Module No.

2: Planning
Introduction-Meaning-Nature-Purpose-Types of plans-Planning process; Strategic
planning: Concept-Process-Importance and Limitations; Environmental Analysis and diagnosis: Meaning-
importance and Techniques (SWOT/TOWS/WOTS-UP-BCG Matrix Competitor Analysis); Decision-
making-Concept-Importance-Committee and Group decision making Process.

Introduction to Planning
Planning is defined as "defining objectives for a given period, designing various courses of action to achieve
them, and selecting the most practicable alternative from the various alternatives." Planning entails setting
objectives and choosing the best path of action in advance. Time is a crucial component in planning. Plans
are always made for a specific period because no firm can plan indefinitely.

Planning is essential for all organisations, whether public or private or run by sole proprietors. To realise
their dreams of increasing sales, making large profits, and succeeding in business, all businessmen must
consider the future, make predictions, and achieve goals. Planning entails deciding what to do, how to do it,
and when to do it.

Meaning of Planning:
Planning is the process of deciding in advance what is to be done, where is to be done , who has to do it and
how it is to be done and when it is to be done.

Nature/ Characteristics of Planning:

1. Planning is primary function of management:

It is the first function to be performed by the manager. No other function can be executed without
performing a planning function because objectives are set up in planning and other functions depend on the
objectives only.

2. Pervasive:
Planning is required at all levels of management. It is not a function restricted to top level managers only but
planning is done by managers at every level. Formation of a major plan and framing of overall policies is the
task of top level managers where departmental managers form plans for their respective departments and
lower level managers make plans to support the overall objective and to carry on day to day activities.

3. Planning is futuristic/forward looking:

Planning always means looking ahead or planning is a futuristic function. Planning is never done for the
part. All the managers try to make predictions and assumptions for the future and these predictions are made
on the basis of past experiences of the managers and with the regular and intelligent scanning of the business
environment.

4. Planning is continuous process:

Planning is a never ending or continuous process because after making plans one also has to be in touch with
the changes in the changing environment and in the selection of one best way. So after making plans
planners also keep making changes in the plans according to the requirements of the company.

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5. Planning involves decision making:
The planning function is needed only when different alternatives are available and we have to select the most
suitable alternative. We cannot imagine planning in the absence of choice because in planning function
managers evaluate various alternatives and select the most appropriate but if there is no alternative available
then there is no requirement of planning.

6. Planning contributes to objectives:

Planning starts with the determination of objectives. It is the first process of planning where managers decide
what is the objective of the organisation and plan accordingly.

7. Planning is a Mental activity

● Planning is the outcome of a mental process rather than wishful thinking and guesswork.
● Planning is a thinking process and it is separate from organisational activities.
● It is based on logical reasoning, facts, foresight, vision, intelligent imagination, and sound judgment.

(7) Planning is a Mental activity

● Planning is the outcome of a mental process rather than wishful thinking and guesswork.
● Planning is a thinking process and it is separate from organisational activities.
● It is based on logical reasoning, facts, foresight, vision, intelligent imagination, and sound judgment.

Types of Planning
Types of Planning are:

1. Strategic Planning:
It decides the major goals and policies of allocation of resources to achieve these goals. It is done at higher
levels of management. Middle managers sometimes are not even aware that strategic planning is being
considered. It is long term. It is generally based on long term forecasts about technology. Political
environment etc and is more uncertain. It is less detailed because it is not involved with day to day
operations of the organisation. At the top of the hierarchy it was decided, objectives are the broad ends of the
organisation which are achieved by means of strategies in their turn are carried out by means of the two
major groups of plans.
a. Single use plans:
As their name suggests, are developed to achieve a specific end when that end is reached the plan is
dissolved. The major types of single use plans are programs and budgets which can be used for one when the
function or program reaches its end.

b. Standing Plans:
On the other hand these were designed for the situations that occur often, enough to justify a standardised
approach. For example it would be insufficient for a bank to develop a single use plan for processing a loan
application of each new client. Instead it uses one standing plan that anticipates in advance whether to
approve or turn down any request based on the information furnished like credit rating, etc. The major types
of standing plans are policies, procedure, methods and rules.

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2. Tactical Planning:
1. It decides the detailed use of resources for achieving each goal.

2. It is done at lower levels of management and middle level of management.

3. It is a short term plan by nature.

4. It is generally based on the past performance of the organisation and less uncertain.

5. It is more detailed because it is involved with the day to day operations of the organisation.

3. Operational Planning:
These are the plans which are made by low level management for the achievement of the tactical plans on
time. It is considered as the base plan on which each plant is planned.

