Unit - 2

Nature and purpose of Planning

Q1) What is Planning? What are its characteristics?

A1) Every organization has to decide about its future course of actions. This will enable the organization to survive and succeed in this competitive business world. No organization can do without planning. Unless we plan, we are leaving future events to chance.

Planning provides a sense of direction to business activities. Planning bridges the gap from where we are and where we want to go. Therefore, planning is very vital for a business enterprise.

In the words of Koontz and O’Donnell, “Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it.”

James Stoner defines “Planning is the process of establishing goals and a suitable course of action for achieving those goals”

“Planning is a trap laid down to capture the future.” WELL PLAN IS HALF DONE.

The nature and characteristics of planning can be explained as follows:

(I) Planning is Goal Oriented: Planning is goal oriented in the sense that plans are developed and executed to achieve goals. At first the goals are set, and then plans are framed to accomplish them. Planning has no meaning, unless it contributes to the achievement of goal.

(2) Future Oriented: Planning is future related activity. Necessary forecasts, are made about the future and accordingly plans are made. ‘n other words, plans are made for the future activities. - whether short term, medium term or long term.

(3) Continuous Activity: Planning is a continuous activity. It is an on-going process. Effective planning requires constant and continuous checking of events. Accordingly, plans are drawn and redrawn depending upon the situation or circumstances at the time of implementation.

(4) Link Between the Present and Future: Planning acts as a link between the past, present and future. Although planning is a future related activity, yet it does not mean that while planning. The managers do not consider the past and present events. One cannot, totally Ignore, the past and present events and achievements while planning for the future events. It is the past experience that helps in preparing realistic future plans.

(5) Primacy of planning: Planning is the primary or basic function of management. Without planning, it would be difficult to organize. To direct and to control. Planning precedes all other managerial functions and every managerial action needs to be properly planned.

(6) Pervasiveness of Planning: Planning is the function of every manager. The need for planning exists at all levels of management. The top level, the middle level and the lower-level managers need to plan. Planning is required not only in business organizations, but also in non - business organizations, such as government organizations, educational institutions, charitable trusts etc.

(7) Planning is an Intellectual Process: The success of plans depends upon to a great extent on the quality of mind (intelligence) of manager. A great deal of imagination and intelligence is needed to prepare sound plans. Normally, a number of alternative plans are required to be prepared. Finally, the best feasible plan is selected. A lot of judgment, experience and intelligence is required to select the best feasible plan.

(8)  Integrated Process: Every plan needs to be integrated with other plans. The plan of one section or department needs to integrated or coordinate With those of other sections or departments in order to achieve organizational goals.

(9)    Planning Provides a Sense of Direction: Planning bridges the gap from where we are and where we want to go. Planning shows the direction to effective action. Without planning, activities are likely to be undertaken in a haphazard manner. This would lead to chaos and confusion.

(10)  Planning Generates Efficiency: Every manager plans in order to achieve highest efficiency. Efficiency is the relation between returns and cost. Through well designed plans, it is possible to achieve highest possible returns at the lowest possible cost. This is because planning facilitates optimum utilization of resources, thereby generating higher efficiency.

Q2) What are the importance of planning?

A2) Planning is an important of functions of management. It Acts as base for the achievement of organizational goals. Importance of planning is as follows.

1.] Provide Direction: A proper plan always gives proper direction for the achievement towards the desired goals. A manager can give proper direction to his subordinates so that right work can be done at the right time so as to get right results. Planning helps to perform all the activities in smooth and systematic manner.

2.] Reduce risks and uncertainties: Modern business world in full of risk and uncertainties. Planning helps to reduce these risks and uncertainties as it involves anticipation of future and prepare for possible risks.

3.] Increases Efficiency: Good planning leads to proper and efficient working of the employees in an organization. Planning helps of to define the objectives of the organization with reference to available resources. Plans are efficient if they achieve their purpose at a reasonable cost, where cost is measured not only in terms of time or money or production but also in the degree of individual and group satisfaction.

4.] Integrated Process: Planning is done for all the departments in the organization. All the departments are interconnected and hence their plans need to be integrated with each other to achieve the desired result.

