Planning; Ch-4; Business Studies

Class 12 (2026-27), Ch-4, Planning, Business Studies, Full Chapter in Book Language

Define planning.

Planning refers to the process of <b>setting objectives for a given time period, formulating various courses of action to achieve them, and then selecting the best possible alternative</b> from among the various courses of action available.

Delve into the details of planning.

1. Planning is one of the basic managerial function and is a choice making activity as it involves selecting the best alternative out of various available options.
   2. It involves setting up of objectives and deciding the appropriate course of action to achieve such objectives. Planning is concerned with both ends (what is to be done) and means (how it is to be done), i.e. it seeks to bridge the gap between where we are and where we want to go.
   3. Plans are always developed for a given time frame. If time factor is not taken into consideration, conditions in the environment may change and all business plans may go waste.
   4. It involves anticipation of future course of events and deciding the best course of action. Thus, it is basically a process of 'thinking before doing'.

List the 3 main aspects in the concept of planning.

1. Setting objectives for a given time period.
   2. Formulating various courses of action to achieve them.
   3. Selecting the best possible alternative from among the various courses of action available.

List the 7 features of planning.

1. Planning Focuses on Achieving Objectives
   2. Planning is a Primary Function of Management
   3. Planning is Pervasive
   4. Planning is Continuous
   5. Planning is Futuristic
   6. Planning involves Decision-Making
   7. Planning is a Mental Exercise

What is '<b>Planning Focuses on Achieving Objectives</b>' as a feature of planning?

Every organisation is set up to achieve predetermined goals. Specific goals are set out in the plans along with the activities to be undertaken to achieve the goals. Hence, planning is purposeful. Planning has no meaning unless it positively contributes for achievement of such predetermined goals.

What is '<b>Planning is a Primary Function of Management</b>' as a feature of planning?

Planning lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn. Thus, planning <b>precedes other functions</b> and it is also referred to as the primacy of planning.

What is '<b>Planning is Pervasive</b>' as a feature of planning?

Planning is required at all levels and in all departments of the organisation. It is not the exclusive function of top management or a particular department. Rather, it is performed by all managers at various levels. However, the nature and extent of planning may vary.<br>For example, top management undertakes strategic planning, and middle and lower management are involved in departmental planning and operational planning respectively.

What is '<b>Planning is Continuous</b>' as a feature of planning?

Plans are prepared for a specific period of time. At the end of that period, there is a need for a new plan on the basis of new situations and conditions. Hence, planning is a <b>continuous process</b>.

What is '<b>Planning is Futuristic</b>' as a feature of planning?

Planning aims to look into future, analyse it and predict it to the best advantage of an organisation. So, planning is regarded as a <b>forward looking function based on forecasting</b>. Through forecasting, future events and conditions are anticipated and plans are drawn accordingly. In short, planning involves thinking about the future for doing actions in present.<br>For example, a business firm prepares its annual plan for production and sales on the basis of sales forecasting.

What is '<b>Planning involves Decision-Making</b>' as a feature of planning?

Planning involves thorough examination and evaluation of various alternatives and selecting the best possible alternative. The need for planning arises only when alternatives are available. But, if there is only one alternative, then there is no need for planning.

What is '<b>Planning is a Mental Exercise</b>' as a feature of planning?

Planning requires application of mind involving <b>foresight, intelligent imagination and sound judgment</b>. So, planning is an intellectual activity of thinking rather than doing as it determines the action to be taken. Planning requires logical and systematic thinking instead of guess work or wishful thinking.

List the 6 points of importance of planning.

1. Planning provides Directions<br>2. Planning reduces the risks of uncertainty<br>3. Planning reduces overlapping and wasteful activities<br>4. Planning promotes innovative ideas<br>5. Planning facilitates decision-making<br>6. Planning establishes standards for controlling

What is '<b>Planning provides Directions</b>' as an importance of planning?

1. By stating the objectives in advance, planning provides <b>direction for action</b>.<br>2. Planning ensures that the goals or objectives are clearly stated so that they act as a guide for deciding the future course of action.<br>3. When goals are well defined, employees know in advance what the organisation has to do and what they must do to achieve those goals.<br>4. Departments and individuals in the organisation are able to work in coordination.<br>5. In the absence of planning, employees would be working in different directions and the organisation would not be able to achieve its desired goals.

What is '<b>Planning reduces the risks of uncertainty</b>' as an importance of planning?

