Unit - 2

Planning

Q1) What are the different types of management plans?

A1) Let's look at the different types of management plans.

Plan types

Planning is a ubiquitous management function; it has an extensive scope. So, all managers at all levels participate in planning. However, the plans made by the higher-level manager will be different from those made by the lower managers.

Plans also differ in what they seek to achieve and the methods that will be used to achieve them. So, let's look at the types of plans managers are faced with.

Goals

This is the first step in planning the organization's action plan. Goals are the foundation of any business and the desired goal / outcome that the business plans to achieve, thus they are the end point of all planning activity.

For example, one of the goals of an organization might be to increase sales by 20%. The manager will then plan all the activities of the organization with this ultimate goal in mind. When framing your organization's goals, a few points should be kept in mind.

1. Goals should be framed for a single activity in mind.
2. They must be results oriented. The objective must not frame any action
3. The objectives must not be vague, they must be quantitative and measurable.
4. They should not be unrealistic. The objectives must be achievable.

Strategy

Obviously, this is the next type of plan, the next step that follows the objectives. A strategy is a complete and comprehensive plan to achieve these objectives. A strategy may be a plan that has three specific dimensions

Set long-term goals

Select a specific course of action

Allocate the necessary resources for the plan.

The training strategy is generally reserved for the top level of management. In fact, it defines all future decisions and the long-term scope and general direction of the company.

Politics

Policies are generic statements, which are basically a guide to channel energies towards a specific strategy. It is the general way for an organization to understand, interpret and implement strategies. Like for example, most companies have a return policy or a hiring policy or a pricing policy, etc.

Policies are set at all levels of management, from primary policies at the highest level to secondary policies. Managers must formulate policies to assist employees navigate a situation with predetermined decisions. They also help employees make decisions in unexpected situations.

Procedure

Procedures are the following types of plans. They are a step-by-step guide to the routine to perform the activities. All employees must follow these staggered sequences so that activities can be carried out in an organized manner.

The procedures are described in chronological order. So, when employees follow the instructions in order and completely, the success of the activity is practically guaranteed.

Take, for example, the procedure for admitting a student to a university. The procedure begins with the completion of an application form. It will be followed by a collection of documents and the classification of applications accordingly.

Rules

Rules are very specific statements that define an action or a non-action. Also, the rules do not allow any flexibility, they are final. All employees of the organization must follow and enforce the rules. Not following the rules can have serious consequences.

The rules create an environment of discipline in the organization. They guide the actions and behaviour of all employees in the organization. The "no smoking" rule is an example.

Program

Programs are a detailed statement that describes policies, rules, objectives, procedures, etc. of a company. These programs are important in the implementation of all kinds of plans. They create a link between the objectives, procedures and rules of the company.

Primary programs are conducted at the top level of management. To support the primary program, all managers will undertake other programs at the middle and lower levels of management.

Methods

The methods prescribe the ways in which the specific tasks of a procedure must be performed. Additionally, the methods are very specific and detailed instructions on how employees should perform each task in the planned procedure. So, managers form methods to formalize routine jobs.

Methods are very important types of plans for an organization. They help in the following ways

1. Give clear instructions to employees, eliminate any confusion
2. Ensures uniformity in employee actions
3. Standardize routine jobs
4. It acts as a general guide for employees and managers.

Budget

A budget is a statement of the expected results that managers expect from the company. Budgets are also a significant statement, so they are expressed in mathematical terms. A budget quantifies the prognosis or future of the organization.

There are several means to prepare budgets that managers make. There is the obvious financial budget, which forecasts the profit of the company. Then there are the operating budgets generally prepared by lower-level managers. Cash budgets control the cash inflows and outflows of the business.

Q2) State the Importance of business planning.

A2) Importance of business planning

Planning is an important function of management; it tells the manager where the organization should go. It also helps the organization reduce uncertainty. Let's take a look at some important planning functions.

1] Planning provides a sense of direction

Planning means drawing up a predetermined plan of action for the organization. Actually, it establishes in advance what and how the work should be done. This helps provide workers and managers with a sense of direction, a guide in some way. Without planning, your actions would be uncoordinated and disorganized.