5.] Provide clear objectives: Planning beings with determination of objectives. It makes clear the purpose of objectives, in fact, it makes objectives clearer and more specific. It helps employees in achieving their objectives or goals of the organizations.

6.] Improvement morale of employees: Planning brings order and discipline in an organization. Employees know in advance as to what is expected of them and how to achieve that. This helps them to bring the best in their performance and also brings healthy attitude towards work, which in turn boost the confidence, morale and efficiency in them.

7.] Helps in optimum utilization of resources: Effective planning leads to proper allocation of resources for various activities. It also facilitates optimum utilization of resources which brings higher efficiency and better results.

8.] Encourage Innovation: In a planning process, manager gets opportunities by providing suggestions for improving performances. Planning is basically a decision-making process which involves creative thinking and Imagination that ultimately leads to innovations and in turn growth and prosperity for the organization.

9.] Facilities Controlling: An effective controlling is possible with well though plans. Planning providers pre-determined goals against which actual performance is completed. Continuous monitoring is one on the performance so that immediate corrective action can be taken if anything goes wrong. In fact, Planning and Controlling are the two side of the same coin. If planning is the root, controlling is the fruit.

10.] Facilitates Co-ordination: All managerial functions lead to co-ordinate in the organization planning revolves around organizational goals. Integrated effects from various departments leads towards achieving organizational goals and it is possible only trough co-ordination among various departments. It is truly said that co-ordinate is essence of management and planning is the base for it.

Q3) What are the steps involved in decision making process?

A3) The steps involved in the decision-making process (as shown in Figure-2) are explained as follows:

1. Setting Objectives:

Refers to the first step of the decision-making process. It's necessary for an organization to define the objectives of taking a specific decision. The decision-making process of an organization is successful if the objectives are clear, realistic, and aligned with this market conditions.

In addition, it's preferred that the objectives should be in quantitative form, so that results can be measured more accurately. Aside from this, the objectives should clearly mention the goals that an organization desires to attain and the time period to attain those goals. For instance, an organization can set an objective ‘to reduce the cost by 5% in the next fiscal year.’

2. Defining the problem:

An organization are often successful if it clearly identifies the problem that a decision is to be taken.

3. Identifying the causal factors:

Involves determining the factors which will affect the decision. For instance, for setting the price of a new product, it's required to determine the factors that influence the prices of the product. These factors are often availability of substitutes, climate, income level of consumers, demand and provide of the product, and costs incurred in manufacturing the product.

4. Finding out alternatives:

Refers to the step in which all the possible alternatives are generated for solving a problem. During this step, a corporation precisely identifies the multiple solutions to resolve a problem.

5. Collecting information:

Involves gathering data with respect to the alternatives generated so they can be properly analysing the information collected is said to the important economic variables that influences the problem. Generally, an organization collects information from internal and external sources.

Internal sources include records maintained by different departments of the organization, like marketing, human resource, production, finance and personnel department. On the opposite hand, external sources include information collected through surveys, interviews, and research conducted.

6. Evaluating information:

Constitutes a vital step of the decision-making process in this step, the collected data is analysed in order that best alternative are often selected. Many of the alternatives are eliminated if they're not able to satisfy the requirements of the organization or don't match with the budget or other constraints of the organization.

All the alternatives are analysed on the premise of their advantages and disadvantages. After conducting a radical analysis of the alternatives with the assistance of quantitative and qualitative tools, the best alternative is chosen.

Q4) What is Decision making?

A4) Decision making is that the act of selecting between the available alternatives. There are countless decisions that humans make on a day-to-day basis. In business enterprises, decisions are made at every step. It's also considered one among the important functions of management. Management functions like planning, organizing, staffing, directing, coordinating and controlling are administered through decisions. Deciding is feasible when there are two or more alternatives to unravel one problem or difficulty. If there's just one alternative, it's not about making decisions. Management without decision is believed to be a person without a backbone. Therefore, deciding may be a problem-solving approach by choosing a selected course of action among several alternatives.