1. Organisations have to face many uncertainties.<br>2. Planning enables a manager to <b>look ahead and anticipate changes</b> and prepare for the risks by making necessary provisions.<br>3. By deciding in advance the tasks to be performed, planning helps to deal with changes and uncertain events.<br>4. The uncertainties cannot be eliminated, but they can be anticipated and managerial responses for them can be developed.

What is '<b>Planning reduces overlapping and wasteful activities</b>' as an importance of planning?

1. Planning helps in deciding the future course of action, which facilitates <b>coordination of efforts</b> of different divisions, departments and individuals.<br>2. As the problems of what to do, how to do, when to do and who is to do it are almost decided, it ensures clarity in thought and action and work is carried on smoothly without interruptions.<br>3. It helps in avoiding confusion, misunderstanding and minimising useless activities.<br>4. Planning also makes it easier to detect inefficiencies and take corrective measures to deal with them.

What is '<b>Planning promotes innovative ideas</b>' as an importance of planning?

1. While planning, many new ideas arise and it results into <b>creative, innovative and foresighted attitude</b> among the managers.<br>2. As planning is the first function of management, new ideas can take the shape of concrete plans.<br>3. Planning is the most challenging activity for the management as it guides all future actions leading to growth and prosperity of the business.

What is '<b>Planning facilitates decision-making</b>' as an importance of planning?

1. Planning helps the manager to look into the future and make a choice from amongst various alternative courses of action.<br>2. The manager has to evaluate each alternative and select the best one.<br>3. Planning helps in taking <b>rational decisions</b> by setting targets and predicting future conditions.

What is '<b>Planning establishes standards for controlling</b>' as an importance of planning?

1. Planning involves setting up of goals and the entire managerial process is concerned with achieving the pre-determined goals.<br>2. Thus, planning provides the <b>standards against which the actual performance is evaluated</b>.<br>3. By comparing actual performance with the standards, managers can know whether they have actually been able to attain the goals or not.<br>4. In case of any adverse deviation, the management can take remedial measures to improve the results.<br>5. In the absence of plans, a manager will have no standards for controlling the actual performance.<br>6. In short, planning provides the <b>basis of control</b>, i.e. controlling is not possible without planning.

List the 6 limitations of planning.

1. Planning leads to Rigidity<br>2. Planning may not work in a Dynamic Environment<br>3. Planning Reduces Creativity<br>4. Planning involves Huge Costs<br>5. Planning is a Time-Consuming Process<br>6. Planning does not Guarantee Success

What is '<b>Planning leads to Rigidity</b>' as a limitation of planning?

1. In an organisation, plans are drawn up with specific goals to be achieved within a specific time frame.<br>2. These plans decide the future course of action and managers may not be in a position to change it.<br>3. This kind of rigidity in plans may create difficulty.<br>4. Managers need to be given some <b>flexibility to cope up with changed circumstances</b> because following a pre-decided plan in case of change in circumstances may not be in the interest of the organisation.

What is '<b>Planning may not work in a Dynamic Environment</b>' as a limitation of planning?

1. The business environment is dynamic. Plans have to operate in an external environment, which consists of a number of dimensions like economic, political, technological, legal and social dimensions.<br>2. The organisation has to constantly adapt itself to changes.<br>3. It is very difficult to make accurate forecasts in the environment if there is change in economic policies or political conditions are not stable or there is a natural calamity.<br>4. Competition in the market can also upset financial plans, sales targets and cash budgets.<br>5. Since planning cannot foresee everything, there may be obstacles to effective planning.

What is '<b>Planning Reduces Creativity</b>' as a limitation of planning?

1. Planning is an activity which is done by the top management and rest of the members have to strictly follow these plans.<br>2. Middle management and other decision makers are neither allowed to deviate from plans nor are they permitted to act on their own.<br>3. As a result, they do not get opportunity to show their skills and it limits their <b>initiative and creativity</b>.<br>4. Most of the time, employees do not even attempt to formulate plans and only carry out orders.<br>5. Thus, planning reduces creativity as people tend to think along the same lines as others. There is nothing new or innovative.

What is '<b>Planning involves Huge Costs</b>' as a limitation of planning?

