NEED OF PLANNING

Definition: Planning is retraceable reasoning as to why a company has specific aims, what
these aims are and how they are to be achieved.
Relationship between objectives and planning:
Planning is the activity that leads to specific objectives being chosen, as much as it is the
scheduling and budgeting of the actions needed to make the objectives become reality.
In companies, most often a person embraces within himself multiple and often conflicting
aims and thus makes for corporate confusion. Every business unit defines its objectives for a
certain time period and makes plans accordingly.
If business planning is to be a real tool to fashion the corporate future it needs to be written.
Only then can the reasoning be clear to all over a period of time. The writing process
becomes more comprehensible and retraceable. It is essential to generate clarity in all the
employees of the organisation
Importance of planning
1. Continuing changes in the business environment. Eg technical change which has an
important effect on product life and development times. An individual acting alone
can often miss a factor of crucial importance.
2. The time over which a successful product earns major profits is declining. Thus a
greater investment needs to be recovered over a shorter time. Companies can no
longer allow themselves the luxury of compensating for initial errors by changes
introduced after a product is launched. The time involved in the changes will bite
increasingly into the time the product has to repay the investment and rink in
undertaking it.
3. Increasing rate of competitive change. A direct competitor is now likely to be from
Japan as from Bengaluru.
4. Competition from alternatives has also arisen. Eg Sales of metal product decline as
plastic and concrete increases. Only by planning a companys whole effort to be
value-oriented can the threat of competition be reduced.
5. Large companies need a business plan that enables them to think big. Size is a
competitive disadvantage. Larger companies are rated by their customers as less
effective than the smaller companies or they are less efficient in themselves. Large
companies are not entrepreneurial.
6. A company must consciously plan its human skills to be in line with its other
investments.
7. Those undertaking business planning will find their greatest challenge in
endeavouring to locate the alternative to the current operations. In doing this the
emphasis must be on creativity. A company never makes above- average profit from a
machine, a factory, or a product. It is from the intangibles of exclusiveness, creativity,
knowhow and understanding of the customers problem that above- average profits

arise. There are always alternative strategies and it is essential in planning to identify
them. (Business Planning for the Board)

Symbiotic relationship between Mission and Purpose

Every kind of organised operation has or at least should have if it has to be meaningful, a
mission or purpose. In every social system, the enterprise have a basic function or task
assigned to them by society. While a business, for example may have a social purpose of
producing and distributing goods and services, it can accomplish this by fulfilling a mission
of producing certain lines of products. The purpose of the state highway department is to
build and operate roads and highways. The purpose of university is teaching and research.
The mission of food processing company like General Mills is to use innovation for
Nourishing Lives. The mission of worlds largest FMCG Company P&G is We will provide
branded products and services of superior quality and value that improve the lives of the
worlds consumers. As a result, consumers will reward us with leadership sales, profit and
value creation, allowing our people, our shareholders, and the communities in which we live
and work to prosper.
In many organisation, the difference between mission and purpose becomes fuzzy. One of the
main reasons for this thin line to exist is due to large size of conglomerates. Many of them
define their objective to attaining synergy or as Reliance defines it To achieve excellence
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in project execution, quality, reliability, safety and operational efficiency. Objectives or