2] Planning reduces uncertainty

Planning not only sets goals, but also anticipates any future changes in the industry or organization. So, it allows managers to prepare for these changes and allows them to deal with uncertainties. Planning takes into account past events and trends and prepares managers for any uncertain events.

3] Planning reduces waste

The detailed plans made take into account the needs of all departments. This ensures that all departments are in tune with the plan and that all their activities are coordinated. There is clarity in thought that leads to clarity in action. All work is done without interruptions or loss of time or resources,

4] Planning invokes innovation

Planning actually involves a lot of innovation on the part of managers. Being the first management function is a very difficult activity. It encourages the manager to broaden his horizons and forces him to think differently. That is why managers must be creative, insightful and innovative.

5] Make decisions = Facilitate

In business planning, the objectives of the organization have been set, an action plan has been developed and predictions have even been made for future events. This makes it easy for all managers at all levels to make decisions with some ease. The decision-making process also becomes faster.

6] Sets standards

Once business planning is done, managers have now established goals and standards. This provides the manager's standards against which he can measure actual performance. This will help the organization to measure whether the objectives have been met or not. Therefore, planning is a prerequisite for control.

Q3) What are the restrictions for business planning?

A3) Planning limitations

While business planning is mandatory and a need for every organization, it has some restrictions. Let's take a look at some of it:

1] Stiffness

Once the planning function is completed and the action plan is established, the manager tends to just follow the plan. The manager may not be in a position to change the plan depending on the circumstances. Or the manager may not be willing to change the plan. This type of rigidity is not ideal for an organization.

2] Not ideal in dynamic conditions micas

In an economic environment, something is rarely stagnant or static. Economic, political, environmental and legal conditions continue to change. In such a dynamic environment, it becomes difficult to predict future changes. And if a manager cannot forecast accurately, the plan can fail.

3] Planning can also reduce creativity.

While making a plan requires creativity, managers blindly follow the plan. They don't change the plan according to the dynamic nature of the business. Sometimes they don't even make the right suggestions to top management. Work becomes routine.

4] Planning is expensive

Planning is an expensive process. Because it is an intellectual and creative process, it is necessary to hire specialized professionals for the job. Also, it involves a lot of research and data collection and number processing. At times, the cost of the planning process can outweigh its benefits.

5] Not completely accurate

When planning, we have to predict the upcoming and forecast certain future events in the organization and the industry. So, of course, there cannot be one hundred percent certainty in such cases. So, it can be said that business planning lacks precision.

Q4) Define Strategic Planning.

A4) Strategic planning means planning strategies and implementing them to realize the objectives of the organization. Start by asking yourself simple questions like: What are we doing? Should we keep doing it or change our line or the way we work? what's the impact of social, political, technological and other factors on our operations? Are we able to accept these changes, etc.?

Strategic planning helps to understand what we are and where we would like to travel in order that environmental threats and opportunities are often taken advantage of, given the strengths and weaknesses of the organization.

Strategic planning is that the formalization of designing during which plans are remodelled long periods of your time for the effective and efficient achievement of the organization's objectives. Strategic planning is predicated on an in-depth environmental scan. It's a projection of environmental threats and opportunities and an attempt to mix them with the strengths and weaknesses of the organization.

While long-term planning might not be fully equipped to soak up environmental impacts, strategic planning is completed to know, anticipate, and absorb environmental vagaries. Strategic planning is an ongoing process. Whenever business organizations want to realize a better rate of growth or change their operations, they need a far better management data system, they coordinate the activities of various departments, they eliminate complacency of organizations; they create strategic plans.

Planning are some things we do before taking action; that’s, it's an anticipated decision-making. It's a process of deciding what to try to and the way to try to it before action is required.

The strategic plan of the corporate is that the start line for planning. It is a guide for the event of solid sub-plans to realize organizational objectives. The goal of strategic planning is to assist a corporation select and organize its businesses during a way that keeps it healthy despite unexpected changes within the environment. It's intended to shape or reshape the company's businesses and products to supply targeted growth and profit.

An interesting question which will come to mind is how conventional long-term planning gave thanks to strategic planning. Before the primary 1970s, managers who made long-term plans generally assumed that plans for the long run were simply extensions of what the organization had exhausted the past.