1. When plans are drawn up, huge costs are involved in their formulation. These may be in terms of <b>time and money</b>.<br>2. For example, checking accuracy of facts may involve lot of time.<br>3. Detailed plans require scientific calculations to ascertain facts and figures.<br>4. Planning also involves number of incidental costs like expenses on boardroom meetings, discussions with professional experts and preliminary investigations to find out the viability of the plan.<br>5. If costs incurred on planning do not justify the benefits derived from it, then planning should be avoided.

What is '<b>Planning is a Time-Consuming Process</b>' as a limitation of planning?

1. The process of planning requires considerable time in evaluating the various possible alternatives and selecting the best one.<br>2. Sometimes, formulation of plans take so much time that there is not much time left for their implementation.<br>3. During sudden and unexpected emergencies, if the management thinks of completing the planning process before taking some decision, then it may worsen the situation.<br>4. Due to this reason, planning has to be avoided whenever there is a need for <b>prompt and immediate decision</b>.

What is '<b>Planning does not Guarantee Success</b>' as a limitation of planning?

1. The success of an enterprise is possible only when plans are properly drawn up and implemented.<br>2. It means, plans need to be <b>translated into action</b>, otherwise they become meaningless.<br>3. Managers have a tendency to rely on previously tried and tested successful plans.<br>4. However, it is not necessary that a plan, which has worked before, will work again in the changed and competitive environment.<br>5. This kind of false sense of security may actually lead to failure instead of success.<br>6. Mere planning does not ensure success, rather efforts have to be made for it.

List the 7 steps of planning.

1. Setting Objectives<br>2. Developing Premises<br>3. Identifying Alternative Courses of Action<br>4. Evaluating Alternative Courses<br>5. Selecting an Alternative<br>6. Implement the Plan<br>7. Follow-up Action

What is '<b>Setting Objectives</b>' as a step of planning?

1. The first and foremost step of planning is setting up of <b>objectives or goals</b>. Objectives may be set for the entire organisation and each department within the organisation.<br>2. Such objectives specify what the organisation wants to achieve. For example, objective of an organisation could mean an increase in sales by 20%.<br>3. Objectives should be stated clearly for all departments, units and employees. They give direction to all departments.<br>4. Departments need to set their own objectives within the broad framework of the organisation's philosophy.<br>5. Managers should also contribute ideas and participate in the objective setting process. They must also understand how their actions contribute to achieving objectives.

What is '<b>Developing Premises</b>' as a step of planning?

1. Planning involves deciding the future course of action, which is quite uncertain. So, every manager has to make certain assumptions about the future. These assumptions are called <b>premises</b>.<br>2. Premises are the <b>base material</b> upon which plans are to be drawn. The base material may be in the form of forecasts, existing plans or any past information about policies.<br>3. Premises must be the same for all and there should be total agreement on them. All managers involved in planning should be familiar with them and use the same assumptions.<br>4. For example, forecasts can be made about the demand for a particular product, etc.

What is '<b>Identifying Alternative Courses of Action</b>' as a step of planning?

1. After setting the objectives and making assumptions about the future, the next step is to determine alternative courses of action through which organisation can achieve its objectives.<br>2. For every plan, there are a number of options. All the alternative courses of action should be identified.<br>3. The course of action which may be taken could be either routine or innovative. An innovative course may be adopted by involving more people and sharing their ideas.<br>4. In case of an important project, more alternatives should be generated and thoroughly discussed amongst the members of the organisation.<br>5. For example, if the objective of a company is growth of business, then company has various possible alternatives, like expansion in same product line, diversifying in new areas, joint venture and so on.

What is '<b>Evaluating Alternative Courses</b>' as a step of planning?

1. After identifying and listing out possible alternative courses, the next step is to evaluate each alternative, i.e. to weigh the <b>pros and cons</b> of each alternative.<br>2. Each course will have many variables which need to be weighed against each other. The positive and negative points of each alternative are thoroughly examined in the light of the objective to be achieved.<br>3. All alternatives should be compared and evaluated in the light of <b>feasibility, cost, benefits and consequences</b> and so on.<br>4. For example, in financial plans, the risk-return trade-off is very common. The more risky the investment, the higher the returns it is likely to give. To evaluate such proposals, detailed calculations of earnings, earnings per share, interest, taxes, and dividends are made and then decisions are taken.

What is '<b>Selecting an Alternative</b>' as a step of planning?

