Class 12 Business Studies

PLANNING
Planning can be defined as “thinking in
advance what is to be done, when it is to be
done, how it is to be done and by whom it
should be done”.

In simple words we can say, Planning bridges

the gap between where we are standing today
and where we want to reach.

Planning means setting objectives and targets

and formulating an action plan to achieve
them. It is concerned with both ends means
i.e., what is to be done and how it is to be
done.
 Features of Planning are :
Primary
Function

Involves Contributes
decision to
making Objectives

Planning

Futuristic Pervasive

Continuous
activity
 1) Planning contributes to objectives
• Planning starts with the determination of objectives. We cannot think of planning in absence of objective.
• After setting up the objectives, planning decides the methods, procedures and steps to be taken for the
achievement of set objectives.
• For example, If an organisation has the objective of manufacturing 1500 washing machines and in one month only
80 washing machines are manufactured, then changes are made in the plan to achieve the final objective.

2) Planning is the primary function of management

• Planning is the primary or first function to be performed by every manager.
• No other function can be executed by the manager without performing the planning function because objectives
are set up in planning and other functions depend on the objectives only.
• For example, In organising function, managers assign authority and responsibility to the employees and level of
authority and responsibility depends upon the objectives of the company.
• Similarly, in staffing, the employees are appointed. The number and type of employees again depends on the
objectives of the company. So planning always proceeds and remains at no.1 as compared to other functions.

3) Planning is Pervasive
• Planning is required at all levels of management. It is not a function restricted to
top level managers only but planning is done by managers at every level.
• Formation of major plan and framing of overall policies is the task of top level
managers whereas departmental managers form plan for their respective departments.
• Lower level managers make plans to support the overall objectives and to carry on day-to-day activities.
 4) Planning is futuristic/forward-looking
• Planning always means looking ahead or planning is a futuristic function. Planning is never done in the past.
• All the managers try to make predictions and assumptions for future and these predictions are made on the basis of
past experiences of the manager and with the regular and intelligent scanning of the general environment.

5) Planning is Continuous
• Planning is a never-ending or continuous process because after making plans also one has to be
in touch with the changes in changing environment and in the selection of one best way.
• So, after making plans also planners keep making changes in the plans according to the
requirement of the company.
• For example, If the plan is made during the boom period and during its execution there is
a depression period then planners have to make changes according to the conditions prevailing.

6) Planning involves Decision Making

• The planning function is needed only when different alternatives are available and we have to select the most
suitable alternative.
• We cannot imagine planning in the absence of choice because in the planning function managers evaluate various
alternatives and select the most appropriate. But if there is one alternative available then there is no requirement
for planning.
Importance / Significance of Planning

Planning
Planning Focuses
Planning reduces
facilitates attention on
provides overlapping
decision- objectives of
direction and wasteful
making the company
activities

Planning Planning Planning

reduces the promotes establishes
risk of innovative standard for
uncertainties ideas controlling
 • Planning is concerned with predetermined course of action. It provides the
directions to the efforts of employees. Planning makes clear what employees
have to do, how to do, etc.
Planning provides • By stating in advance how work has to be done, planning provides
direction direction for action. Employees know in advance in which direction
they have to work. This leads to unity of direction also.
• If there was no planning, employees would be working in different
directions and organisation would not be able to achieve its desired goal.

• Organisations have to face many uncertainties and unexpected situations

every day.
Planning reduces • Planning helps the manager to face uncertainty because planners try to foresee
the future by making some assumptions regarding the future keeping in mind
the risk of their past experiences and scanning of business environments.
uncertainties • The plans are made to overcome such uncertainties. The plans also include
unexpected risks such as fire or some other calamities in the organisation. The
resources are kept aside in the plan to meet such uncertainties.

