Planning

Planning is the fundamental management of critical objectives, including the process,

execution, and outcome. It is an intellectual process of management that an organisation
follows with various methodologies, blueprints, and discussions. It is necessary to get the best
possible result following the specific planning. Various objectives have a distinct planning
process according to the goal is achieved. According to planning, various actions and
encounters occur, which extracts the outcome at the end of the process.

Concept of planning

Planning is the basic and primary function of management. It has to be pre-decided to outline
the activities in the future. Planning is forming plans to develop and execute the activity to get
the best possible outcome. The management concept of planning includes formulating good
policies, budget segregation, advertisement objectives, marketing strategies, etc.

If we discuss the importance of planning, planning helps provide direction and reduce risk and
uncertainty, especially in the business field. It also reduces overlapping and wastage of
resources in a company, promotes new innovative ideas, facilitates decision-making, and
establishes a standard of control over the management.

Therefore, the planning focuses on achieving the goals and objectives; it is a continuous
process, future-oriented, and decision-making to provide a structure to the management.

Need of Planning
Planning is considered as the first step in the process of management. With the increasing
complexities in the business environment, increasing competition in markets, technological
changes and the changes taking place in consumer preferences, the need for proper planning
has become all the more important. The following reasons can be mentioned in order to
emphasize the need for planning:-

1. Growing Complexities of Business: As a result of the increasing complexities in the business

environment, planning has become very important for the modern businesses. Apart from
these, significant advancements are being made on the technological front. In the same way,
the preferences of the consumers are also changing rapidly. Due to all these reasons, it has
become important that not only planning should be done for the present business environment
but it should also be done for the future business environment. The outlook of the process of
planning is future oriented and therefore it can take into account all the developments that are
probable in the future.

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2. Related with Performance: the process of planning helps the organization in establishing
goals for each department and also for each employee. It has been seen that where formal
planning process is present, the organizations have performed better as against the
organizations where the planning process is not undertaken regularly. The variables for
evaluating the performance can be the return on investment, earning per share or sales target
etc. It has been established by several studies that the process of planning significantly helps in
improving the performance of the organization.

3. Focus on objectives: the emphasis in case of the process of planning is on establishing

objectives for the organization and also providing guidelines which can help in achieving these
objectives. The organizational goals provide a direction and all the decisions made during the
process of planning are directed towards the achievement of these goals. It also helps in
ensuring that the time and effort of the management is utilized to its fullest.

4. Proper allocation of resources: The process of planning helps in anticipating the needs of the
organization. In this way, it allows proper planning of the Inquisition and the elevation of
organizational resources which in turn reduces the wastage of these resources and makes sure
that these resources are optimally used.

5. Facilitates control: the process of planning can be used for the purpose of designing a
mechanism of control in the organization. For example, quantitative targets can be set and they
can be compared with the real performance and the difference between the two can be easily
noticed by the management. In this way, a periodical review of the performance can help in
identifying low performance areas. Any deviation present in profits, production or sales can be
easily noticed during these periodical reviews and therefore the management can immediately
take remedial action.

6. Helpful in decision-making: it also needs to be noted that the process of planning is

significantly helpful in decision-making. As the process of planning helps in deciding the actions
that need to be taken in order to achieve the organizational goals, this process also provides
the basis for decision making. The objectives as well as the plans policies etc. act as the
guidelines that help in routine decision-making within the organization.

7. Avoiding business failure: the process of planning also helps in avoiding any business
failures. The common reasons behind business failures are wrong and unscientific plans.
Therefore, if the plans are not formulated properly, the resources of the organization may be
wasted. As a result, the organization will not be in a position to deal with its competitors where
well-designed plans are in place. In this way, efficient planning helps the organization in
optimally using the resources available to it and in this way the chances of business failure are
reduced significantly with the help of efficient planning.

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Types of Plan
A management plan is a global plan that provides the objective of any organization’s project. A
plan certainly defines responsibilities, roles, etc., to ensure the achievement of the targeted
goal. A plan is a resource that everyone in the firm can use, be it the top-level manager or the
low-level manager. The plan creates an outline for the organization as to what should be the
aim and objective, the strategies that the firm will use, and what method will the firm use to
measure its performance. The plan is applicable in all types of organizations be they big or
small. There are different types of plans that can be helpful for managers in making decisions
and solving their problems.