Decision making is that the selection, supported some criteria, of two or more possible alternatives. "- George R. Terry

In conclusion, we will say that call making is that the process of selecting a selected course of action among several alternatives to unravel organizational problems or difficulties.

Decision-making is vital to realize organizational goals / objectives within the given time and budget. Find the simplest alternative, use resources appropriately, and satisfy employees within the workplace. As a result, the goals or objectives of the organization are often achieved supported the specified result.

Q5) What are the features of decision making?

A5) From definitions and elements, we can draw the subsequent important features of managerial decisions:

1. Rational Thinking:

It is invariably supported rational thinking. Since the human brain with its ability to find out, remember and relate many complex factors, makes the rationality possible.

2. Process:

It is the method followed by deliberations and reasoning.

3. Selective:

It is selective, i.e., it's the selection of the best course among alternatives. In other words, decision involves selection of the best course from among the available alternative courses that are identified by the decision-maker.

4. Purposive:

It is usually purposive i.e.; it relates to the end. The answer to a problem provides an efficient means to the desired goal or end.

5. Positive:

Although every decision is usually positive sometimes certain decisions is also negative and should just be a decision to not decide. As an example, the manufacturers of VOX Wagen car once decided to not change the model (body style) and size of the car although the opposite rival enterprise (i.e., the Ford Corporation) was planning to introduce a new model every year, in the USA.

That a negative decision and is equally important was stressed by Chester I. Bernard-one of the pioneers in Management Thought-who observed, “The art of executive decision consists in not deciding questions that aren't now pertinent, in not deciding prematurely, in not making decisions that can't be made effective, and in not making decisions that other should make.”

6. Commitment:

Every decision relies on the concept of commitment. In other words, the Management is committed to each decision it takes for 2 reasons- viz., (/) it promotes the steadiness of the concern and (ii) every decision taken becomes a neighbourhood of the expectations of the people involved within the organisation.

Decisions are usually such a lot inter-related to the organisational lifetime of an enterprise that any change in one area of activity may change the opposite areas too. As such, the Manager is committed to decisions not only from the time that they're taken but up to their successfully implementation.

7. Evaluation:

Decision-making involves evaluation in two ways, viz., (i) the executive must evaluate the alternatives, and (ii) he should evaluate the results of the decisions taken by him.

Q6) What are the planning tools and techniques?

A6) The useful tools and techniques of managerial planning include the following:

- Forecasting

- Contingency planning

- Scenarios

- Bench marketing

- Participative planning

- Use of staff planners

Forecasting
Forecasting is the process of predicting what will happen in the future. Almost every plan involves forecasts of some sort. The economist regularly reports forecasts of economic conditions interest rates, unemployment, and trade deficits. Among other issues. There are some based on qualitative forecasting. Qualitative forecasting uses experts’ opinions to predict the future. Also, it is involved to use mathematical models and statistical analysis of historical data and surveys to predict the future events.

Contingency Planning

It identifies alternative courses of action that can be implemented to meet the needs of changing circumstances. Although it is not possible for anyone to predict when things will go wrong, it can be expected that they will. It is unlikely that any plan will ever be completely perfect. Changes will occur in the environment. When crisis and emergencies occur, managers and the organizations have contingency plans that are ready to be implemented. Contingency plans contain "trigger points" that indicate when pre-selected alternative plans should be activated.

Scenario Planning

It involves identifying several alternative future scenarios that may occur. Plans are then made to deal with each scenario as it occurs.

For example, the Heart and Stroke Foundation of Ontario set out to design a new model for the health care funding, they wanted to challenge the organization to think in different ways about the future. The scenario planning process benefited them by helping the board and other invited experts to rehearse strategic development plans and tactics in five different realistic scenarios.

Benchmarking

It is a technique that uses external comparisons to better evaluate one's current performances and identify possible actions for the future. The purpose of it is to find out what other people and organizations are doing well at and plan how to incorporate these ideas into one's own operations. One of the benchmarking techniques are used to search for best practices. Best practices are things that lead to superior performance. It is considered that the best run organizations also emphasize internal benchmarking that encourages all members and work units to learn and improve by sharing one another's best practices.