1. After evaluating the various alternatives, the next step is to select the most suitable course of action. This is the <b>real point of decision-making</b>.<br>2. The alternative to be selected should be the most feasible, profitable and with least negative consequences.<br>3. Sometimes, a combination of plans may be selected instead of one best course.<br>4. When a plan cannot be subjected to a mathematical analysis, then subjectivity, judgment and experience of the manager play an important part in selecting the most viable alternative.<br>5. The manager will have to apply permutations and combinations and select the best possible course of action.

What is '<b>Implement the Plan</b>' as a step of planning?

1. This is the step where other managerial functions also come into the picture. Plans are of no use until these are put in action.<br>2. This step is concerned with <b>transforming the plan into action</b> by activating other managerial functions.<br>3. For this, plans are communicated to all the employees very clearly as they have to actually carry on the work.<br>4. For example, if plan of the organisation is to increase production, then more labour, more machinery will be required. This step would also involve organising for labour and purchase of machinery.

What is '<b>Follow-up Action</b>' as a step of planning?

1. Planning is a continuous process and it does not end with the implementation of plans.<br>2. Constant monitoring and review of plans at periodic intervals is very important to ensure that activities are performed according to the schedule.<br>3. It helps to make necessary changes in the plans in case of any deviations.<br>4. For example, if target of a company is to produce 12,000 cars per year, then company must ensure that at least 1,000 cars are produced per month. In case of any shortage, necessary actions must be taken.

Define '<b>Plan</b>'.

Plan is a document showing detailed scheme, program and strategy, worked out in advance for fulfilling an objective.
Every organisation has to prepare a plan before making any decision related to business operation or undertaking any project. Plans can be classified into several types depending on the use and the length of the planning period.

List the 2 types of plans.

1. <b>Single-use Plans</b><br>2. <b>Standing Plans</b>

Define and explain 'Single-use Plan'.

Single-use plan is one time plan which is specifically designed to achieve a particular goal. For example, Programme, Budget.
1. Single-use plans are made for handling non-recurring problems, i.e. they can't be used again and again.
2. The length of a single-use plan differs depending on the type of the project. It may span a week or a month. A project may sometimes be of only one day, such as organising an event or a seminar or conference.
3. These plans include budgets, programmes and projects.
4. They are also known as Specific Plans as they are formulated to fit the specific situations.

Define and explain 'Standing Plan'.

A standing plan is one which is used for activities that occur regularly over a period of time. For example, Policy, Procedure, Method, Rule
1. It is designed to ensure that internal operations of an organisation run smoothly. Such a plan greatly enhances efficiency in routine decision-making.
2. It is a plan that is developed once but is modified from time to time to meet business needs as required.
3. Standing plans include policies, procedures, methods and rules.
4. Standing plans help in decision-making on problems which are of recurring nature.
5. They are also known as Multi-use Plans or Repeated-use Plans.

Define and explain '<b>Objectives</b>'.

Objectives are the ends which the management seeks to achieve within a given time period by its operations. Keywords: End Result, Benchmarks
1. Objectives can be said to be the desired future position that the management would like to reach.
2. They represent the end point of planning. All other managerial activities are also directed towards achieving these objectives.
3. They are usually set by top management and different departments may have their own objectives.
4. Objectives define the future state of affairs and serve as a guide for overall business planning.
5. Objectives should be expressed in specific terms, i.e., they should be measurable in quantitative terms.
6. Example: The objective of a mobile company can be to increase the mobile users by 10% in 2 years.

Define and explain '<b>Strategy</b>'.

Strategy is a comprehensive plan for accomplishing an organisation objectives. Keywords: Comprehensive, Broad Contours
1. Strategy provides the broad contours of an organisation's business.
2. Strategy also refers to the future decisions defining the organisations direction and scope in the long run.
3. A strategy is formulated after considering the changes taking place in the business environment.
4. The changes in economic, political, social, legal and technological environment will affect an organisations strategy.
5. Strategy involves preparing oneself for meeting unforeseen factors.
6. Major strategic decisions will include decisions like whether the organisation will continue to be in the same line of business or combine new lines of activity with the existing business or seek to acquire a dominant position in the same market.

List the 3 dimensions (or steps) of strategy.

1. Determining long-term objectives.<br>2. Adopting a particular course of action.<br>3. Allocating resources necessary to achieve the objective.

List the 4 features of strategy.

1. It is formulated by top management due to its relative importance.<br>2. It is formulated after considering both internal and external environment.<br>3. It is dynamic as it depends on ever changing business environment.<br>4. It provides guidelines for thinking and action.