I. Standing Plans

Standing plans are those plan which is used again and again whenever a particular situation
arises. It is designed to make sure that the internal operations of an enterprise run smoothly.
These plans are developed once but are designed to be used over the years. It is generally
developed in such a manner that it can be modified when needed. These plans are also known
as multiple-use plans or repeated-use plans. These plans are generally prepared by top-level
managers. Standing plans include objectives and goals, strategy, policy, procedure, rules, and
methods. The following are explained below:

1. Objectives and Goals

Both the terms are used interchangeably, as both imply the target one desires to accomplish.
Goals are the desired set of affairs that an organization wants to accomplish. Whereas
objectives are specific targets within the general goal to achieve a certain task. Thus objectives
are specific with support in the attainment of goals. The process of planning beings with the
setting up of objectives. The planning stage includes courses of action and identifies the results
that the company desires. These are usually set up by the top level. All organizations large or
small can identify problems and establish overall goals for their business, but they need specific
objectives to progress.

For example, the managers of a department may have the objective to increase sales by 15%.
This becomes an objective of selling more units for his employees. Objectives refer to purposes
or aims that an organization wants to achieve at different periods. Activities of an organization
are directed towards the objectives. In other words, objectives indicate the destination of the
organization.

2. Strategy

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The term strategy is mostly used in military science and games. But in view of growing
competition and a rapidly changing environment, now it has become equally relevant to the
business organization. In business, it refers to a comprehensive (i.e., determining long-term
objectives, adopting a course of action, and allocation of resources) and an integrated plan,
which indicates the desired future of the organization. It is very often said that a proper
strategy is the blueprint of an organization’s desired destination. It is an elaborate, systematic
and special type of plan, which is formulated to meet the challenges forwarded by the
competitors or other external factors, such as changes in the economic, political, social, legal,
and technological environment. It involves preparing itself for meeting unforeseen factors.

For example, Pepsi and Coca-Cola are competitors in the soft drink market. If Pepsi reduces the
price, then the counter plan of Coca-Cola is to maintain its market may be considered a
strategy.

3. Policy

The policy is a general statement that guides thinking or channelizing energy towards a
particular direction. It also defines boundaries within which the decision can be made. It is a
parameter within which managers use their discretion to apply the policy. There are policies for
all levels and departments in the organization. There are major company policies that are
common for all customers, clients, competitors, etc. Whereas minor policies are for the insiders
of an organization and mainly contain minute details of information important to the
employees.

For example, the policy of a company may be not to employ any person who is less than 18
years of age.

4. Procedures

A procedure refers to a particular course of action in order to achieve the desired result.
Basically, it is a series of chronological steps to be taken to perform an activity. It simplifies the
work by eliminating unnecessary steps and brings uniformity of action. Procedures may bring
rigidity in the working of all organizations by specifying the best way of doing it. It tends to
become outdated unless reviewed and revised at periodic intervals. It provides no room for
creative thinking and at times discourages initiatives.

For example, an enterprise may have the following procedure for the purchase of goods:
Identification of various suppliers, inviting quotations from them, comparison of quotations,
placing orders to the suppliers who offer the best quotation, receipt, and inspection of goods,
and making the payment to the suppliers.

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5. Rules

Rules are a set of directives or statements to do or not to do certain things, to behave or not to
behave in a particular way. Every organization aims to operate in an orderly manner to regulate
and control the working behaviour of employees. Rules are formed by the organization and
these are enforced to maintain. They are rigid and do not allow derivations. The breach of rules
usually carries a penalty. It aims to maintain discipline and thereby helps to improve efficiency.
Any violation of the rule is generally associated with some sort of disciplinary action.

For example, a company may have a rule of no smoking in the office premises, ‘smoking is
strictly prohibited’.

6. Method

Methods are formalized techniques and standard ways of doing repetitive and routine jobs. It
prescribes the manner of doing the task. They also provide detailed guidance for day-to-day
activities and are helpful in the use of procedures with minimum expenditure of time, effort,
and money. The method specifies the manner in which a work can be performed effectively and
efficiently. It should be stated clearly and in precise terms to improve organizational efficiency
and bring a sense of order to the workplace. It is a prescribed way in which one step of the
procedure is to be performed. Specified techniques are to be used in a particular operation.

For example, there are different methods for the valuation of stock, like the FIFO method, LIFO
method, and HIFO method. A business can select any one method for the valuation of the
stock. Selecting a particular method avoids confusion and helps in the smooth functioning of
the organization. ( FIFO- first in first out, LIFO- last in first out, and HIFO- highest in first out).