Participation and Involvement

Includes, in all planning steps, the people who will be affected by the plans and/or who will be asked to help implement them. This process brings many benefits to the organization. Participation can increase creativity and information available for planning. Also, it increases the understanding and acceptance of plans, along with commitment to their success. Although its takes a long time, it can improve results by improving implementation. All employees participate in the planning process and are regularly updated about the company's program towards its goal.

Use of Staff Planners

Staff planners are employed to help coordinate planning for the organization as a whole or for one of its major components. They help bring focus and energy to accomplish important planning tasks. A risk involved is a tendency for a communication gap to develop between the staff planners and line managers. Everyone must work closely together; the resulting plans may be inadequate and people may lack commitment to implement the plans no matter who good they are.

Q7) What is Value chain? What are its functions?

A7) A value chain consists of a list of processes or activities that a company performs to bring a product or service to market. The activity is divided into two functions.

1. Main activities

These include features that are directly involved in the creation of goods or services. These consist of features such as inbound and outbound logistics, operations, marketing and sales, and product service.

2. Support activities

These include features that facilitate the production of goods or services. It consists of functions such as personnel, technology, procurement, and infrastructure.

According to Porter, coordinating activities can improve an organization's operational efficiency and ultimately create a competitive advantage for the organization.

Q8) Explain the framework for strategic management.

A8) The framework for strategic management are-

1. Competitive Advantage

Organizations can reduce production costs or differentiate their products as an advantage over their rivals. It is also important to identify the brand and its position in the market and identify all the competitive advantages that the company has over its competitors.

2. Corporate Strategy and Portfolio Theory

Modern portfolio theory provides a framework for allocating assets to maximize expected return for a particular level of risk. Portfolio theory allows an entity to perform a cost-benefit analysis of resource deployment to see the benefits of individual resource allocation for the entire enterprise.

Developed by the Boston Consulting Group, Growth-Share Matrix helps companies analyse the value of individual business units by plotting them around their business. The two parameters of judgment are market share (a measure of a business unit's competitiveness against other companies in the same industry) and industry growth rate (a measure of the outlook for the particular industry in which the unit operates).

3. Core Competence

Companies should strive to develop relatively good discipline expertise and eliminate or outsource remaining business activities. Being able to do this allows organizations to offer markets and consumers their own unique products, services, or perspectives.

4. Experience curve

The experience curve represents the proposition that when production doubles, value-added costs decrease at a constant rate.

5.General Competitive Strategy

Companies need to focus their strategies on cost leadership, focus, or differentiation. According to renowned business strategist Michael Porter, there is a risk of wasting resources if a company does not focus on a single factor. Such strategies focus on specializing in products or services by creating their own sales proposals or creating economies of scale to achieve low costs of production.

6. Industry Structure and Profitability

The Competitive Forces Model (Porters 5 Forces) is a framework used to assess the competitiveness of the industry.

7.Threat of New Entrants

In a highly competitive industry, the threat of new entrants is high. Assuming that the industry or sector is profitable, it is considered an attractive business outlook for many. Some deterrents to facilitate market entry include patents, high capital requirements, customer loyalty to established brands, and economies of scale of existing size.

8.Alternative Threat

If a product or experience can be easily replicated by similar alternatives, the demand for that product is said to be diminished. An industry or sector is considered competitive if consumers can find similar alternative products.

9.Customer Bargaining Power

In a highly competitive market, customers can enjoy high bargaining power. Sellers will no longer be able to put price pressure on them to prioritize profitability.

10.Supplier Bargaining Power

If multiple suppliers exist to procure raw or intermediate materials, they cannot unreasonably affect the final price.

11.Competitive Rivals

Competitive industries enjoy a high degree of innovation and advanced competitive marketing strategies.

Q9) What are the types of strategic management? What is its component?

A9) Strategic management as an idea are often approached in several ways. The subsequent is a summary of common sorts of strategic management.

