Planning

 Planning is the first managerial function to be performed. It is

concerned with deciding in advance what is to be done in
future, when, where and by whom it is to be done. It is a
process of thinking before doing.

 “ If you don’t know where you are going, no road will get you there.Without
the activities determined by planning, there would be nothing to organize, no
one to motivate and no need to control” G.R Terry
 FEATURES OF PLANNING
1. Focus on realizing the objectives set.
2. Intellectual process involving mental exercise.
3. Selective as it selects the best course of action.
4. Lays foundation of the successful actions of
management
 FEATURES OF PLANNING
5. It is flexible.
6. It is Continuous.
7. Efficiency increased- It is measured by what
it contributes to the objectives.
 OBJECTIVES OF PLANNING
1. Helps in effective forecasting.
2. Provides certainty in the activities.
3. Establish coordination in the enterprise.
4. Provides economy in the management.
5. Helpful in the accomplishment of budgets.
6. Gives direction to all the activities of an
organization.
MERITS AND DEMERITS OF PLANNING
Advantages: Disadvantages :
1.Reduces uncertainty 1.Limitations of forecasts
2.Ensures economical 2.Rigidity in administration
operations 3.Time consuming process
3.Facilitates control 4.Costly affair
4.Improves motivation 5.Influence of external
5.Gives competitive edge factors
6.Avoids duplication of 6.Psychological factors
efforts
STEPS IN PLANNING
1. Awareness of opportunities and problems.
a) What business opportunities will arise in future
b) What benefits will the organization get
c) How to exploit these opportunities
2. Collecting and analyzing information.
3. Determination of objectives.
4. Assessment of environment.
5. Planning Premising (assumptions) and forecasting.
6. Review of key factors.
 STEPS IN PLANNING
7. Development of alternative plans
8. Evaluation of alternative plans
9. Selection of a suitable plan
 Essentials of a good plan
 It should define objective
 Simple
 Clear
 Comprehensive
 Flexible
 Economical
 Balanced
 Practicable
Limitations

 Costly
 Time consuming task
 Reduces initiative
 Rigid
 Inaccuracy
 Easily effected by external limitations
 Capital invested in fixed assets limits planning.
 KINDS OF PLANNING

KINDS OF PLANNING

Organizational level Focus Time period

Corporate Strategic Long range
Divisional Operational Medium range
Functional Tactic Short range
 ORGANIZATIONAL PLANNING
 Corporate planning or top level planning: It lays down the
objectives, policies and strategies of an organization. Usually made
for a longer time period.

 Divisional planning or middle level planning: It is related to a

particular department or division. It lays down the objectives,
policies and strategies of a department.

 Sectional planning or lower level planning: focused on laying down

detail plans for the day to day guidance.
 FOCUSED PLANNING
1. Strategic planning: deciding the objectives and to decide the
resource allocation in order to realize the objectives. Done
by the top management.
2. Operational planning: ensuring efficient use of resources and to
develop a control mechanism so as maximum efficiency is
ensured.
3. Tactical planning: made for short term moves. Required to meet
the sudden changes in the environment forces.
 TIME PERIOD PLANNING
1. Long range planning: for a period of five years at least. Involves
capital budgeting, product planning, project planning etc. deals with
a great uncertainty.
2. Medium range: for one to five years. Relate to development of new
products and markets, product publicity etc. supportive to long
range plans.
3. Short range: up to one year. Made to achieve short term goals.
Focused on the internal environment of the business.
 Management By Objectives (MBO)
 MBO is a process whereby the superior and subordinate managers
of an enterprise jointly identify its common goals, define each
individuals, major areas of responsibility in terms of result expected
of him and use these measures as guides for operating the unit and
assessing the contribution of each of its members.
Steps of MBO Program
1. The organization’s overall objectives and strategies are
formulated.

2. Major objectives are allocated among divisional and

departmental units.

3 Unit Managers collaboratively set specific objectives for their

units with their superiors.

4 Specific objectives are collaboratively set for departmental

members
Conti..