II. Single-use Plans

Single-use plans are made to serve a specific objective. They cease to exist once such an
objective is achieved. They are nonrecurring and the duration of this plan generally depends
upon the type of project. These plans are short-lived and they have to be reformulated after
every use. These plans include programme and budget, following are explained below:

1. Programme

Programmes are comprehensive plans designed to implement the policies and accomplish the
objective by combining goals, task assignments, policies, resources, etc. They are usually single-
use plans indicating the steps to be taken, resources to be used, and the period for completion
of the task. It gives a step-by-step approach to guide the action necessary to reach a pre-
determined goal. There are two types of programmes major and minor. Major programmes are

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basic plans for example- the poverty eeradication
radication programme. Minor programmes are derivative
programmes designed to implement major programmes.

For example,, a company may have a programme with respect to ‘Construction of new factory
premises’.

2. Budget

According to George. R. Terry,” a budget is an estimate of future needs arranged to an orderly

basis covering some or all of the activities of an enterprise for a definite period of time”. A
budget is a statement of expected results that are expressed in numerical terms for a definite
period. It is a single-use
use plan expressed in quantitative terms. It is a projection of anticipated
cost results and the allocation of resources. On one hand, it is an instrument of planning, as it
helps to make the plans clear, on the other hand, it is an instrument of control, as it serves as a
standard for evaluating performance. It is prepared for one year.

For example,, the sales department of an organization provides its budget, wherein they have
estimated the figures about different types of material that will be needed for production, its
quality, the time of purchase, and what amount is to be spent on it. There as othero such
departments that prepare these budgets.

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Process of Planning
The process of planning consists of the following steps:

 Establishing objectives: The first step in the planning process is to identify the goals of the
organization. The internal as well as external conditions affecting the organisation must be
thoroughly examined before setting objectives. The objectives so derived must clearly indicate
what is to be achieved, where action should take place, who is to perform it, how it is to be
undertaken and when is it to be accomplished. In other words, managers must provide clear
guidelines for organizational efforts, so that activities can be kept on the right track.
 Developing premises: After setting objectives, it is necessary to outline planning premises.
Premises are assumptions about the environment in which plans are made and implemented.
Thus, assumptions about the likely impact of important environmental factors such as market
demand for goods, cost of raw materials, technology to be used, population growth,
government policy, etc. on the future plans are made. Plans should be formulated by the
management, keeping the constraints imposed by internal as well as external conditions in
mind.
 Evaluating alternatives and selection: After establishing the objectives and planning premises,
the alternative courses of action have to be considered. The pros and cons as well as the
consequences of each alternative course of action must be examined thoroughly before a choice
is made.
 Formulating derivative plans: After selecting the best course of action, the management has to
formulate the secondary plans to support the basic plan. The plans derived for various
departments, units, activities, etc., in a detailed manner are known as ‘derivative plans’. For
example, the basic production plan requires a number of things such as availability of plant and
machinery, training of employees, provision of adequate finance, etc. To ensure the success of a
basic plan, the derivative plans must indicate the time schedule and sequence of performing
various tasks.
 Securing cooperation and participation: The successful implementation of a plan depends, to a
large extent, on the whole-hearted cooperation of the employees. In view of this, management
should involve operations people in the planning activities.
 Providing for follow-up: Plans have to be reviewed continually to ensure their relevance and
effectiveness. In the course of implementing plans, certain facts may come to light that were not
even thought of earlier. In the light of these changed conditions, plans have to be revised.
Without such a regular follow-up, plans may become out-of-date and useless. Moreover, such a
step ensures the implementation plans along right lines

Planning premises : A planning premise is a set of assumptions that are derived from forecasting the
future. It is a logical and systematic estimate of the future factors that can affect planning

Types of Planning Premises

 Internal and External Premises

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  Controllable, semi-controllable and non-controllable premises
 Tangible and Intangible premises

Internal and external premises:

Internal premises originate from factors within the enterprise. They relate to premises. Sales forecasts,
personnel forecasts (skills and abilities of personnel) etc. These premises may be strengths or
weaknesses of the organization. Strength represents a positive attitude which provides strategic
advantage to the company over competitors and weakness is a limitation or constraint that provides
strategic disadvantage. Managers analysis their strengths and weaknesses through corporate analysis
and when corporate analyses (internal) is combined with environmental analyses (external), it is called
SWOT analyses (Strength, Weaknesses, Opportunities. Strengths). External premises originate from
factors outside the organization. These are the indirect action environmental factors (social, political,
technological etc.) which affect the organization. They are also non- controllable premises beyond the
control of the organization.

