher levels we
may term it as strategic planning.
4. Efficiency of plans:
The effectiveness of a plan pertains to the degree to which it achieves the purpose or
objectives. The efficiency of the plan refers to the contribution to the objectives, offset by
the costs and other factors required to formulate and operate it.

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2.3. IMPORTANCE OF PLANNING

As the primary function of management, planning is considered vital in every sphere of activity.
The importance of planning may be stated as follows:

1. It focuses on objective

Once the objective of the business has been fixed, the next step is to prepare a plan for its
effective accomplishment. The enterprise objective cannot be realized overnight. It has to be
achieved gradually over a certain period.

2. It helps to avoid wastage of resources

Planning makes it possible to make optimum use of the available resources, namely, time,
money, materials and machines. This is possible as the employees and the executives know
before hand what they have to do.

3. It ensures efficiency as well as effectiveness

Efficiency is ensured by doing right things and effectiveness is achieved by doing things right.
Planning helps to do not only right things but also things right. Each department knows what it is
supposed to do well in advance as a result of planning.

4. It reduces risk and uncertainty

Planning is for future use and future is uncertain. While planning, future uncertainties are
anticipated and adequate provisions are made to meet or overcome the same.

5. It provides for co-ordination

The work done in any organization is a team-work. Different departments participate in the
process of goal attainment. Planning makes the responsibilities of each individual and department
very clear. Thus, planning by explaining the responsibilities of each individual and department
provides scope for co-operation and co-ordination.

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6. It facilitates control

If planning is the first function of management, Control is the last function. Planning without
control is useless and control without planning is meaningless. Control helps the enterprise to
know whether the plan has been successfully implemented and the objective has been achieved.

7. Planning also provides scope for decentralization

Dispersal of authority throughout the organization is known as decentralization. Once the basic
and derivative plans of the enterprise have been prepared, the next step is to explain the same to
all the subordinates who are going to perform the various tasks.

2.4.ADVANTAGES OF PLANNING
a) Planning minimizes uncertainties.
Business is full of uncertainties. Planning helps in reducing uncertainties of future as it
involves anticipation of future events.
b) Planning facilitates co-ordination:
Planning revolves around organizational goals. All activities are directed towards common
goals.There is an integrated effort throughout the enterprise in various departments and
groups. It avoids duplication of efforts. In other words, it leads to better co-ordination.
c) Planning improves employee’s morale.

Planning creates an atmosphere of order and discipline in organization. Employees know in

advance what is expected of them and therefore conformity can be achieved easily. This
encourages employees to show their best and also earn reward for the same. Planning creates
a healthy attitude towards work environment which helps in boosting employees moral and
efficiency.

d) Planning helps in achieving economies:

Effective planning secures economy since it leads to orderly allocation of resources to various
operations. It also facilitates optimum utilization of resources which brings economy in
operations.It also avoids wastage of resources by selecting most appropriate use that will
contribute to the objective of enterprise.

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2.5. LIMITATIONS OF PLANNING

a. Uncertain Nature:

The element of uncertainty cannot be totally eliminated in planning. Plans are meant for future use
but future happenings cannot be accurately foreseen.

b. Expensive:

Preparation and implementation of any plan is expensive not only in terms of time but also in
terms of efforts and money required.

c. Rigidity:

It is always necessary to strictly adhere to the plan in so far as the daily work routine in an
enterprise is concerned. Lack of flexibility in plans leads to monotony and boredom.

d. Loss of initiative:

The staff in an enterprise shall perform their duties in the way they are expected to do in the
plans. As a result, they are reduced to machines. There is no scope for the display of skills by
individuals and this leads to loss of initiative.

e. Ignorance of subordinates’ interests:

Plans are prepared to attain the organizational goal in the most effective manner. In doing so,
often, the interests, preferences, capabilities and attitudes of the employees are ignored. As a
result, the subordinates do not give their wholehearted support to the implementation of the
plans.

f. Complacent attitude:
There is always a feeling that once the plan is prepared, the target of the enterprise can easily be
attained. The success of every plan depends much on the effectiveness with which it is
implemented. A plan is only a means to an end and not an end itself.

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2.6. PROCESS OF PLANNING

The following are the various stages involved in the process of planning:

1. Identifying business opportunities:

It is necessary to make an analysis of both the internal and external environment to know the
trends in the near future. Business activities are influenced by internal as well as external factors.
Government regulations, technological changes, availability of material and labour and the extent
of competition are some of the important factors affecting business prospects.

2. Establishment of objectives:

The second step in the planning process is to establish the organizational objectives in tune

with the opportunities identified, taking into account there sources available.

3. Determination of Planning Premises:

Planning Premises are the assumptions made about the future happenings. As planning is for future
and future is uncertain, certain assumptions about the future become necessary.

4. Identifying the alternative courses of action

There are always alternative ways of carrying out any task just as there are different routes to
reach a destination point. To attain the objective of a business, different courses of action may
be available.

5. Evaluating the alternative courses of action

Once the alternative courses of action are identified, the next step is to evaluate the same. By
evaluation we mean studying the merits and demerits of each. Each alternative should be
examined carefully to decide on its suitability.