1. Planning provides Direction:

Planning is concerned with a predetermined course of action. It provides the directions to the efforts of
employees. Planning makes clear what employees have to do, how to do, etc. By stating in advance how
work has to be done, planning provides direction for action. Employees know in advance in which direction
they have to work. This leads to Unity of Direction also. If there was no planning, employees would be
working in different directions and the organisation would not be able to achieve its desired goal.

2. Planning Reduces the risk of uncertainties:

Organisations have to face many uncertainties and unexpected situations every day. Planning helps the
manager to face the uncertainty because planners try to foresee the future by making some assumptions
regarding future keeping in mind their past experiences and scanning of business environments. The plans
are made to overcome such uncertainties. The plans also include unexpected risks such as fire or some other
calamities in the organisation. The resources are kept aside in the plan to meet such uncertainties.

3. Planning reduces overlapping and wasteful activities:

The organisational plans are made keeping in mind the requirements of all the departments. The
departmental plans are derived from the main organisational plan. As a result there will be co-ordination in
different departments. On the other hand, if the managers, non-managers and all the employees are following
the course of action according to plan then there will be integration in the activities. Plans ensure clarity of
thoughts and action and work can be carried out smoothly.

4. Planning Promotes innovative ideas:

Planning requires high thinking and it is an intellectual process. So, there is a great scope of finding better
ideas, better methods and procedures to perform a particular job. Planning process forces managers to think
differently and assume the future conditions. So, it makes the managers innovative and creative.

5. Planning Facilitates Decision Making:

Planning helps the managers to make various decisions. As in planning goals are set in advance and
predictions are made for the future. These predictions and goals help the manager to make fast decisions.

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6. Planning establishes standard for controlling:
Controlling means comparison between planned and actual output and if there is variation between both then
find out the reasons for such deviations and take measures to match the actual output with the planned. But
in case there is no planned output then the controlling manager will have no base to compare whether the
actual output is adequate or not.
For example, if the planned output for a week is 100 units and actual output produced by employee is 80
units then the controlling manager must take measures to bring the 80 unit production upto 100 units but if
the planned output, i.e., 100 units is not given by the planners then finding out whether 80 unit production is
sufficient or not will be difficult to know. So, the base for comparison in controlling is given by the planning
function only.

7. Focuses attention on objectives of the company:

Planning function begins with the setting up of the objectives, policies, procedures, methods and rules, etc.
which are made in planning to achieve these objectives only. When employees follow the plan they are
leading towards the achievement of objectives. Through planning, efforts of all the employees are directed
towards the achievement of organisational goals and objectives.

Steps of Planning / Planning Process:

1. Determination of goals or objectives
In planning a function manager begins with setting up objectives because all the policies, procedures and
methods are framed for achieving objectives only. The managers set up very clearly the objectives of the
company keeping in mind the goals of the company and the physical and financial resources of the company.
Managers prefer to set up goals which can be achieved quickly and in a specific limit of time. After setting
up the goals, the clearly defined goals are communicated to all the employees.

2. Determination of Planning Premise

Premises refer to making assumptions regarding the future. Premises are the base on which plans are made.
It is a kind of forecast made keeping in view existing plans and any past information about various policies.
There should be total agreement on all the assumptions. The assumptions are made on the basis of
forecasting. Forecast is the technique of gathering information. Common forecasts are made to find out the
demand for a product, change in government or competitor policy, tax rate, etc.

3. Determining Alternative course of action

After setting up objectives the managers make a list of alternatives through which the organisation can
achieve its objectives as there can be many ways to achieve the objective and managers must know all the
ways to reach the objectives.
For example, if the objective is to increase in sale by 10% then the sale can be increased:
(a) By adding more line of products;
(b) By offering discount;
(c) By increasing expenditure on advertisements;
(d) By increasing the share in the market;
(e) By appointing salesmen for door-to-door sales etc.
So, managers list out all the alternatives.

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4. Evaluation alternative courses
After making the list of various alternatives along with the assumptions supporting them, the manager starts
evaluating each and every alternative and notes down the positive and negative aspects of every alternative.
After this the manager starts eliminating the alternatives with more negative aspects and the one with the
maximum positive aspect and with the most feasible assumption is selected as the best alternative.
Alternatives are evaluated in the light of their feasibility.