SWOT Analysis

SWOT represents strengths, weaknesses, opportunities and threats. This analysis allows you to research internal and external factors. Internal factors include positive (advantages) or negative (weaknesses) factors that are present within the organization and should be changed or affected in how, while external factors are positive (external) Includes opportunity) or negative (threat) factors. You're being evaluated and aren't necessarily modified or suffering from you or your organization.

Balanced Scorecard

The Balanced Scorecard helps you discover out which aspects of your business got to be improved by dividing the performance evaluation process into four areas called legs. These legs are:

1. Learning and growth
2. Business process
3. Customer perspective
4. Financial data

The Balanced Scorecard method can generate a timely reporting mechanism that displays all the statistics associated with your company's growth.

Strategic Management Component

1. Prescription

Development involves assessing the environment in which the organization operates and developing a strategy for how the organization operates and competes. This is similar to the first step in the budgeting process.

2. Implementation

The implementation involves deploying your organization's resources to achieve your goals.

Q10) How does strategic management work?

A10) Strategic management requires setting company goals, analysing the behaviour of competitors, reviewing the interior structure of the organization, assessing the present strategy, and ensuring that the strategy is being implemented company-wide.

Strategic management is either normative or descriptive. Normative strategic management means developing a technique that precedes organizational issues. Descriptive strategic management means executing strategies as required.

Senior management is liable for implementing the strategy, but ideas, goals, or organizational challenges can come from any member of the corporate. Many companies employ strategists whose job is to think and plan strategically to enhance corporate functioning.

Q11) What is Strategic management?

A11) Strategic management is that the development and implementation of key objectives and projects performed by the organization's managers on behalf of shareholders (or owners). The formulation process typically begins with an assessment of obtainable resources, an industry analysis to assess the competitive environment during which the corporate operates, and an indoor operational assessment. This overall assessment creates a technique for achieving the specified goals. The implementation of the developed strategy aims to coordinate the corporate towards its main purpose.

Strategic management offers many benefits to the businesses that use it, including:

1.     Competitive Advantage: Strategic management gives a corporation a plus over its competitors because its aggressive nature means it's conscious of a constantly changing market.

2.     Achieving Goals: Strategic management helps keep goals achievable by employing a clear and dynamic process for developing steps and implementations.

3.       Sustainable Growth: Strategic management has been shown to steer to more efficient organizational performance and manageable growth.

4.     Cohesive Organization: Strategic management requires company-wide communication and implementation of goals. Organization that employs together towards a goal is more likely to succeed in that goal.

5.     Raising management awareness: Strategic management means looking to the longer term of the corporate. If administrators do that consistently, they're going to be better conscious of industry trends and challenges. By implementing strategic planning and thinking, they're better prepared to face future challenges.

Q12) Explain the classification of policies.

A12) The policies are classified as under:

1. On the basis of Origin/Source:
   • Originated Policies: Policies which are framed by the top executives, and directs the employees about what decisions they can take in a particular situation. Hence, the employees are supposed to follow them strictly.
   • Appealed Policies: If a subordinate is confused regarding if he/she possesses sufficient authority to look after the situation or not, in that case, the subordinate may seek an order from the superior. This order is said to be appealed authority.
   • Imposed Policies: Imposed policies are the ones imposed on the business, by the external agencies like government, suppliers, trade unions, industry associations, creditors, etc.

• Basic Policies: Those policies of the firm which are pursued by the top management level are regarded as basic policies.
• General Policies: General Policies are for middle-level management, as they are related to the company’s day to day operations and dealings.
• Departmental Policies: Departmental policies are specific in nature as they are framed for the particular department only. For instance, marketing policies, production policies, personnel policies, purchase policies, finance policies, research and development policies.

• Planning Policies: Such policies embrace future courses of action, as they are formulated to achieve business targets. These can be organization-wide or department-wide policies.
• Organizational Policies: Policies concerning organizational goals and objectives are termed as organizational policies.
• Motivation and control Policies: Policies established to motivate or encourage employees as well as to control their activities, so as to lead the firm’s objectives, while satisfying the personal goals of the employees.