6. Selecting the best course of action:

Once the alternative courses of action have been evaluated, the next step is to select the best. The
finally selected course of action should help the organization in making an optimum use of the
available resources and help to attain the objectives set in the most effective manner.

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7. Formulation of derivative plans:

After the basic plan of the enterprise has been determined, the next step is to prepare the
subsidiary or derivative plans to support the basic plan. For example, once the production plan
of a manufacturer is ready, a number of supportive plans concerning the purchase of raw-materials,
tools and equipment, engaging workers, etc., will have to be formulated.

8. Periodic evaluation and review:

Once the implementation of the plan starts, it becomes necessary to evaluate performance at
periodic intervals to ensure that the activities of the enterprise proceed in the right direction and
as laid down in the plan. This will help to identify shortcomings, if any, in the plan and to take
corrective action at the right time.

2.7. TYPES OF PLANS

Any organization can have different plans. Plans can be classified in the following ways:

A. On the basis of Nature

1. Operational Plan: Operational plans are the plans which are formulated by the lower
level management for short term period of up to one year. It is concerned with the day
to day operations of the organization. It is detailed and specific. It is usually based on
past experiences. It usually covers functional aspects such as production, finance,
human resources etc.
2. Tactical Plan: Tactical plan is the plan which is concerned with the integration of
various organizational units and ensures implementation of strategic plans on day to
day basis. It involves how the resources of an organization should be used in order to
achieve the strategic goals. The tactical plan is also known as coordinative or functional
plan.
3. Strategic Plan: Strategic plan is the plan which is formulated by the top level
management for a long period of time of five years or more. They decide the major
goals and policies to achieve the goals. It takes in a note of all the external factors and
risks involved and make a long-term policy of the organization.

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B. On the basis of managerial level:

1. Top level Plans: Plans which are formulated by general managers and directors are
called top-level plans. Under these plans, the objectives, budget, policies etc. for the
whole organization are laid down. These plans are mostly long term plans.
2. Middle-level Plans: Managerial hierarchy at the middle level includes the
departmental managers. A corporate has many departments like purchase department,
sales department, finance department, personnel department etc. The plans formulated
by the departmental managers are called middle-level plans.
3. Lower level Plans: These plans are prepared by the foreman or the supervisors. They
take the existence of the actual workplace and the problems connected with it. They are
formulated for a short period of time and called short term plans.

C. On the basis of time:

1. Long Term Plan: Long-term plan is the long-term process that business owners use to
reach their business mission and vision. It determines the path for business owners to
reach their goals. It also reinforces and makes corrections to the goals as the plan
progresses.
2. Intermediate Plan: Intermediate planning covers 6 months to 2 years. It outlines how
the strategic plan will be pursued. In business, intermediate plans are most often used
for campaigns.
3. Short-term Plan: Short-term plan involves pans for a few weeks or at most a year. It
allocates resources for the day-to-day business development and management within
the strategic plan. Short-term plans outline objectives necessary to meet intermediate
plans and the strategic planning process.
D. On the basis of use:
1. Single Plan: These plans are connected with some special problems. These plans end
the moment of the problems to be solved. They are not used, once after their uses.
2. Standing Plan: These plans are formulated once and they are repeatedly used. These
plans continuously guide the managers. That is why it is said that a standing plan is a
standing guide to solve the problems. These plans include mission, policies, objective,
rules and strategy.

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2.8. MBO-MANAGEMENT BY OBJECTIVES

Management by objectives (MBO) is a management model that aims to improve performance

of an organization by clearly defining objectives that are agreed to by both management and
employees. The term was first outlined by management guru Peter Drucker in 1954 in his book
"The Practice of Management."

2.8.1. BENEFITS OF MBO

• Better managing

• Clarifying organisation

• Encouraging personal commitment

• Developing controls

2.8.2. LIMITATIONS OF MBO

• Failure to teach MBO philosophy

• Failure to give guidelines to goal setters

• Difficulty in setting goals

• Emphasis on short term objectives

2.9. FORECASTING

Forecasting is a decision-making tool used by many businesses to help in budgeting, planning,

and estimating future growth. In the simplest terms, forecasting is the attempt to predict future
outcomes based on past events and management insight.

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2.10 DECISION MAKING

A decision can be defined as a course of action purposely chosen from a set of alternatives to
achieve organizational or managerial objectives or goals. Decision making process is
continuous and indispensable component of managing any organization or business activities.

The important characteristics or features of decision-making are given below:

• It is a goal-oriented activity

The objective of decision-making is always to attain a specific goal.

• Existence of alternative courses of action

As mentioned earlier, the need for decision-making would arise only when there are alternative
ways of performing a task. If there is only one course of action available there is nothing to
decide .

• It may be positive or negative

Another interesting feature of decision making is that the decision made may be either positive
or negative.

• Decision-making is both a science and an art

As a science, decision-making requires knowledge of method, rule or principle concerning the

problem. As an art, it requires skill for making the decision a success.

• It is situational

It means that the decision-maker may make different decisions for the same problem under
different situations.