5 Action Plans, defining how objectives are to be achieved,

are specified and agreed upon by managers and
subordinates.

6 The action plans are implemented.

7 Progress towards objectives is periodically reviewed, and

feedback is provided.

8 Successful achievement of objectives is reinforced by

performance bases rewards.
Features of MBO
 A philosophy not a technique

 Short term & long term objectives

 Performance appraisal

 Planning is an Integral part

Advantages of MBO
 Better Managing

 Emphasis on results

 Org. roles & structures clarified

 Increased commitment

 Improved controls
 Weaknesses of MBO
 Failure to teach philosophy

 Lack of guidelines to goal setters

 Dangers of inflexibility

 Short run nature of goals.

Suggestions for improving MBO
 Support of top management
 Objective should be realistic and achievable
 Objectives should be reviewed and modified
 Formal training should be given
 Should be accepted as style of management
Business Forecasting
 Business Forecasting is an estimate or
prediction of future developments in business such as
sales, expenditures, and profits.
 It is not surprising that business forecasting
has emerged as one of the most important
aspects of corporate planning.
 Business Forecasting
 Forecasting has become an invaluable tool for business people to
anticipate economic trends and prepare themselves either to
benefit from or to counteract them.

 If, for instance, business people envision an economic downturn, they

can cut back on their inventories, production quotas, and hiring's.
 If, on the contrary, an economic boom seems probable, those same
business people can take necessary measures to attain the
maximum benefit from it. Good business forecasts can help
business owners and managers adapt to a changing economy.
 Importance of Business forecasting
 Better understand seasonal peaks and depression
 Determine actual cost of sale
 When to order new inventory
 What is the best time to launch a new product
 Is it the right time to develop a new product
 Whether you need additional staff
 When can you afford to hire them plus so much more
 Advantages of Business Forecasting

1 Helps to Predict The Future

 Forecasting does not provide you with a crystal ball to see
exactly what will happen to the market and your company
over the coming years, but it will help give you a general
idea. This will provide you with a sense of direction which
will allow your company to get the most out of the
marketplace.
2.Keep Your Customers Happy
 In order to keep your customers satisfied you need to provide
them with the product they want when they want it. This
advantage of forecasting in business will help predict product
demand so that enough product is available to fulfill customer
orders.
3.Learn From The Past
 Looking at what has happened in the past can help companies
predict what will happen in the future. Thus making the company
stronger and most likely more profitable.
4.Keeps Companies Looking Ahead
 By forecasting on a regular basis, it forces companies to continually
think about their future and where their company is headed. This
will allow them to foresee changing market trends and keep up
with the competition.
5 Remain Competitive
 A business that does not use forecasting techniques will likely
surrender to their competition in a short time. Having a general
idea of what sales to expect in the following period is very
important. This will help a company prepare to meet customer
demand, otherwise the customer will look to fulfill their needs
elsewhere.
6 Receive Financing
 In order to receive financing for new startups or to fund an
existing enterprise, a forecast will need to be completed. The
lender needs an estimate on the number of sales you will
have within a given time period before they will consider
lending out large sums of money.
7 Prepare for New Business
 By forecasting demand, a company can see if an increase in
sales is likely approaching. This will allow the company to
prepare for this increase in business by providing extra staff
or production facilities to meet this new level of demand.
 Limitations of Business Forecasting
 In spite of many advantages, some people regard business forecasting “as an
unnecessary mental gymnastics and reject it as a sheer waste of time, money
and energy.”
 The reason for the same lies in the fact that despite all precautions, an
element of error is bound to creep in the forecasts and we cannot eliminate
guesswork in forecasts.
 It is also felt that forecasting is influenced by the pessimistic or optimistic
attitude of the forecaster.
 It may not be possible to make forecasts with a pin-point accuracy. But, it
still cannot undermine the importance of business forecasting.
 The management should first make use of statistical and
econometric models in making forecasts and then apply
collective experience, skill and objective judgment in
evaluating the forecasts.
 Further, the forecasts should be constantly monitored and
revised with the changed circumstances.