5. Selecting an alternative
The best alternative is selected but as such there is no mathematical formula to select the best alternative.
Sometimes instead of selecting one alternative, a combination of different alternatives can also be selected.
The most ideal plan is most feasible, profitable and with least negative consequences.

After preparing the main plan, the organisation has to make a number of small plans to support the main
plan. These plans are related to performance of routine jobs in the organisation. These are derived from the
major plan. So, they are also known as derivative plans. These plans are a must for accomplishing the
objective of the main plan. The common supportive plans are plans to buy equipment, plan for recruitment
and selection of employees, plan to buy raw material, etc.
6. Implement the plan
The managers prepare or draft the main and supportive plans on paper but there is no use of these plans
unless and until these are put in action. For implementing the plans or putting the plans into action, the
managers start communicating the plans to all the employees very clearly because the employees actually
have to carry on the activities according to specification of plans. After communicating the plan to
employees and taking their support the managers start allocating the resources according to the specification
of the plans. For example, if the plan is to increase sales by increasing the expenditure on advertisement,
then to put it into action, the managers must allot more funds to the advertisement department, select better
media, hire advertising agencies, etc.

7. Follow up
Planning is a continuous process so the manager’s job does not get over simply by putting the plan into
action. The managers monitor the plan carefully while it is implemented. The monitoring of a plan is very
important because it helps to verify whether the conditions and predictions assumed in the plan are holding
true in the present situation or not. If these are not coming true then immediately changes are made in the
plan.

During follow up many adjustments are made in the plan. For example, if the expenditure planning is done
keeping in mind 5% inflation rate but in the present situation if the inflation rate rises to 10% then during
follow up the managers make changes in the plans according to the 10% inflation rate.

Concept of Strategic planning:

Strategic planning is a process in which an organization's leaders define their vision for the future and
identify their organization's goals and objectives. The process includes establishing the sequence in which
those goals should be realized so that the organization can reach its stated vision. Strategic planning typically
represents mid- to long-term goals with a life span of three to five years, though it can go longer. This is
different than business planning, which typically focuses on short-term, tactical goals, such as how a budget
is divided up. The time covered by a business plan can range from several months to several years.

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Process of strategic planning:

1. Identify:

A strategic planning cycle starts with the determination of a business's current strategic position. This is
where stakeholders use the existing strategic plan -- including the mission statement and long-term strategic
goals -- to perform assessments of the business and its environment. These assessments can include a needs
assessment or a SWOT (strengths, weaknesses, opportunities and threats) analysis to understand the state of
the business and the path ahead.

2. Prioritize. Next, strategic planners set objectives and initiatives that line up with the company
mission and goals and will move the business toward achieving its goals. There may be many
potential goals, so planning prioritizes the most important, relevant and urgent ones. Goals may
include a consideration of resource requirements -- such as budgets and equipment -- and they often
involve a timeline and business metrics or KPIs for measuring progress.

3. Develop. This is the main thrust of strategic planning in which stakeholders collaborate to formulate
the steps or tactics necessary to attain a stated strategic objective. This may involve creating
numerous short-term tactical business plans that fit into the overarching strategy. Stakeholders
involved in plan development use various tools such as a strategy map to help visualize and tweak
the plan. Developing the plan may involve cost and opportunity tradeoffs that reflect business
priorities. Developers may reject some initiatives if they don't support the long-term strategy.

4. Implement. Once the strategic plan is developed, it's time to put it in motion. This requires clear
communication across the organization to set responsibilities, make investments, adjust policies and
processes, and establish measurement and reporting. Implementation typically includes strategic
management with regular strategic reviews to ensure that plans stay on track.

5. Update. A strategic plan is periodically reviewed and revised to adjust priorities and reevaluate goals
as business conditions change and new opportunities emerge. Quick reviews of metrics can happen
quarterly, and adjustments to the strategic plan can occur annually. Stakeholders may use balanced
scorecards and other tools to assess performance against goals.

Importance and Limitations of strategic planning:

Businesses need direction and organizational goals to work toward. Strategic planning offers that type of
guidance. Essentially, a strategic plan is a roadmap to get to business goals. Without such guidance, there is
no way to tell whether a business is on track to reach its goals.