• It may be voluntary or induced

When the decision-maker makes the decision himself and is not pressurized by anyone, such a
decision is known as a voluntary decision. On the other hand, when he is pressurised either by
individuals or by the situation to evolve a decision to solve a problem, the decision becomes

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• It is a complex mental exercise

Decision-making involves careful consideration of the alternative courses of action, evaluation

of the same and selection of the best course of action. The entire process of decision-making
requires application of mind and intelligence. Then only, he can take best decision.

• It is an ongoing activity

Decision making is a continuous process. Decisions are to be taken in everyone’s life right
from cradle to grave. In a business organisation too several decisions need to be taken right
from its inception to dissolution.

2.11. TYPES OF DECISIONS

1. ORGANISATIONAL AND PERSONAL DECISIONS

Organizational decisions are made to advance the interest of the organization.

Personal decisions are made by an executive as an individual and not as a part

of an organization. An executive who charges jobs or organization is making a

personal decision.

2. INDIVIDUAL AND GROUP DECISIONS

When a decision is taken by an individual in the organization, it is known as

individual decision. These are concerned mainly with routine problems for which broad

policies are available. Such decisions are generally taken in small organizations and

in those organizations where autocratic style of management prevails.

Group decisions are those taken by a group of persons constituted for the purpose.

Decisions taken by the board of directors or a committee are, examples of group

decisions.

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3. ROUTINE AND STRATEGIC DECISIONS

Routine decisions are made repetitively following certain established rules, procedures

and policies. They do not require collection of new data and can be taken without

much deliberations. Such decisions are taken generally by the executives at the

middle and lower management levels.

Strategic or basic decisions, on the other hand, are more important and are

generally taken by the top management of organizations.

They relate to policy matters and so require a thorough fact finding and analysis

of the possible alternatives. Launching a new programme, location of a new plant,

installation of a computer system are examples of strategic decisions.

4. PROGRAMMED AND NON-PROGRAMMED DECISIONS

Programmed decisions are concerned with relatively routine and repetitive problems.
Information on these problems is already available and can be processed in a pre-planned
manner. Such decisions have short-term impact and are relatively simple. They are, made at
lower levels of management.
Non-programmed decisions deal with unique or unusual problems. Such novel or non-
repetitive problems cannot be tackled in a predetermined manner.

5. POLICY AND OPERATING DECISIONS

Policy decisions are of vital importance and are taken by the top management.

They affect the entire organization.

operating decisions are taken by the lower management in order to put into action

the policy decisions. For instance, the bonus issue is a policy matter which is to

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be decided by the top management and calculation of bonus is an operating decision

which is taken at the lower levels.

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UNIT-II – PLANNING
Type: 100% THEORY
QUESTIONS
UNIT II:

Planning-Meaning-Nature-Importance-Advantages and Limitations-Process of Planning-

Types of Plans – MBO-Forecasting-Decision Making.

SECTION A

1. Define planning. (April/May 2019)(Nov/Dec 2018) (April/May 2018) (Nov/Dec

2015,2014) (April/May 2015,2014)Nov2014
2. What is mean by procedures? (April/May 2019)
3. Define decision making/ short note on decision making. (Nov/Dec 2018) (Nov/Dec
2017) (Nov/Dec 2013)(April/May 2014)
4. Expand the word MBO.(April/May 2018)
5. What are the characteristics of a sound plan?(Nov/Dec 2017)
6. Name any four principles of planning. (Nov/Dec 2016) (Nov/Dec 2015)
7. What is short term plan? (Nov/Dec 2016) (April/May 2015)
8. What is long term plan?(Nov/Dec 2013)
9. What is mean by MBO?(Nov2014)
10. State any three features of a good plan.(Nov/Dec 2011)

SECTION B

1. Explain the planning premises. (April/May 2019)

2. Describe the nature of planning. (April/May 2019)
3. What are the characteristics of good plan? (Nov/Dec 2018) (April/May 2018)
(Nov/Dec 2016) (Nov/Dec 2015)
4. List out the limitations of planning. (Nov/Dec 2018) (Nov/Dec 2016) (April/May
2015)
5. Illustrate the administrative problems faced in decision making. (Nov/Dec 2015)
6. Discuss about process of decision making. (Nov/Dec 2013) (April/May 2014)(Nov
2014)
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SECTION C

1. Describe the steps in planning. (April/May 2019) (Nov/Dec 2013)

2. Describe the various types of plans. (Nov/Dec 2018) (April/May 2018) (Nov/Dec
2017) (Nov/Dec 2015) (April/May 2018)
3. Briefly explain the importance of planning. (April/May 2018) (April/May 2015)
(Nov/Dec 2013) (Nov/Dec 2011)
4. Briefly explain planning process. (Nov/Dec 2017) (Nov/Dec 2016) (April/May
2014)(Nov2014)
5. Describe the merits of planning. (Nov/Dec 2017)(Nov2014) (Nov/Dec 2011)
6. Discuss the methods of planning. (April/May 2014)
7. Stets involved in planning process. (Nov/Dec 2011)

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