Controllable. Semi- controllable and non-controllable premises:

Controllable premises are those within the control of a business enterprise. such as, men, Monet,
materials, policies, procedure, programmers etc. They can be controlled but a business enterprise to
ensure better sales of its products. Semi- controllable premises are those which can be partially
controlled by a business enterprise like, labour position on the market. Non-controllable premises are
those that lie beyond the control of a business enterprise. Ware, natural calamities and external
environment factors are non- controllable premises.

Tangible and intangible premises:

Tangible premises can be estimated in quantitative terms like, production units, cost per unit etc.
Intangible premises cannot be quantified, for example, good will of the firm, employer- employee
relationships, leadership qualities of the managers, motivational factors that get employees to work etc.

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Management by Objectives (MBO)
Management by objectives (MBO) is a strategic management model that aims to improve the
performance of an organization by clearly defining objectives that are agreed to by both management
and employees. According to the theory, having a say in goal setting and action plans encourages
participation and commitment among employees, and aligns objectives across the organization.

MBO Process:

(1) Setting of organizational Objective : Usually the objectives starts at top level and then moves in
downward direction. Its follows sequence -- identify the purpose , then strategic objectives( long term
goals ), then departmental objectives ( short term goals ), then aligning with individual objectives.

(2) Key Result Area--Identifying key performance areas. These are those process which are must and
Important .Examples – product quality, cost , sales , raw material quality , cash flows , investment.

(3) Setting subordinate objective--Organization is formed by group of managers and their team
Members. Each manger must know the objective, purpose and the required deliverables. In the
hierarchy each manager is superior and subordinate ( except top level). The superior manager shares
the propose recommendations for the subordinate objectives and subordinate sets their own point of
view .Mutual discussions is initiated for final objective set up.

(4) Matching resources with objectives—Resources can be – human –material– machinery– supply
chain. Need to analyze the capacity –quality – skills set – availability –requirement –supply of resources

(5) Appraisal- Manager can evaluate team member progress by setting up performance appraisals.
Performance appraisals will allow you to give personal feedback on what each team member is doing
well and where they can improve on their individual goals so they can better serve the company as a
whole. This step in performance management is crucial because it emphasizes effective communication
between management and the team. Team members may look forward to performance evaluations
because feedback can provide a boost to team productivity.

(6) Continuity of the process – absorbing the changes

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Corporate Strategy
Corporate strategy is a comprehensive plan that guides a company’s decisions to achieve its long-term
goals and competitive advantages. It’s like a roadmap that helps the company navigate its way to
success. This strategy involves making important choices about what businesses to be in, how to
differentiate from competitors, and how to allocate resources effectively.

In simpler terms, a corporate strategy is a big-picture plan that helps a company decide what it wants to
achieve and how it will get there. Just like how you might plan your steps to reach a destination, a
company uses corporate strategy to plan its steps to reach its business goals. This strategy involves
deciding which products or services to offer, what should be the target market, how to compete with
other companies, and how to use its resources wisely.

Growth Strategy
This strategy aims to increase the size and scale of the organization. It can be achieved through:

 Market Penetration: Selling more of the current products to existing customers.

 Market Development: Expanding into new markets or geographies with existing products.

 Product Development: Introducing new products to existing markets.

 Diversification: Entering new markets with new products, which can be related (similar to the
company’s core business) or unrelated (different from the core business).

Example of Growth Strategy: Amazon

Originally an online bookstore, Amazon has implemented a growth strategy by expanding into various
product categories (electronics, clothing, etc.) and services (Amazon Prime, Amazon Web Services). This
strategy has enabled them to become a global e-commerce giant and a leader in cloud computing.

Stability Strategy
This strategy focuses on maintaining the company’s current position and performance while ensuring
consistent and steady growth. Companies often adopt it in mature industries where rapid growth is
challenging.

Example of Stability Strategy: Coco-Cola

Coca-Cola, a beverage company, often employs a stability strategy. It consistently maintains its core
product line of soft drinks while making subtle adjustments to adapt to changing consumer preferences.
This strategy helps the company sustain its brand identity and market share over time.

Retrenchment Strategy
Adopted when a company faces challenges or downturns, this strategy aims to consolidate resources
and strengthen the organization. It can involve:

 Turnaround: Implementing short-term actions to stop the decline and stabilize the situation.