However, environmental shocks during the 1970s and 1980s, like energy crises, deregulation of the many industries, accelerating technological change, and increasing global competition undermined this approach to long-term planning.

These changes within the "rules of the game" forced managers to develop a scientific approach to analysing the environment, assessing the strengths and weaknesses of their organization, and identifying opportunities where the organization could have a competitive advantage. As a result, the worth d was recognized

Q5) Explain with the help of an example Strategic planning concept.

A5) Planning is related to the future. A planning process implies different degrees of future.

Some parts of the organization require planning for many years into the future, while others require planning only for a short period.

For example, capital spending is related to a long-term period, while a year's budget is short-term in nature. The first is called strategic planning or long-term planning.

"Strategic planning" can be defined as the process of determining the organization's objectives and the resources that will be used to achieve these objectives, as well as the policies that guide the investment use, and arrangement of these resources.

Examples of strategic planning in an organization are: business diversification into new lines, planned growth rate in sales, type of products to be offered, etc. Strategic planning encompasses all functional areas of the business and is affected within the existing and long-term. Framework of economic, technological, social and political factors.

It also involves the analysis of various environmental factors, particularly with regard to how an organization relates to its environment. Generally, for most organizations, the strategic planning period varies between three and five years.

Q6) What steps does strategic planning process consists of?

A6) The strategic planning process consists of the subsequent steps:

1. Determination of mission and objectives:

Strategic planning begins with determining the mission of the organization. The main objectives for which the organization has been created must be clearly defined. Strategic planning deals with the long-term relationship of an organization with its external environment. Then, the business mission must be set in terms of the social impact of the organization.

2. Environmental analysis:

To identify opportunities and threats, the external environment of the organization is analyzed. A list of important factors that can affect the activities of the organization is prepared.

3. Self-assessment:

In the next step, the strengths and weaknesses of the organization are analyzed. This analysis will allow the company to capitalize on its strengths and minimize its weaknesses. The company can use external opportunities by focusing on its internal capacity. By combining its strengths with environmental opportunities, a company can face competition and achieve growth.

4. Strategic decision making:

Then strategic alternatives are generated and evaluated. After that, a strategic decision is made to reduce the performance gap. The organization must select the alternative that best suits its capabilities. For example, to grow, a company may enter new markets or develop new products or sell more in current markets.

The choice of strategy depends on the external environment, the perception of management, the attitude of management towards risk, past strategies and the power and efficiency of management.

5. Implementation and control of the strategy:

Once the strategy is decided, it must be translated into tactical operational plans. Programs and budgets are developed for each function. Control must be developed to evaluate performance as the strategy is implemented.

Whenever actual results are below expectations, the strategy should be reviewed or re-evaluated. It must be modified and adapted to changes within the external environment.

Q7) State the importance of Strategic Planning.

A7) Strategic planning offers the subsequent benefits:

1. Economic benefits:

Companies that make strategic plans have good sales, low costs, high EPS (earnings per share) and high profits. Companies have economic benefits if they create strategic plans. Companies like Reliance, Infosys, Tata, Wipro, Deloitte, etc. they're the giants that report good financial results as a results of sound strategic planning.

2. Guide to organizational activities:

Strategic planning guides members toward organizational goals. Unify organizational activities and efforts toward long-term goals. Guide members to become who they need to become and to try to what they need to try to. It focuses on specific goals that make it clear to members during which direction to maneuver. Making a profit is a smaller amount significant than getting a rate of growth of 10% per annum.

Paying high dividends is a smaller amount significant than paying dividends at a 40% rate. Meeting the requirements of society is a smaller amount meaningful than providing free education to schoolchildren during a specific community. Resource allocation and attempts to realize objectives are facilitated by clear specifications in strategic planning. It makes the objectives operational and provides the proper direction to the activities of the organization.

3. Competitive advantage:

In the world of globalization, companies that have a competitive advantage (ability to deal with competitive forces) have better financial and sales results. This is often possible if you foresee the longer term. The longer term is often predicted through strategic planning. It enables managers to anticipate problems before they arise and resolve them before they worsen.