The following four aspects of strategy development are worth attention:

1. The mission. Strategic planning starts with a mission that offers a company a sense of purpose and
direction. The organization's mission statement describes who it is, what it does and where it wants to go.
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 Missions are typically broad but actionable. For example, a business in the education industry might seek
to be a leader in online virtual educational tools and services.
2. The goals. Strategic planning involves selecting goals. Most planning uses SMART goals -- specific,
measurable, achievable, realistic and time-bound -- or other objectively measurable goals. Measurable
goals are important because they enable business leaders to determine how well the business is
performing against goals and the overall mission. Goal setting for the fictitious educational business
might include releasing the first version of a virtual classroom platform within two years or increasing
sales of an existing tool by 30% in the next year.
3. Alignment with short-term goals. Strategic planning relates directly to short-term, tactical business
planning and can help business leaders with everyday decision-making that better aligns with business
strategy. For the fictitious educational business, leaders might choose to make strategic investments in
communication and collaboration technologies, such as virtual classroom software and services but
decline opportunities to establish physical classroom facilities.
4. Evaluation and revision. Strategic planning helps business leaders periodically evaluate progress against
the plan and make changes or adjustments in response to changing conditions. For example, a business
may seek a global presence, but legal and regulatory restrictions could emerge that affect its ability to
operate in certain geographic regions. As result, business leaders might have to revise the strategic plan to
redefine objectives or change progress metrics.

Environmental Analysis and diagnosis:

Meaning: An environmental analysis is a strategic technique used to identify all internal and external factors
that could affect a company’s success. Internal components reveal the strengths and shortcomings of a
company, while external components represent the opportunities and risks. This exists outside of the
company.
Importance:
Organizations need to do environmental analysis because it helps them:

● Find opportunities: By looking at the outside world, organizations can find new trends and chances
to enter new markets or make new products or services.
● Identify threats: It helps businesses find threats to their business, such as new competitors, changes
in regulations, or a slowing economy.
● Create effective strategies: Organizations can create effective strategies that are in line with their
goals and objectives when they understand how the outside world affects their business.
● Anticipate change: Environmental scanning helps organizations plan ahead for changes in the
outside world and create strategies to deal with them.
● Make informed decisions: It helps organizations learn more about the outside factors that affect
their business so that they can make better decisions.

Organizations that want to stay competitive and successful in a business world that is changing quickly need
to do environmental analysis. It helps them take advantage of opportunities, lower risks, and come up with
good plans that lead to growth and success.

Techniques:
a) SWOT:
SWOT stands for strengths, opportunities, weaknesses, and threats, in case you didn’t know. These four
factors are utilized to determine where a company stands regarding strategy.

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These four elements are divided into two groups. We must talk about them a bit to see how they can assist us
in conducting an environmental study.

● Internal Factors

Internal factors in this type of analysis are strengths and weaknesses. Because they can be affected and even
controlled by the organization, they are referred to as internal analysis if a corporation has a firm brand
name.

This is a strength because it was made possible by the organization’s efficient use of resources. As a result,
this is an internally generated element that highlights one of the causes of the company’s success.

● External Factors

External considerations in this type of environmental assessment include threats and opportunities. Unlike
the elements listed above, the company cannot control them in any way. In fact, these circumstances
frequently occur on their own. Competition is a concerned to all businesses since it is impossible to
eliminate it. As a result, external factors function in this manner. Through SWOT analysis, in
environmental study, Strengths may be enhanced, weaknesses can be eliminated by taking advantage of
opportunities when they arise, and threats can be minimized by remaining vigilant.

b) TOWS:

A TOWS analysis is very similar to SWOT. However, there is a key difference between the two, other than a
reshuffling of a few letters!

While SWOT analysis, puts the emphasis on the internal environment (your strengths and weaknesses),
TOWS forces you to look at your external environment first (your threats and opportunities).

Doing this allows you to gain a better understanding of the strategic choices that you face. (Remember that
"strategy" is the art of determining how you'll "win" in business and life.) It helps you ask, and answer, the
following questions:

● How can we make the most of our strengths?

● How do we circumvent our weaknesses?
● How can we capitalize on external opportunities?
● How should we best manage threats?

Once you've answered these questions, the next step is to match external opportunities and threats with your
internal strengths and weaknesses.

c) BCG Matrix:
The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term
strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to
decide where to invest, to discontinue, or develop products. It's also known as the Growth/Share Matrix.

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The Matrix is divided into 4 based on an analysis of market growth and relative market share, as shown
below.

