Planning Premises

Planning premises may be classified as follows:

1. Internal and external premises:

Internal premises are the resources and abilities which pertain to the firm's own climate.
These include sales forecasts, capital investment in plant and equipment, skill of labor force,
competence of management policies and programmers of the organization, values and beliefs
of organization members, management philosophy, etc.

Such premises are amenable to management control. On the other hand, external premises are
related to the external environment of business.

They consist of economic, technological, social and political factors such as population
trends, Government policies and regulations, employment figures, national income, price
levels, technological changes, sociological factors, etc.

External premises may be classified in three groups, namely general business environment,
product market and the factor market characteristics.

2. Controllable, semi-controllable and uncontrollable premises:

Controllable premises are those factors over which management has full control. Plant
location, expansion programme, advertising policy, capital investment, etc are examples of
controllable premises.

Uncontrollable or non-controllable premises refer to war, population trends, new inventions,

natural calamities, business cycles, government policy, legislation, etc which are beyond the
control of management.

They upset the plans and require periodical revision of plan in accordance with current
developments. Semi-controllable premises are those over which management has partial
control. Union management relations, firm's share in the market, etc. are examples of such
premises.

3. Tangible and intangible premises:

Tangible or quantitative premises are those which can be expressed or measured in

quantitative terms, e.g., labor hours, units of production, number of machines, capital
investment, industry demand, population growth, etc.

On the other hand, intangible premises are those which can not be measured quantitatively,
e.g., company reputation, public relations, employee motivation and morale, attitudes and
philosophy of the owners, political stability, etc. In spite of their qualitative nature, intangible
premises play an important role in managerial planning.

4. Foreseeable and unforeseeable premises:

Foreseeable premises tend to be definite and well-known and they can be foreseen with
certainty. Requirements for men, money and machines are examples of foresee able premises.
Unforeseeable premises "such as war, strike, natural calamities are unpredictable.