• The organisational plans are made keeping in mind the requirements of all the
departments. The departmental plans are derived from the main organisational
Planning reduces plan. As a result, there will be coordination in different departments.
overlapping and • On the other hand, if the managers, non-managers and all the employees are
wasteful activities following course of action according to the plan then there will be integration in
the activities. Plans ensure clarity of thoughts and action and work can be
carried out smoothly.
 • Planning requires high thinking and it is an intellectual process. So, there is a great scope for
Planning promotes finding better ideas, better methods, and procedures to perform a particular job.
innovative ideas • Planning process forces managers to think differently and assume the
future conditions. So, it makes the managers innovative and creative.

• Planning helps managers to make various decisions.

Planning facilitates
• As in planning goals are set in advance and predictions are made for
decision-making future. These predictions and goals help the manager to make fast decisions.

• Controlling means comparison between planned and actual performance and if there is
variation between both then find out the reasons for such deviations and take measures to
Planning match the actual performance with the planned performance.
• But in case there is no planned output then the controlling manager will have no base to
establishes compare whether the actual output is adequate or not.
standard for • For example, If the planned output for a week is 100 units and the actual output produced
by an employee is 80 units then the controlling manager must take measures to bring the 80
controlling units production up to 100 units but if the planned output, i.e. 100 units is not given by the
planners then finding out whether 80 units production is sufficient or not will be difficult to
know. So, the base for comparison in controlling is given by the planning function only.

• Planning function begins with the setting up of the objectives, policies, procedures, methods
Focuses attention and rules, etc. which are made in planning to achieve these objectives only.
on objectives of • When employees follow the plan, they are leading towards the achievement of objectives.
the company • Through planning, efforts of all the employees are directed towards the achievement of
organisational goals and objectives.
 Limitations of Planning are
• Once plans are made to decide the future course of action the manager may not be in a position to
Planning leads change them.
• Following pre-decided plan when circumstances are changed may not bring positive results for the
to rigidity organisation. This kind of rigidity in plan may create difficulty.

• Business environment is very dynamic as there are continuous changes taking place in economic,
Planning may political and legal environment.
It becomes very difficult to forecast these future changes. Plans may fail if the changes are very
not work in •
frequent.
dynamic • For example, There may be a change in economic policy, a change in fashion and trend or a change
in competitors' policy. A manager cannot foresee these changes accurately and the plan may fail if
environment many such changes take place in the environment.

• With the planning, the managers of the organisation start working

Planning rigidly and they become blind followers of the plan only.
• The managers do not take any initiative to make changes in the plan
reduces according to the changes prevailing in the business environment.
creativity • They stop giving suggestions and new ideas to bring improvement in
working because the guidelines for working are given in planning only.
 • The planning process involves lot of cost because it is an intellectual process and
Planning companies need to hire professional experts to carry on this process.
• Along with the salary of these experts the company has to spend a
involves huge lot of time and money to collect accurate facts and figures.
cost • So, it is a cost-consuming process. If the benefits of planning are
not more than its cost then it should not be carried on.

• Planning process is a time consuming process because it takes a

Planning is a long time to evaluate the alternatives and select the best one.
time consuming • Lot of time is needed in developing planning premises. So, because of this, the action gets
delayed. And whenever there is a need for prompt and immediate decision then we
process have to avoid planning.

• Sometimes, managers have a false sense of security that plans have worked successfully
Planning does in past so these will be working in future also.
not give • There is a tendency for managers to rely on pretested plans. It is not true that if a plan
has worked successfully in past, it will bring success in future also as there are so many
guarantee unknown factors which may lead to failure of the plan in future.
success • Planning only provides a base for analysing the future. It is not a solution for future
course of action.
 • In planning we are always thinking in advance and planning is concerned with the
future only and the future is always uncertain.
Lack of • In planning many assumptions are made to decide about the future course of action.
But these assumptions are not 100% accurate and if these assumptions do not hold true

Accuracy •
in the present situation or in future conditions then the whole planning will fail.
For example, If in the plan it is assumed that there will be 5% inflation rate and in
future conditions, the inflation rate becomes 10% then the whole plan will fail and
many adjustments will be required to be made.