4. Minimize risk:

Strategic planning provides knowledge to evaluate risk and frame strategies to attenuate risk and invest in safe business opportunities. The probabilities of creating mistakes and selecting the incorrect goals and methods are therefore reduced.

Risk is inherent altogether businesses and it's almost certain that not anticipating risk through strategic planning will cause business failure, unless proven otherwise accidentally. Business companies operating during a dynamic, changing, and risky environment cannot deal with a scarcity of strategy, the incorrect strategy development, or ineffective strategy implementation.

5. Beneficial for companies with an extended gestation gap:

The time span between investment decisions and therefore the generation of income from those investments is named the gestation. During this era, changes in technological or political forces can affect the implementation of selections and plans can therefore fail. Strategic planning discounts the longer term and allows managers to face threats and opportunities. Big amount of money is required in projects followed by expected financial returns.

6. Promotes motivation and innovation:

Strategic planning involves managers at the very best levels. Not only are they committed to goals and methods, but they also come up with new ideas for strategy implementation. This promotes motivation and innovation. It also provides motivation to lower-level people once they know that their efforts are contributing to the organization's goals.

The satisfied workforce is that the strength of the organization. Save huge costs in reducing absenteeism, job turnover, role conflicts, etc. It promotes discipline within the organization and improves the effectiveness of human resources and also organizational effectiveness.

7. Optimal use of resources:

Strategic planning makes better use of resources to realize maximum performance. Resources are scarce and strategic planning helps to use them where they're needed most.

If your grand strategy is correct, any number of tactical mistakes are often made, and yet the corporate succeeds.

Q8) What are the limitations of strategic planning?

A8) Limitations of strategic planning:

1. Lack of knowledge:

Strategic planning requires tons of data, training and knowledge. Managers must have high conceptual skills and skills to form strategic plans. If they are doing not have the knowledge and skill to organize strategic plans, the specified results won't be achieved. It'll also end in huge financial losses for the organization. This limitation is often overcome by training managers to form strategic plans.

2.     Interdependence of units:

If business units at different levels (corporate level, business level, and functional level) aren't coordinated, it can create problems for the effective implementation of strategic plans.

3.     Managerial perception:

To avoid developing risky goals and methods that they will not be ready to achieve, managers can land on sub-optimal goals and plans. Sometimes short-term commitments also defer long-term strategy development.

4.     Financial considerations:

Strategic planning requires an excellent deal of your time, money, and energy. Managers are often constrained by these considerations when making effective strategic plans. These limitations are generally conceptual and may be overcome through rational, systematic and scientific planning. Researchers have shown that companies that make strategic plans outperform people who don't.

5.     Exchange problems:

The factor acts more as a limiting think about light of changes in future conditions. During a complex and rapidly changing environment, the succession of latest problems is usually magnified by implications that make planning difficult. The matter of change is more complex in long-term planning.

Current conditions tend to weigh heavily on planning and, by overshadowing future needs, can sometimes cause errors in judgment. Factors like changing technology, consumer tastes and needs, business conditions, and lots of others change rapidly and sometimes in unpredictable ways. Under such conditions, the design activities administered in one period might not be relevant for an additional period because the conditions in two periods are quite different.

6.  Failure of people:

There are many reasons why people fail to plan, both at the formulation and implementation levels. a number of the foremost important failures are the shortage of commitment to planning, the shortage of development, solid strategies, the shortage of clear and meaningful objectives, the tendency to overlook the premises of designing , the lack to ascertain the scope of the plan, inability to ascertain planning as a rational approach, over-reliance on past experience, failure to use limiting factor principles, lack of support from top management, lack of delegation of authority, lack of control techniques adequate and resistance to vary .

These factors are liable for improper planning or incorrect planning within the organizations in question.

7.     Time and cost:

When browsing the strategic planning process, managers must also consider both time and price factors. The varied steps of designing can go as far as possible because there's no limit to precision in planning tools. But planning is suffering from time and price factors.

Time may be a limiting factor for all managers within the organization and if they're busy preparing elaborate reports and directions beyond a particular level, they're risking their effectiveness. Excessive time spent securing information and trying to suit it into a compact plan is dysfunctional within the organization.