• Written Policies: As the name suggests, written policies are those policies of the firm which are published to guide the employees and also to have a basic understanding of the company’s rules. Some of the written media, where written policies can be found are – bulletins or notice boards, news releases, handbooks, booklets or manuals.
• Implied Policies: Policies which emerges from the conduct are implied policies. It emanates in the area where existing policies are not in force.
• Implicit policies: Policies communicated by word of mouth by the key people in the organization are called implicit policies.

Policies the basic set of rules which the employees are required to follow at the time of working and responding. It embraces the ‘how’ facet of planning. It defines as well as confines the limit of the behaviour of employees and so the employees have to work within the periphery of policies.

Q13) What is policy? What are its features?

A13) Policies can be defined as the fundamental written statements which are meant to guide the thinking and action in decision making of the managers. It is a standing solution for recurring situations, as it is a ready reference to many problems.

A firm’s policies are framed by the Chief Executives and Board of Directors while taking suggestions from all the subordinates. It helps in directing and limiting the scope of actions of the firm while pursuing its long-term goals and protecting the interest of the company.

The Characteristics of Ideal Policy are-

Upcoming points will explain the characteristics or qualities of an ideal policy:

• Objective-oriented
• Clear and explicit, which removes chaos and ambiguities
• Carefully designed
• Simply presented, facilitating the understanding to all in the correct manner.
• Based on the holistic view, taking into account all employees, resources, facilities etc.
• Practical
• Flexible enough to match the needs of the firm and allow reasonable discretion to subordinates who are responsible for its implementation.
• Reviewed, revised and replaced whenever required.
• Properly communicated and implemented.

Policies serve as the company’s rules and principles developed and adopted, so as to attain a rational outcome through consistency in their decision making. For the purpose of formulating policies, first of all, the core activities of the firm are identified and basic strategy is laid out, on the basis of which the managers decide the way in which issues are handled.

Q14) What is Setting objectives? What do objectives do?

A14) Setting objectives is a vital part of the revised SRDS scheme. Objectives provide structure and clarity of expectation for the individual, the manager, the team and department. They provide the link between the purpose of the job role and the individual’s efforts; they also form the basis from which an individual’s contribution will be assessed.

Setting objectives focuses attention and action. Objectives give you something to work towards, and help to direct energy and effort. They stimulate the need to act. Research has found that where staff are involved in setting their own objectives, they are more motivated to achieve them (Locke, E A and Latham G.P, Goal setting; a motivational technique that works. Englewood Cliffs, NJ: Prentice Hall, 1984). They lead naturally into moving from the what to the how.

Objectives are the ends for the achievement of which managerial activities are directed. Objectives are the pre-requisites of planning. It constitutes the purpose, the attainment of which is necessary for the business. These are the standing plans of the business. These are not only helpful in planning but also in other managerial functions like organizing, directing and controlling. Clear cut objectives help in proper decision making and in achieving better results. The setting up of unrealistic objective may waste the efforts and time of the employees of the organization.

Q15) While Setting Objectives in Management, what are the points that must be considered?

A15) While Setting Objectives in Management, following points must be considered in the mind:

• OBJECTIVES SHOULD BE CLEARLY EXPRESSED

There should be clear goals or targets expressed. There must be no ambiguity in the language in which they are communicated. The employees of the organization must not have any confusion in mind regarding what is to be achieved. A good objective is that which is clear and provides right direction to go for its attainment.

• IDENTIFICATION OF UNDERLYING ASSUMPTIONS

An objective is made on various underlying assumptions. All such assumptions should be identified and interpreted in a discerning manner as they affect the working of the organization.

• REALISTIC

Objective set must be realistic and attainable to achieve. They should be made by keeping in view all the internal as well as external factors of business environment. This should also be ensured that the corporate objective set is compatible to the individual objectives of the employees.

• PRECISE, MEASURABLE AND VERIFIABLE

The objective should be precise and concise so that everybody can understand it well. It should be measurable also so that performance of every employee can be assessed easily. Also, they should be verifiable so that actual performance can be compared with the standards set.