The above points show that planning is not

Conclusion a substitute for success of an organisation
because it suffers from many limitations.
But it does not mean that managers should
not perform planning function, rather they
should perform planning function keeping
in mind the limitations of planning and
then try to overcome these limitations.
 Steps taken by
Planning Process
management in the Step 1 : Setting Objectives
planning process
Step 2 : Developing Premises

Step 3 : Identifying alternative

courses of action

Step 4 : Evaluating alternative

courses of action

Step 5 : Selecting an alternative

Step 6 : Implementing the

plans

Step 7 : Follow up action

1) Setting Objectives :
 The first and foremost step in the planning process is to set up an objective.
 The managers set up very clearly the objectives of the company keeping in mind the goals of the company and the
physical and financial resources of the company.
 Managers prefer to set up goals which can be achieved quickly and in specific limit of time. After setting up the goals,
the clearly defined goals are communicated to all the employees.
 Objectives serve as a guide for overall business planning. They are usually set by the top management of the
organization.

2) Developing Premises :
 Premises refer to making assumptions regarding future. Premises are the base on which plans are made. It is a kind of
forecast made keeping in view existing plans and any past information about various policies.
 There should be total agreement on all the assumptions. The assumptions are made based on forecasting.
 Forecast is the technique of gathering information. Common forecast are made to find out the demand for a product,
change in government or competitor policy, tax rate, etc.

3) Identifying Alternative Courses of Action :

 After setting up of objectives the managers make a list of alternatives through which the
organisation can achieve its objectives as there can be many ways to achieve the objective
and managers must know all the ways to reach the objectives.
 For example : If the objective is to increase in sale by 10% then the sale can be increased :
a) By adding more lines of products
b) By offering discounts;
c) By increasing expenditure on advertisements;
d) By appointing salesmen for door-to-door sales, etc.
 So, managers lists out all the alternatives.
4) Evaluating Alternative Courses of Action :
 After making the list of various alternatives along with the assumptions supporting them, the manager starts evaluating each and
every alternative and notes down the positive and negative aspects of every alternative.
 After this, the manager starts eliminating the alternatives with more negative aspect and the one with the maximum positive aspect
and with the most feasible assumption is selected as the best alternative. Alternatives are evaluated in the light of their feasibility.

5) Selecting an Alternative :
 The best alternative is selected but as such there is no mathematical formula to select the best alternative.
 Sometimes instead of selecting one alternative, a combination of different alternatives can also be selected. The most ideal plan is the
most feasible, profitable and with the least negative consequences.
 After preparing the main plan, the organisation has to make several small plans to support the main plan. These plans are related to
the performance of routine jobs in the organisation. These are derived from the major plan. so, they are also known as derivative plans.

6) Implementing the Plan :

 The managers prepare or draft the main and supportive plans on paper but there is no use for these
plans unless and until they are put in action.
 For implementing the plans or putting the plans into action, the managers start communicating
the plans to all the employees very clearly.
 After communicating the plan to employees and taking their support the managers start allocating
the resources according to the specification of the plans.
 For example, if the plan is to increase sales by increasing the expenditure on the advertisement, then to put it into action, the
managers must allot more funds to the advertisement department, select better media, hire advertising agency, etc.

7) Follow up Action :
 Planning is a continuous process so the manager‟s job does not get over simply by putting the plan into action. The managers monitor
the plan carefully while it is implemented.
 The monitoring of a plan is very important because it helps to verify whether the conditions and predictions assumed in the plan are
holding in the present situation or not.
 • Plan is a document that outlines how
Plan goals are going to be met.
• It is a specific action proposed to help
the organization achieve its objectives.