8.     Stiffness:

Often people feel that planning provides rigidity in management action. Many sorts of internal inflexibilities are often the results of planning itself. Planning stifles initiative from employees and forces managers to adopt a rigid or straitjacket mode of performing their work. In fact, rigidity can make management work harder than necessary. This will end in lag in job performance, lack of initiative, and failure to adapt to the changing environment.

Many people feel that planning has limited value because the simplest results are often obtained by confusing the kinds of operations during which each situation is addressed when and if it seems relevant to the immediate problem. Although this planning rigidity factor may be a limiting factor, but without planning, it's really difficult to work particularly in large organizations.

Planning also involves costs on a part of the organization. The varied factors discussed above contribute to the restrictions of strategic planning, either by making planning ineffective or by making planned work less.

Directions for questions 9 to 13: Study the given information & answer the following questions:

Following are the criteria to recruit a professor in an organisation:

The Applicant must be

1. Graduate in any discipline with min. 67% marks.
2. Have his/her age in between 28 to 33 years as on 26-09-2017.
3. Have a PG degree/ 3 years diploma or must have completed B.Ed. With more than 55% marks.
4. Have minimum 3 years’ experience in teaching.
5. Be ready to join 1 year probation.

If a candidate satisfies all the criteria except

1. At (c) above, but is an Arts with Maths graduate with minimum 72% marks and has an experience of more than 4 years and more her/his case is to be referred to the Principal.
2. At (d) above, but master degrees with minimum 60% marks, her/his is to be referred to the Vice Principal.

Details of applicants are given below in the questions. On the basis of the following course of action which is based on the data given above, mark the answer.

All cases are given to you as on the date 26-09-2017.

Q9) Manika is a B.Sc. Graduate with 70% marks and has completed PG in M.Sc. She completed 27 years of age in 2015 and has 3 years’ experience as a Maths Faculty. She is ready to join probation period of one year.

1. If case is to be referred to Principal.
2. If case is to be referred to Vice Principal
3. If candidate is to be selected
4. If information is inadequate to take a decision.
5. If candidate is not to be selected.

A9) Option C

Explanation: Clearly Manika will be selected as she meets all the requirements.

Q10) Mamta is a graduate in B.A. And B.Ed. With 75% and 70% respectively. She has been working as a professor in Math for 5 years and has freelancing experience of 2 years. Mamta’s age is 30 years and she is ready to join 2-year probation.

1. If case is to be referred to Principal
2. If case is to be referred to Vice Principal
3. If candidate is to be selected.
4. If information is inadequate to take a decision.
5. If candidate is not to be selected.

A10) Option C

Explanation: Mamta will be selected for the post as she meets all the requirements.

Q11) Shobha, a 29-year-old science graduate with 70% marks in her graduation has 53% marks in her B.Ed. And she also has an Arts with Maths graduation securing 80% marks. She also worked with Satyam for a span of 5 years and she is willing to join the probation period for 1 year.

1. If case is to be referred to Principal.
2. If case is to be referred to Vice Principal.
3. If candidate is to be selected.
4. If information is inadequate to take a decision.
5. If candidate is not to be selected.

A11) Option A

Explanation: Since she has 53% marks in B.Ed. But did Arts with Maths graduation securing 80% marks, so her case must be referred to the principal.

Q12) Abhishek is a graduate in B.Sc. And postgraduate in M.Sc. With 78% marks and has been working for the past 7 years during which he worked as a teacher in coaching institute for two years. He was born on 07.11.1986 and is ready to join probation period of 1year.

1. If case is to be referred to Principal.
2. If case is to be referred to Vice Principal.
3. If candidate is to be selected.
4. If information is inadequate to take a decision
5. If candidate is not to be selected.

A12) Option D

Explanation: Since we do not know his B.Sc. Marks, so information is inadequate to take the decision.

Q13) Aman has been working as Assistant Professor for the past 5 years. She has completed MA and graduation with 73% marks each and is ready to join one year probation. She was born on 22 Aug 1987.

1. If case is to be referred to Executive Head.
2. If case is to be referred to Vice President.
3. If candidate is to be selected.
4. If information is inadequate to take a decision.
5. If candidate is not to be selected.

A13) Option C

Explanation: Clearly the candidate will be selected.