• CLASSIFICATION OF OBJECTIVES

Objectives may be classified as primary, secondary, individual and social. These should be classified properly on the basis of their importance. These should be supplemented by the sub-goals in all the key departments.

• KEY FACTORS AND COORDINATION

The key factors are the limiting factors which must be considered while setting up the objectives. Lack of coordination between the departments will lead to exploitation of limiting factors and partial accomplishment of goals.

• FLEXIBILITY

Business environment keeps on changing. The objectives are made on the basis of forecasts made by the planning experts. A good objective is one which is capable of being modified in the changing environment which means it must be flexible. A flexible objective can make only the organization able to exploit the opportunities arising out of the dynamic business environment.

Q16) What are the objectives of planning?

A16) Planning is the first step in management. The increasing complexities of business, technological changes, increasing marketing competition, changing consumer preferences have necessitated proper planning. Following are the aims and objectives of planning:

1. To bring certainty in future events: Future is uncertain and full of risks. Planning aims to provide guidance to an organization in bringing certainty in future events, as much as possible, for the achievement of organization goals.

2. To provide specific direction: Planning aims to provide a specific direction for doing various activities in an appropriate manner.

3. Forecasting: Forecasting is the essence of planning. The objective of planning is to predict the future course of events.

4. To bring economy in managerial operations: Bringing economy in managerial operations is an important objective of planning. Planning guides an organization in this regard so that organizations can easily utilize all available resources in the best and cheapest way.

5. To attain pre-determined goals: It is the aim of planning to ensure the achievement of predetermined goals of the organization.

6. To get victory over competitions: Planning provides proper guidance to an organization to get victory over competitors.

Q17) What is corporate planning?

A17) Planning activities for the whole enterprise is called corporate planning.

The basic focus of corporate planning is to determine the long-term objectives of the organization as an entire then to get plans to attain these objectives taking into mind the likely changes within the external environment (macro level). Corporate planning is usually carried out at the top level of management.

“Corporate planning includes the setting of objectives, organizing the work, people and systems to enable those objectives to be attained, motivating through the planning process and through the plans, measuring performance then controlling progress of the plan and developing people through better decision making, clearer objectives, more involvement and awareness of progress.” —David Hussey

Hussey has given a broad definition of corporate planning. It covers various functions of management besides defining planning. The total planning activities in the organization and not the entire management function is corporate planning.

“Corporate Planning is the continuous process of creating present risk-taking decisions systematically and with the greatest knowledge of their futurity; organizing systematically the efforts needed to carry out these decisions, and measuring expectations through organized, systematic feedback.” —Peter Drucker

The activities are carrying out at the top level is corporate planning. Corporate planning is important for the success of the whole organization. The highest management is liable for the formulation of such plans and is prepared according to the inputs that are given to them either from the environment or the lower levels in the organizational hierarchy. The plans are generally long term and are broad based.

The corporate planning is of two types:

i. Strategic Planning

Ii. Operational Planning

The method of developing strategies to reach a defined objective is called Strategic Planning. It sets the long-term direction of the organization during which it wants to proceed in future. According to Anthony it is often defined as the “process of selecting the objectives of the organization, on changes on these objectives and on the policies that are to control the acquisition, use and disposition of these resources.”

An assessment of available resources is made at the top and then things are planned for a period of time of up to 10 years. It basically deals with the entire assessment of the organization; strengths capabilities and weaknesses and an objective evaluation of environment is formed for future pursuits.

Examples of strategic planning in an organization may be; planned growth rate in sales, diversification of business into new lines, sort of products to be offered then on. Strategic planning also involves the analysis of various environmental factors specifically with reference to how organization relates to its environment.

Steps that are included in strategic planning are:

1. Specifying Missions and Objectives.

2. Elaborate Environmental Scanning.

3. Strategy Formulation.

4. Strategy Implementation

5. Evaluation and Control

Strategic planning is of prime importance for any organization as they might specify the other decisions that require to be taken.

II. Operational or Tactical Planning:

Operational planning, is also called tactical or short-term planning, usually, covers one year approximately.  The conversion of strategic plans into detailed and specific action plans is called Operational planning. These plans are designed to sustain the organization in its products. Operational planning is done at the middle or lower level of management.