Types of Plans
Single Use Plans
Single-use plans are one time use plan. These are
designed to achieve a particular goal that once achieved
will not reoccur in future.
Features of single use plan :
• Single use plans are used only once.
• Prepare to meet the demand of specific situation.
• These are discarded when the situation is over.
• Every time a new plan is prepared for a new
situation, e.g., budget, programme, projects.
Standing Plans
Standing plans are also known as repeat use plans. They
are made once but can be modified from time to time.
Features of standing plans :
• Standing plans are recurring plans used for an indefinite
period.
• These are stable in nature.
• These plans act as guidelines for smooth functioning of the
organisation, e.g., policy, procedure, rules, methods, etc.
• Strategy and objectives are types of plans which are not
classified as single-use or standing plans
Difference between Single-use and Standing Plan :
Sr. No. Single-Use Plan Standing Plan
Single use plan is used only Standing plan is used again
1) once. and again.
Single use plan is developed
Standing plan is made for
for one time event or course
2) of action that is not likely to
activities that occur regularly
over a period of time.
repeat.
It is usually developed once, but
It is discarded when the used over and over again with
3) project is over. necessary modifications from
time to time.
Single use plans include-
Standing plans include policies,
4) budget, programme and
procedures, methods, rules, etc.
projects.
 Types of Plans
1. Objectives 8. Budgets

2. Strategy 7. Programmes

3. Policies 6. Rules

4. Procedures 5. Methods
1) Objectives (Neither Single Use nor Standing Plan) :
 Objectives are the endpoints which are numerically expressed, that the
management seeks to achieve within a given time period.
 E.g., increasing sales by 10% in the next quarter.

a) Serves as guide for overall business planning.

Features of
b) All activities are guided towards objectives.
Objectives :
c) These are usually set by top-level management

2) Strategy (Neither Single Use nor Standing Plan) :

 A strategy is a comprehensive plan to achieve organisational objectives.
 The dimensions of strategy are:
 Determining long term objectives.
 Adopting a particular course of action.
 Allocating resources for achieving the objectives.
 E.g., choice of advertising media, sales promotion techniques, which channels
of distribution to be used, who are the customers, what is the demand, etc.

a) It is the blueprint of the business and provides an outline of the

Features of
business.
Strategy :
b) Strategy is influenced by the business environment.
c) Strategy directs future decision making and scope in long run
3) Policies (Standing Plan) :
 The policy is a general guideline that guides thinking or channelises energies
towards a particular direction.
 It brings uniformity in decision-making and action for the interpretation of strategy.
 E.g., the admission policy of an educational institution, recruitment policy, and
pricing policy of a company within which objectives are set and decisions are made.

a) Based on objectives.
Features of
b) Guides managers to implement the strategy.
Policies :
c) It defines broad parameters within which a manager may function.

4) Procedures (Standing Plan) :

 Procedures are required steps established in advance to handle future conditions.
 The sequence of steps to be followed by employees in different situations must be predetermined.
 For example : The procedure for admission to a particular school can be :
Procedures are made common for the entire department to coordinate their activities. So, procedures
cut across all the department lines. For example, The procedure to handle the order by manufacturing
department may involve sales department also.

Features of a) Sequence of steps to carry on different activities.

Procedures : b) Generally meant for insiders only.
c) Are mostly in a chronological order.
5) Methods (Standing Plan) :
 Methods can be defined as formalised or systematic ways of doing routine or repetitive jobs.
 Selections of the right method save time, money and effort and increases efficiency.
 It deals with a task consisting of one step of a procedure and specifies how this step is to be performed.
 For example : For the valuation of depreciation whether to use straight line
or diminishing balance method of depreciation.

Features of a) Methods vary from task to task

Methods : b) Selection of the right method saves time,
and money and increases efficiency.
c) Standardised way in which a task has to be performed.

6) Rules (Standing Plan) :

 A rule is a specific statement that specifies clearly what is to be done or not to be done.
 It is a guide to behaviour.
 A rule does not allow for any flexibility or discretion and prescribes a penalty for violation.
 For example : „No Smoking‟ in office premises, reporting for work at a particular time, etc.

Features of a) Specifies what to do and what not to do.