Directions for questions 14 to 18: Study the information given below carefully and answer the following questions.

A Hospital has decided to recruit doctors. The following criteria are to be applied to select the candidates. An applicant must

1. Be an MBBS/BDS graduation with at least 50% marks & 70% marks in MD.
2. Have minimum 2 years work experience.
3. Be ready to sign a 2 years bond.
4. Age criteria: 25 years to 32 years as on 11.11.2016.

However, if the applicant fulfils all the eligibility criteria except

1. i. But has obtained 60% in graduation degree and 50% in MD and has 3 years working experience, the case may be referred to the CMO.
2. Ii, but is willing to pay an amt. Of Rs 1.5 lakh if he/she wants to leave, the case may be referred to the Senior doctors.
3. Iii, but is a BDS doctor, the case is to be referred to the Junior doctors.

Details of applicants are given below in the questions. On the basis of following course of action which is based on the data given above, mark the answer.

All cases are given to you as on the date 11.11.2016.

Q14) Kavita is an MBBS doctor with 60% marks and Post-graduation in MD with 82% marks. She has been working as doctor for last 5 years. She is not willing to sign the bond but can pay Rs 1 lakh if she leaves. She has just completed 27 years.

1. If candidate is to be selected.
2. If case is to be referred to the Senior doctor.
3. If case is to be referred to the Junior doctor.
4. If case is to be referred to the CMO.
5. If Applicant is not to be selected.

A14) Option E

Explanation: As Kavita is not willing to sign the bond but can pay Rs 1 lakh if she leaves. So, she will not be selected.

Q15) Rohit is 28 years old and has been working in a hospital for the past 4 years. He has scored 72% and 82% marks in MBBS and MD respectively. He is ready to sign a bond with any hospital.

1. If candidate is to be selected.
2. If case is to be referred to the Senior doctor.
3. If case is to be referred to the Junior doctor.
4. If case is to be referred to the CMO.
5. If Applicant is not to be selected.

A15) Option E

Explanation: The candidate won’t be selected as she doesn’t meet the age criteria.

Q16) Veer is BDS graduate with 74% marks in degree and 93% marks in MD. He joined as a doctor in Sanjeev ani Hospital three years ago at the age of 27 years. He is willing to sign a bond with Hospital.

1. If candidate is to be selected.
2. If case is to be referred to the Senior doctor.
3. If case is to be referred to the Junior doctor.
4. If case is to be referred to the CMO.
5. If Applicant is not to be selected.

A16) Option C

Explanation: The candidate although has joined hospital 3 years ago but it has not been given if he has worked for the given 3 years. So, the case will be referred to the Junior Doctor.

Q17) Romi is a doctor and has obtained 59% and 60% marks in MBBS and MD respectively. He is 28 years old and ready to sign a bond.

1. If candidate is to be selected.
2. If case is to be referred to the Senior doctor.
3. If case is to be referred to the Junior doctor.
4. If case is to be referred to the CMO.
5. If the given data is insufficient to decide.

A17) Option E

Explanation: As his experience is not given so data is insufficient to decide.

Q18) Decision making is the thoughtful process where one has to choose between the available alternatives or options wisely in the way that it reduces the outflow of one’s resources and increase the incoming of resources while keeping in mind all the characteristics like time, money, quantity, quality, etc.

A18) Given

Costs of operations are $75,192 per year for 5 years

After Tax Cost of Debt is 10%

Tax rate is 35%

Cost of operations per month is:

=Cost of Operations per annum 

Number of months=$75,19212=$6,266per month=Cost of Operations per annum

Number of months=$75,19212=$6,266per month

Cost of Debt per month is:

=10%perannum=10%12=0.8333%permonth=10%perannum=10%12=0.8333%permonth

Case I:

Present value of cost of operations occurring only at the end of year

=Cost of Operations × PVF

(10%,1year) =$75,192×0.990=$74,440=Cost of Operations × PVF (10%,1year) =$75,192×0.990=$74,440

Case II:

Present value of Cost of Operations spread evenly throughout the year

Decision Making

As the present value in case II, i.e., the present value of the cost of operations, is less when the costs are spread throughout the year, it's beneficial to spread it equally over the year to reduce the outflow of resources.