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  Divestiture: Selling off a particular business unit or division.

 Liquidation: Shutting down the company or parts of it.

Example of Retrenchment Strategy: General Motors (GM)

General Motors faced financial challenges and declining performance during the economic downturn. As
part of a retrenchment strategy, they filed for bankruptcy, restructured their operations, and focused on
their core brands (Chevrolet, Cadillac, etc.). This strategy allowed them to recover and regain
profitability.

Integration Strategy
This strategy involves expanding the company’s role in its value chain either by:

 Horizontal Integration: Merging with or acquiring competitors in the same industry.

 Vertical Integration: Taking over parts of the production process, either by integrating backward
(acquiring suppliers) or forward (acquiring distributors).

Example of Integration Strategy: Apple

Apple is known for its integration strategy, specifically vertical integration. It designs its own hardware,
develops its own operating systems, and creates its own software applications. This approach gives it
control over the entire user experience, from devices to services, contributing to brand loyalty and
differentiation.

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Competitive strategies:
Competitive strategies are important because they affect the overall strategy of a business. If a business
doesn't have a competitive strategy, it may not find a unique advantage against its competitors. A
competitive strategy is important in finding and developing new ideas for products and services that the
company can offer. Other advantages of implementing a competitive strategy include:

 The exploration of new opportunities

 The retaining of customer loyalty with better products and services
 Innovation to stay current on technological changes in the market

1. Cost leadership strategy

A cost leadership competitive strategy keeps prices for products and services lower than competitors to
encourage customers to purchase the lower-priced products to save money. Businesses use a cost
leadership strategy in industries with high price elasticity, such as energy and transportation. This
competitive strategy is most effective for companies that can produce a large volume of products for
low costs. These businesses often have large-scale production methods, high-capacity utilization and
various distribution channels with which to work.

Example: Archibald Products is an online retailer of various household goods and uses a cost leadership
strategy to maintain lower shipping costs for their customers and competitive production costs. The
company purchases large quantities of the products it sells so that it can distribute them quickly to
customers. It also keeps its overhead costs low by training a few employees to handle every step of the
distribution process so that it can order large quantities and compete with other online retailers.

2. Differentiation leadership strategy

Businesses may use the differentiation leadership strategy to differentiate their products from
competitors by emphasizing product features. This strategy might involve the design or function of a
product. A company that's been in operation for a while may use this strategy to show that an original
offering is better than newer products. Alternatively, a newer company may use this strategy to show
that a new invention is more beneficial than an existing one. The goal is to appeal to more customers
through unique features and quality while keeping competitors from obtaining a larger market share for
products.

Example: Lowdo is a search engine that uses a product differentiation strategy to appeal to certain
customers through its products and services. For Lowdo searches to be successful, it uses tailored,
personalized search filtering based on its customers' needs. This allows the company to keep its
customers loyal and prevent them from using other search engines.

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3. Cost focus strategy

Similar to the cost leadership strategy, the cost focus strategy involves catering to a specific market. This
strategy still involves trying to offer the lowest price, but it attempts to target a unique market segment
with specific preferences and needs. When a company implements a cost focus strategy, it can establish
brand awareness more easily within a specific geographic market.

Example: Wrando is a clothing store that uses a cost focus strategy to generate sales by advertising to
working parents with young children. The company experiences success because it lowers its costs by
purchasing clothing items from manufacturers in large quantities and outsourcing its distribution
process so that it can keep all its employees dedicated to serving customers at its stores. Parents can
shop for themselves and their children in one location, and they can access affordable clothing that
other department stores in the area may sell for higher prices.

4. Differentiation focus strategy

Similar to the differentiation leadership strategy, the differentiation focus strategy attempts to highlight
unique product attributes and features. The difference between them is that while the differentiation
leadership strategy may involve appealing to a broader market, the differentiation focus strategy
involves appealing to a specific market segment. This strategy typically doesn't prioritize the price of a
company's offerings, as it attempts to highlight how a company's offerings are unique compared to
those of its competitors.

Example: Windy Skies Resorts is an island resort that has hotels, swimming pools and adventure
activities like zip lines. It decides to implement the differentiation focus strategy by advertising how it
serves corporate. This advertising strategy helps it distinguish itself from other resorts in the area that
cater to large families. At Windy Skies Resorts, corporate can enjoy their stays and make friends with
other corporate. They can enjoy their vacations without having to worry about a loud, noisy
environment disrupting their relaxation.

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