Rules : b) Are rigid, stringent and compulsive in nature
7) Programmes (Single use Plan) :
 Programmes are the combination of objectives, policies, procedures and rules.
 The programmes are made to get systematic working in the organisation.
 The programmes create relation between policies, procedures and goals.
 For example : The construction of a shopping mall, and the opening of a new department.

Features of a) Detailed Statement About A Project.

Programmes : b) Is Prepared For Various Activities.

8) Budgets (Single use Plan) :

 A budget is a statement of expected result for a given future period expressed in numerical terms.
 A budget is a plan which quantifies future facts and figures.
 A budget is a statement of expenses, revenue and income for a specified period.
 For example : Sales budget, Cash budgets

a) Statement of expected result expressed in numerical terms.

Features of
b) Quantifies future facts and figures.
Budgets :
c) Budgets are prepared by managers at every level.
Difference between Rules and Methods :
Sr. No. Rules Methods
Rules are norms for the
Methods are formalised way of
1) action and non-action of
doing routine and repetitive jobs.
employees.
Rules are very specific or
2) very rigid also.
Methods are specific but flexible.

Methods bring quantity

Rules improve the behaviour
3) of the employees.
improvement and
standardisation.
If rules are not followed then If methods are changed then there
4) there is a strict penalty for it. can be warning but no penalty.
Example : Follow straight line
5) Example : Rule - No smoking
method of depreciation.
Difference between Policies and Objectives :
Sr. No. Policies Objectives
Policies are organisation's
Objectives are end results of an
1) way of solving a particular
organisation.
problem.
Policies describe how the Objectives describe what is to
2) work is to be done. be done.
Policies explain the mode
Objectives are the endpoint of
3) of achieving the
planning.
objectives.
Policies are framed by top, Objectives are generally
4) middle and lower level formed by top level managers
managers. only.
Difference between Policies and Procedures :
Sr. No. Policies Procedures
Policies are organisation's own way Procedures are step by step way of doing
1) of tackling the problem. a job.
Policies are guide to think for
2) decision making.
Procedures are guide to actions.

Policies are derived from objectives Procedures are required for

3) of the company. implementation of policy.

4) Policies are more rigid. Procedures are less rigid.

Policies are expressed in general Procedures are expressed in specific

5) terms. terms.
Example : Procedure for maintaining
admission can be:
Example : school‟s policy to give
a) Separate file,
6) admission to students securing more
b) Keeping admission forms in file,
than 60% marks.
c) Checking data, filling in form with
original document, etc.
Difference between Policies and Rules :
Sr. No. Policies
Policies are organisation's own
1) way of handling a problem.
2) Policy is a general statement.
Policy is a guide for decision-
3) making and thinking.
Policy describes what is to be
4) done, under different situations.
5) Policies are less rigid.
Example : policy of giving
6) admission to students securing
more than 60% marks.
Rules
Rules are norms regarding the actions
and non-actions of employees.
Rule is a specific statement.
Rule is a guide to the behaviour of
employees.
Rules describe what is to be done and
what is not to be done by the
employees.
Rules are very rigid.
Example : No smoking in office
premises.
Difference between Procedures and Methods :
Sr. No. Procedures Methods
Procedures are sequences
Methods are formalised
of steps to be followed for
1) performing some
way of doing routine and
repetitive jobs.
important jobs.
Methods are less rigid or
2) Procedures are more rigid.
flexible.
Methods help for
Procedures help in the
3) implementation of policy.
standardisation and
coordination of activity.
Example : procedure for
Example : methods of
giving admission in school
4) or giving contracts to an
valuation of stock or
method of production.
outside agency.
Difference between Strategy and Policy :
Sr. No. Strategy Policy
It is a comprehensive plan which
1) includes various steps.
It is a single plan.

It is formulated for solving

It is formed to carry out
2) challenging and unforeseen
routine function.
problems.
Every time, a new strategy is
Common policy is used
3) prepared to solve different
for all routine problems.
problems.
It is permanent in
4) It is temporary in nature.
nature.
It allocates human and other It uses the resources for
5) resources. decision-making.