Define and explain '<b>Policies</b>'.

Policies are general statements that guide thinking or channelise energy towards a particular direction. Keywords: General Guidelines, Broad Parameters
1. Policies are derived from objectives. They define the broad parameters within which a manager may use his discretion to apply the policy.
2. There are policies for all levels and departments in the organisation ranging from major company policies to minor policies.
3. Policies provide a basis for interpreting strategy. They are guides to managerial action and decisions in the implementation of strategy.
4. The policies pre-decide some issues, avoid confusion and it becomes easier to resolve problems or issues.
5. Policy acts as a guide to take decisions in an unexpected situation. In short, policy is the general response to a particular problem or situation.
6. Example: Policy of a company may be not to employ any person who is less than 18 years of age.

Define and explain '<b>Procedures</b>'.

A procedure is a chronological sequence of various steps to be taken in order to perform activity in an efficient manner. Keywords: Steps, Sequence
1. A procedure is generally established for repetitive activity, so that same steps are followed whenever that activity is performed. They are generally meant for insiders to follow.
2. Policies and procedures are related to each other as procedures are steps to be carried out within a broad policy framework.
3. The sequence of steps to be taken is generally to enforce a policy and to attain pre-determined objectives.
4. An enterprise may have different procedures, like procedure for processing an order, recruitment of employees, collection of payments and so on.
5. Procedures are very rigid and do not leave any scope for individual judgment.
6. Example: An enterprise may have following procedure for purchase of goods: (i) First, identify the various suppliers, (ii) Invite quotations from them, (iii) Compare the quotations, (iv) Place order to the supplier, who offers the best quotation, (v) Receipt and inspection of goods, and (vi) Make payment to the supplier.

1. Define and explain '<b>Methods</b>'.

Method is a prescribed process in which a particular operation or an activity is performed considering the objective of the organisation. Keywords: Way of doing
1. It deals with a task comprising one step of a procedure and specifies how this step is to be performed. The methods may vary from task to task.
2. Selection of proper method saves time, money and effort and increases efficiency.
3. Methods should be stated in clear and precise terms to improve organisational efficiency and to bring orderliness to the work place.
4. Example: There are different methods available for valuation of stock like FIFO (First in first out), LIFO (Last in first out), etc. Business can select any method for valuation of its stock. Selection of a particular method avoids confusion and helps in smooth functioning.

2. Define and explain '<b>Rules</b>'.

Rules are specific statements that inform what is to be done. Keywords: Penalty imposed
1. Rules reflect a managerial decision that a certain action must or must not be taken. Employees are expected to comply with the rules while performing an activity.
2. Rules are rigid and demand strict compliance. They do not allow for any flexibility or discretion.
3. Rules are usually the simplest type of plans as there is no compromise or change unless a policy decision is taken.
4. Rules are enforced to maintain discipline and to avoid disorder and chaos in the organisation. Their violation is generally associated with some sort of disciplinary action.
5. Example: A company may have rule of 'No Smoking' in the factory premises.

3. Define and explain '<b>Programme</b>'.

Programme is a detailed statement about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action. Keywords: Mixture of Plans, Ways of doing a task
1. Programmes will include the entire gamut of activities as well as the organisation's policy and how it will contribute to the overall business plan.
2. It gives a step-by-step approach to guide the action necessary to reach a pre-determined goal. The minutest details are worked out, i.e., procedures, rules, budgets, within the broad policy framework.
3. Programme can be of different types, like production programme, training programme, sales promotion programme, etc.
4. Example: A company may have programme with respect to 'Construction of new Factory Premises'.

4. Define and explain '<b>Budget</b>'.

Budget is the statement of expected result expressed in numerical terms over a specific period of time. Keywords: Controlling device
1. It is a plan which quantifies future facts and figures. For example, a sales budget may forecast the sales of different products in each area for a particular month.
2. Budget may also be prepared to show the number of workers required in the factory at peak production times.
3. As budget is expressed in numerical terms, it becomes easier to compare actual figures with expected figures and take corrective action subsequently.
4. Thus, budget is also a control device from which deviations can be taken care of.
5. However, making a budget involves forecasting. So, it is a fundamental planning instrument in many organisations.
6. Some important budgets used in an organisation are: Sales Budget, Production Budget, Cash Budget, Revenue and Expense Budget, etc.
7. Example: Cash Budget is prepared to show the expected inflow and outflow of cash for a period in advance.