Operational planning is often defined as follows:

“Operational planning is that the process of deciding, the most effective use of the resources already allocated and to develop an impact mechanism to assure effective implementation of the actions so that organizational objectives are achieved.”

An Operational plan is an annual work plan:

It narrates short term business strategies; it explains how a strategic plan will be put into operation (or what portion of a strategic plan will be put into operation (or what portion of a strategic plan are addressed) during a given operational period (fiscal year).

These plans are to support strategic plans whenever some difficulty is faced in its implementation. Any changes in internal organization or external environment need to be fulfil by tactical plans.

For examples, there's sudden change in prices of products, difficulty in procuring raw materials, unexpected moves by competitors; tactical plans will help in meeting such unforeseen situations. The success of tactical plan depends upon the speed and adaptability with which management acts to fulfil sudden situation.

The efficient use of resources already allocated and with the development of a control mechanism to make sure efficient implementation of the action in order that business objectives are attained is referred as Operational planning.

Q18) What is Functional Planning?

A18) The planning that's made to make sure smooth working of the organization taking into account the needs of each and every department is called functional planning. The aim of functional planning is to market standardized management practices for corporate functions within the department’s decentralized corporate management structure.

Following are the three basic activities need to be carried out in functional planning:

(1) Functional Guidance:

Managers must be told and guided what they must be doing to properly manage corporate functions within the enterprise is known as functional guidance.

(2) Goal Setting:

Goal setting means certain quantifiable goals need to be set that would measure the effectiveness of the functional planning. Goals should be meaningful, achievable and measurable.

(3) Functional Assessments:

Functional assessment wraps up the functional planning process. Here the Comparison is formed between the goal setting and therefore the goal achievement. The functional assessment should have the subsequent characteristics:

(i) Substantiation:

Managers who are accountable for corporate functions must explain how resources and activities devoted to their function provide support to the achievement of the corporate priorities and functional targets is substantiation.

(ii) Measure of Success.

Measure of success means managers accountable for corporate functions must quantifiably measure the success in meeting goals identified in their functional guidance.

(iii) Foresight:

Managers should be in a position to identify developing gaps and risks faced in their respective functional areas, alongside recommendations to refill those gaps and risks is foresight.

(iv) Proactive and Reactive Planning:

Classification of planning into proactive and reactive is based on the organization’s response to environmental dynamics. Planning is an open system approach and is affected by environmental factors which keep it up changing continuously. However, organizations response to those changes differs. Based on these responses, planning could also be either proactive or reactive.

Q19) What is Proactive and Reactive planning?

A19) Proactive planning is based on the anticipation of the future outcomes and state of affairs that might affect the working of the organization is known as proactive planning. Such a planning has got to be broad based, highly flexible and creative by nature.

The organization that favours this type of planning often anticipates the future and takes necessary steps before the happening of the events. In India, companies like Reliance Industries, Hindustan Lever etc., have adopted this approach and their rate of growth has been much faster than others.

As the name suggests, Reactive type of planning isn't in the anticipation of the future but becomes active only the matter is confronted or has already occurred. This is merely the corrective action that's taken. This approach of planning is beneficial in an environment which is fairly stable over a long period of time.

Q20) What is Formal and Informal planning and Automated planning?

A20) The existence of formal hierarchy of the organization and is usually carried out in the stepwise process is called formal planning. It's according to the pre expressed policies and the rules of the organization. This type of planning is completed at a large scale and relies on the logical thinking. The planning process that's adopted is documented, and regular.

Planning is typically carried out in very small organizations where the formal organization structure may or might not exist is called informal planning. The planning is typically intuitive in nature and is short termed. Since the environment for smaller organizations isn't complex, they do reasonably well with informal planning process.

Automated planning and scheduling may be a branch of AI that concerns the realization of strategies or action sequences, typically for execution by intelligent agents, autonomous robots and unmanned vehicles. This sort of designing is generally found within the technologically advanced organizations.