mission are not just the end point in planning but an end in itself. It is the end towards which
organising, staffing, leading, and controlling are aimed. (Essentials of Management)
Organisational Planning
Planning is a critical management activity regardless of the type of organisation being
managed. Modern managers face the challenge of sound planning in small and relatively
simple organisations as well as in large, more complex ones, and in non-profit organisation
such as libraries as well as in for-profit organisation Tata Motors. Organisational planning has
two purposes: protective and affirmative. The protective purpose of planning is to minimize
risk by reducing the uncertainty surrounding business conditions and clarifying the
consequences of related management actions. The affirmative purpose is to increase the
degree of organisational success. (Management- Certo)
Strategies
Planning is used to determine basic long-term objectives of an enterprise and adoption of
courses of action and allocation of resources necessary to achieve goals. Plans are made in
light of what a competitor might or might not do. It could be used in a competitive sense or
broadly to reflect an enterprises operation. It could be done to adopt a course of action or
allocate resources necessary to achieve goals.
Policies
Plans are essential to define policy. Policy define an area within which decisions are to be
made and ensure that the decisions are consistent with and contribute to goals. Policies help
define issues before they become problems, make it unnecessary to analyse the same situation
every time it comes up and unify other plans, thus permitting managers to delegate authority
and still maintains and operate control over what their subordinates do.
Procedures
Plans can be used to establish procedures. Procedures are plans that establish a required
method of handling future activities. They are chronological sequences of required activities.
Procedures cut across all functions and hence are very important from the working of the
organization. It is essential for ensuring convergence in actions towards goal of the
organization.
Eg. Hand-offs from one leader to the next are tricky because of the politics and intrigue that
surrounds them, the complex nature of the CEO position and the dynamic nature of
companies. For that reason, they represent a time when the company is vulnerable. By
crafting a thoughtful, strategic approach to succession, the board fully addresses its
governance responsibilities and sets the new leader on a firm course toward future success.
Normally, these executives lie beyond the companys reach in terms of development, but in a
best-practices approach to succession planning, companies actually bring potential CEO
successors in through other positions. This allows the company to make a strategic
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investment in the new executives development, as the board not only increases its companys
bench strength but also has a chance to explore the executives likely effectiveness as CEO.
Both Jim Donald (Starbucks) and John Chambers (Cisco) ascended to CEO positions this
way. The opportunity for the executive and the board to develop their relationship greatly
reduces transition risk. (Succession Planning, OB)
Programs
Plans could be also used to define specific required actions or non-actions, allowing no
discretion. It reflects a managerial decision that a certain action must or must not be taken.
Plans could define programs that will help improve the quality of a service, morale of the
workers, status and quality of employee.
Budget
The budget is the fundamental planning instrument in majority of the companies. It forces a
company to make in advance either for a week or for five years, a numerical compilation of
expected cash flow, expenses and revenues, capital outflow, or labour or machine hour
utilizations. Financial budget are made using long term as well as short term sources of
finance. This requires the planners to work together for preparing the budget.
Formal Planning
In formal planning, specific goals covering a specific time period are defined. These goals are
written and shared with organizational members to reduce ambiguity and create a common
understanding about what needs to be done.
Planning provides direction to managers and non-managers alike. When employees know
what their organization or work unit is trying to accomplish and what they must contribute in
order to reach goals, they can coordinate their activities, cooperate with each other, and do
what it takes to accomplish those goals. Without planning, departments and individuals might
work to cross-purposes and prevent the organization from efficiently achieving its goals.
Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider
the impact of change, and develop appropriate responses. Although planning wont eliminate
uncertainty, managers plan so they can respond effectively. In addition, planning minimizes
wastes and redundancy. When work activities are coordinated around plans, inefficiencies
become obvious and can be corrected or eliminated. Finally, planning establishes the goals or
standards used in controlling. When managers plan, they develop goals and plans. When they
control, they see whether the plans have been carried out and the goals met. Without
planning, there would be no goals against which to measure or evaluate work effort.
Planning & Performance
Numerous studies have shown the relationship between planning and performance. Some of
the conclusions that can be arrived at are given below. First generally speaking, formal
planning is associated with positive financial results higher profits, higher returns on assets,
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and so forth. Second, it seems that doing a good job planning and implementing those plans
play a bigger part in high performance than does how much planning is done. Next, in studies
where formal planning didnt lead to high performance, the external environment often was
the culprit.
When external forcessuch as government regulation or powerful labour unionsconstrain
managers option, they reduce the impact planning has on an organisations performance.
Finally, the planning performance relationship seems to be influenced by the planning time
frame. It seems that at least four years of formal planning is required before it begins to affect
performance. (Management)
Eg. McDonalds entered India in the year 1996 when the fast food retail market in India was
at a nascent stage. Encountered with several challenges in the beginning in terms of adapting
to the tastes, preferences and culture of the local customers, changing the perception of Indian
consumers towards American food habits, obstruction from political parties, issues with
distribution, designing a proper supply chain to training the employees on McDonalds
standards, the fast food giant emerged to be the market leader by 2011. Though McDonalds
commands the leadership position in the Indian fast food market their exists stiff competition
from the local traditional fast food retailers as well as other multinational firms which entered
the fast growing Indian fast food market. This involved meticulous planning to be done by
McDonalds. (Prof. Bhattacharya)

Levels of planning
There are four levels of planning

Mission statement
Strategic planning
Tactical planning
Operational planning

Mission Statement:
Mission statement defines the basic purpose of the organization, especially for external
audiences. It distinguishes the organization from others of a similar type. The content of a
mission statement often focuses on the market and customers. Some mission statements
describe company characteristics such as corporate values, product quality, location of
facilities, and attitude toward employees. The mission is the basis for the strategic (company)
level plans, which in turn shapes the tactical (divisional) level and the operational
(departmental) level. Examples of mission statement are:
State Farms mission is to help people manage the risks of everyday life, recover from
the unexpected, and realize their dreams. We are people, who make it our business to
be like a good neighbour; who built a premier company by selling and keeping
promises through our marketing partnership; who bring diverse talents and
experiences to our work of serving the State Farm customer. Our success is built on a
foundation of shared values - quality service and relationships, mutual trust, integrity,
and financial strength.
Volvo groups mission statement - By creating value for our customers, we create
value for our shareholders. We use our expertise to create transport-related products
and services of superior quality, safety and environmental care for demanding

customers in selected segments. We work with energy, passion and respect for the
individual.
Toyotas mission statement is - "Toyota will lead the way to the future of mobility,
enriching lives around the world with the safest and most responsible ways of moving
people. Through our commitment to quality, constant innovation and respect for the
planet, we aim to exceed expectations and be rewarded with a smile. We will meet our
challenging goals by engaging the talent and passion of people, who believe there is
always a better way."
"The mission of The Walt Disney Company is to be one of the world's leading
producers and providers of entertainment and information. Using our portfolio of
brands to differentiate our content, services and consumer products, we seek to
develop the most creative, innovative and profitable entertainment experiences and
related products in the world."

