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Planning meaning
Basic and important managerial function
Thinking in advance
A process of chalking out a future course
of action for accomplishing a purpose of
the enterprise.
Bridge the gap between present and the
desired future
Helps to utilize available time and
resources in an efficient and effective
manner
How is
it to be
done
When is
it to be
done
Nature of Planning
Purposes of Planning
Provides direction
Reduces uncertainty
Minimizes waste
Sets the standards for controlling
Avoids repetition of certain activities.
Provides performance standards.
IMPORTANCE OF PLANNING
Leads to success:
Planning does not guarantee success, but studies have shown
that, often things being equal, companies which plan not only
outperform the non planners but also outperform their own past
results. With the help of a sound plan, management can act
proactively and not simply react. It involves an attempt to shape
the environment on the belief that business is not just the
creation of environment but its creator as well.
Management & Entrepreneurship Module-2
Facilitates Control:
In planning, the manager set goals and develops plans to
accomplish these goals. These goals and plans then become
standards or benchmarks against which performance can be
measured. The function of control is to ensure that the
activities conform to the plans. Thus, control can be exercised
only if there are plans.
Train executives:
Planning is also an excellent means for training executives.
They become involved in the activities of the organisation
and the plans arouse their interest in the multifarious aspects
of planning.
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Tactical Planning
It is long-term planning.
It is short-term planning.
Types of Planning
Based on Breadth
Strategic Plans
Apply to the entire organization.
Establish the organizations overall goals.
Seek to position the organization in terms of its
environment.
Cover extended periods of time.
Operational Plans
Specify the details of how the overall goals are to be
achieved.
Cover short time period.
Different operational plans: policies, procedures, method,
rules
Management & Entrepreneurship Module-2
Long-Term Plans
Plans with time frames extending beyond three
years
Short-Term Plans
Plans with time frames on one year or less
Guides day to day activities
Based on Specificity
Specific Plans
Plans that are clearly defined and leave no
room for interpretation
Directional Plans
Flexible plans that set out general guidelines,
provide focus, yet allow discretion in
implementation.
Single-Use Plan
A one-time plan specifically designed to meet
the need of a unique situation.
Standing Plans
Ongoing plans that provide guidance for
activities performed repeatedly.
Planning Principles
Identifying alternatives:
Based on the organizational objectives and planning premises, various
alternatives can be identified. The concept of various alternatives suggests that
a particular objective can be achieved through various actions. For example: if
an organisation has set its objective to grow further, it can be achieved in
several ways like expanding in the same field of business or product line,
diversifying in other areas, joining hands with other organisations, or
taking/over another organisation, and so on.
Choosing an alternative:
After the evaluation of various alternatives, the most fit one is selected.
Sometimes , evaluation shows that more than one alternative is equally good.
In such case, a planner may choose more than one alternative. There is another
reason for choosing more than one alternative because the future is not
constant. Therefore, planner must be ready with alternative, normally known
as contingency plan, which can be implemented in changed situations.
Implementation of plans:
After formulating basic and derivative plans, the sequence of activities
is determined so that plans are put into action. Based on plans at
various levels, it can be decided who will do what and at what time.
Limitations of Planning
Lack of accurate information
Time consuming process
Expensive
Environmental constraints
Capital invested in Fixed Assets limits planning
Planning may create rigidity.
Plans cannot be developed for dynamic
environments.
Formal plans cannot replace intuition and
creativity.
Formal planning reinforces todays success, which
may lead to tomorrows failure.
Decision Making
Decision
Making a choice from two or more alternatives.
Definition by George Terry:
Decision making is the election based on some
criteria from two or more possible alternatives
Koontz & O'Donnel Decision is the selection
from among alternatives of a course of actions
Identifying a Problem:
Every decision starts with a problem, a discrepancy
between an existing and a desired condition. Here
sales manager representative need new laptops
because their old ones are outdated and inadequate
for doing their job.
Developing alternatives:
The fourth step in the decision-making process requires the
decision maker to list viable alternatives that could resolve the
problem. This is the step where a decision maker needs to be
creative.
Analysing alternatives:
Once alternatives have been identified, a decision maker must
evaluate each one. There are times when decision maker might
not have to do this step. If one alternative scored highest on
every criterion, you wouldnt need to consider the weights
because that alternative would already be the top choice.
Management & Entrepreneurship Module-2
Selecting an alternative:
The sixth step in the decision-making process is choosing the
best alternative or the one that generated the highest total in
step 5.
Types of Decision
2 Categories:
1. Programmed Vs Non Programmed Decisions [based
on nature of decision making]
Programmed Decisions
Tactical Decision
Operatonal Decision
Provides direction to
Decision taken in order to
These are every day decisions
organization by establishing
implement and support strategic taken to implement and support
vision, mission and long term
decision
tactical decisions
goals
Critical and very important
for organization
Certainty
Risk
Uncertainty
Lower
Moderate
Higher
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Rationality
Managers make consistent, value-maximizing
choices with specified constraints.
Assumptions are that decision makers:
Are perfectly rational, fully objective, and logical.
Have carefully defined the problem and identified all
viable alternatives.
Have a clear and specific goal
Will select the alternative that maximizes outcomes in
the organizations interests rather than in their personal
interests.
Exhibit 66 Assumptions of
Rationality
Bounded Rationality
Managers make decisions rationally, but are limited
(bounded) by their ability to process information.
Assumptions are that decision makers:
Will not seek out or have knowledge of all alternatives
Will satisficechoose the first alternative encountered that
satisfactorily solves the problemrather than maximize the
outcome of their decision by considering all alternatives and
choosing the best.
Delphi Group:
Problem will be submitted to a panel of experts. The
panel members never meet face to face, they dont even
know other members. Experts contribute individually
and their opinions will be combined and in effect
averaged to get the best solution.
Objectives
Broad aims what an organization wants to
achieve
Derived from mission statement
Shows what we want to accomplish, where
we want to be, how we want to do.
Objective example:
To increase profitability
To increase market share
Enhance productivity
Achieve innovation
Setting Objectives
Planning Premises
Assumptions about environment which
affect planning activity
George Terry: Planning premises are the
assumptions providing a background
against which the estimated events
affecting the planning will take place
Classification
Internal & External Planning Premises
Tangible & Intangible Planning Premises
Controllable & Uncontrollable Planning
Premises
Planning premises:
A] Internal and external premises:
Internal- sales forecasts, policies, capital
investment, skill of the labour force.
External
business environment, factors
influencing product demand, factors influencing
resource availability.
General & economic environment
Technological changes
Government policies & regulations
Population growth
Political stability
Sociological factors
Demand for the product
Hierarchy Of Plans
Top-Level
Management
Middle-Level
Management
Lower-Level
Management
Strategic Plans
Tactical Plans
Operational Plans
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Strategic Plans
Long Range Plan.
Time Frame:3 or
more years.
Top Management
responsibility.
Concerned with
broad objectives
of the
organisation.
Focus on
planning and
forecasting.
Tactical /
Intermediate Plans
Intermediate
Plan.
Time Frame:2-3
years.
Performed by
managers at
middle level.
Concerned with
integrating the
work of various
departments in
the organisation.
Focus on
Coordination.
Operational Plans
Short range plan.
Time Frame: one
year.
Done usually at
lower levels.
Covers day-today operations;
implements
internal goals.
Focus on control,
primarily.