1. Low: These are products with low growth or market share

2. High and Low: Products in high growth markets with low market share
3. High and High: Products in high-growth markets with high market share
4. Low and High: Products in low growth markets with high market share

d) Competitor Analysis:
A competitor analysis, also referred to as a competitive analysis, is the process of identifying competitors in
your industry and researching their different marketing strategies. You can use this information as a point of
comparison to identify your company’s strengths and weaknesses relative to each competitor.
Need for competitor analysis:
Identify your business’s strengths and weaknesses:
By studying how your competitors are perceived, you can draw conclusions about your own brand’s
strengths and weaknesses. Knowing your company’s strengths can inform your positioning in the market, or
the image of your product or service that you want members of your target audience to have in their minds.
It’s essential to clearly communicate to potential customers why your product or service is the best choice of
all those available. Being aware of your company’s weaknesses is just as important in helping your business
grow. Understanding where you fall short of your customers’ expectations can help you identify areas where
you may want to invest time and resources. You might learn that customers prefer your competitors’
customer service, for example. Study your competition to find out what they’re doing right, and see what
you can apply to your business.
Understand your market:
While identifying competitors, you may find companies that you didn’t know about or that you didn’t
consider part of your competition before. Knowing who your competitors are is the first step to surpassing
them. Conducting a thorough assessment of what your competitors offer may also help you identify areas
where your market is underserved. If you find gaps between what your competitors offer and what customers
want, you can make the first move and expand your own offerings to satisfy those unmet customer needs.
Spot industry trends:
Studying the competition can also help you see which way the industry as a whole is moving. However, you
should never do something just because your competitors are doing it. Copying the competition without
really considering your own place in the market rarely, if ever, leads to success.
Set benchmarks for future growth:
When doing a competitor analysis, you should include companies that are both larger and smaller than your
own. Studying well-established businesses in your industry can give you a model of what success looks like
and a reference point against which to compare your future growth.

Decision Making:
A decision is a course of action purposely chosen from a set of alternatives to achieve organizational
or managerial objectives or goals.
“Decision-making is the selection based on some criteria from two or more possible alternatives.” -G.R.
Terry

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 “Decision-making is a course of action chosen by a manager as the most effective means at his disposal for
achieving goals and solving problems.” – Theo Haimann

Features of Decision-Making:

(i) Decision-Making is Goal-Oriented:

Each and every decision of management major or minor must make, at least, some contribution towards the
attainment of organisational objectives. In case otherwise, decision-making is a wasteful activity; involving
only a sheer wastage of the time, energy and efforts of managers, and precious organisational resources.
(ii) Decision-Making is Pervasive:
There are three dimensions of the pervasiveness of decision-making; viz:
(a) All managers in the management hierarchy take decisions, within the limits of their authority, pertaining
to their areas of functioning.
(b) Decision-making is done in all functional areas of management e.g. production, marketing, finance,
personnel, research and development etc.
(c) Decision-making is inherent in all functions of management i.e. planning, organising, staffing, directing
and controlling.
(iii) Decision-Making is an Intellectual Exercise:
Decision-making calls for creativity and imagination on the part of managers; in that decision-making forces
managers to think in terms of developing best objectives and best alternatives for attaining those objectives.
In fact, the more intelligent a manager is; the better would be the decision-making done by him.
(iv) Decision-Making Involves a Problem of Choice:
Decision-making is fundamentally a choosing problem i.e. a problem of choosing the best alternative, from
out of a number of alternatives, in a rational and scientific manner. If in a managerial decision-making
situation, alternatives do not exist; then there is no decision-making problem involved in that situation.
Further, more are the alternatives that are available in a situation; the more complicated the decision-making
process is likely to be.
(v) Decision-Making is a Continuous Process:
Decision-making process commences since the inception of business and continues throughout the
organisational life. All managers take decisions for organisational purposes; so long as the enterprise is in
existence. In fact, decision-making is also involved in the process of liquidating or winding up a business
enterprise.
(vi) Decision-Making is the Basis of Action:
All actions of people operating the enterprise are based on the decisions taken by management vis-a-vis
organisational issues. In fact, the quality of actions by people well depends on the quality of decisions taken
by management.
(vii) Decision-Making Implies a Commitment of Organisational Resources:
Commitment of organisational resources time, efforts, energies, physical resources etc. is implied both
during the process of taking decisions and more particularly, at time of implementation of decisions. Right
decisions, accordingly, imply a right commitment of resources; and wrong decisions imply a wrong
commitment of precious organisational resources.
(viii) Decision-Making is Situational:
Decision-making much depends on the situation facing the management; at the time when a decision-making
problem crops up. Whenever the situation changes; decision-making also changes; e.g. decision-making by
management on similar issues is radically different during boom conditions and during conditions of
recession or depression.

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