Strategic Planning :
Top managers are typically responsible for establishing strategic plans. Strategy depends for
success, on a sound calculation and co-ordination of the end and the means. Strategic plan
mainly consists of :
A clear definition of the business and how it will operate
A plan that lays out the major goals, objectives, and the means for achieving them
A set of targets that guide operational execution and allow progress to be tracked
against the overall goals and objectives
The strategic plan is the blueprint that defines the organizational activities and resource
allocationsin the form of cash, personnel, space, and facilitiesrequired for meeting these
targets. Strategic planning tends to be long term and may define organizational action steps
from two to five years in the future. The purpose of strategic plans is to turn organizational
goals into realities within that time period. Implementation requires that the strategy be
communicated effectively to all the individuals and groups that must contribute to its
execution, including all the people within the organization and increasingly extending into the
organizations suppliers and other business partners.

Tactical planning
Tactical goals and plans are the responsibility of middle managers, such as the heads
of major divisions or functional units. A division manager will formulate tactical plans that
focus on the major actions the division must take to fulfil its part in the strategic plan set by
top management. Tactical plans typically have a shorter time horizon than strategic plans
over the next year or so. In a business or non-profit organization, tactical plans define what
major departments and organizational subunits will do to implement the organizations
strategic plan. Human resource managers will develop tactical plans to ensure that the
company has the dedicated order takers and customer service representatives it needs during
these critical periods. Tactical plans might include cross-training employees so they can
switch to different jobs as departmental needs change, allowing order takers to transfer to
jobs at headquarters during off-peak times to prevent burnout, and using regular order takers
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to train and supervise temporary workers during peak seasons.13 These actions help top
managers implement their overall strategic plan. Normally, it is the middle managers job to
take the broad strategic plan and identify specific tactical plans.
Tactical planning is the process of defining the tactics, initiatives, and allocation of
resources required to meet agreed-on targets and overall business objectives and strategies
that have been defined during the strategic planning and target-setting processes. Tactical
planning includes the development of tactics and initiatives to sustain and improve current
business operations and the evaluation and prioritization of new initiatives and projects at all
levels of the organization to assess their ability to contribute to the overall objectives and
targets. This evaluation will include the definition of activities that should be continued,
changed, commenced, or stopped and the impact on resource requirements. Tactical planning
begins after management has completed the strategic planning process and established nearterm performance targets to guide more detailed planning. The tactical plan provides a road
map for the organization. It identifies a destination, plots a course, defines intermediate
checkpoints on the journey, and estimates the resources required to complete the journey. An
effective plan also provides insight into alternative routes that may be taken as obstacles or
opportunities emerge during the journey. The tactical planning and financial planning
processes are iterative as potential tactics are evaluated in terms of their ability to contribute
to meeting the organizations strategic objectives and achieving the targeted financial
performance. Once the overall targets have been established, they are cascaded and
communicated throughout the organization. The cascading of targets involves the allocation
of targets to individual businesses and the translation of a high-level target into lower-level
targets to guide the development of tactical plans. For example, senior management may set
an overall profitability target for a business. The management team then works to translate
the overall profitability target into its component parts.
Defining tactical planning is as simple as asking following question:
What tactics will be pursued to meet the performance targets emanating from the strategic
plan?
Tactical plans describe the operations, initiatives, and actions that will be performed in order
to achieve agreed-upon performance targets. All planning must be focused on a goal or target.
The tactical planning process starts with the issuance of targets that the plan needs to meet.
These targets are set around the key performance measures that the organization has
established during the strategic planning process and should be agreed on before detailed
planning begins.
Tactical plans typically address three different activities:
Sustaining current operations
Improving current operations
Embarking on new ventures or initiatives
Sustaining current operations defines the actions required to continue operating in the current
way when no material change in performance or behaviour is required. Improving current
operations defines those actions or projects that seek to improve the level of performance of
an existing part of the organization. It could encompass a process change, an organizational
change, adoption of a new technology, a change of supplier, or a new marketing program.
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New ventures or initiatives break new ground for the organization. Perhaps the firm enters a
new market, builds a new plant, launches a new product line, or creates a new distribution
channel. Most tactical plans include actions that fall into all three categories. Management
will be required to make choices and trade-offs among the categories and to assess the overall
risk/return profile to ensure that it is acceptable while offering a reasonable probability of
meeting the targets.

Companies consider three variables in determining the optimal time horizon for tactical
planning:
1. The normal cycle of product development and selling within the industry. For
example, automotive companies typically plan anywhere from two to four model
years into the future, reflecting the elapsed time from conception to market for a new
product. Pharmaceutical companies adopt an even longer time horizon driven by the
time frame for the development and approval of new drugs and the length of patent
protection for a drug once approved. A fashion retailer may look out only two fashion
seasons when developing detailed tactical plans. Toy manufacturer Mattel focuses its
detailed plans on the next two toy selling seasons.
2. The lead time required for making major resource allocation decisions. Decisions that
require significant capital investment in new plant or facilities or those that have a
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long cycle time before a return is realized, such as oil exploration, will have a longer
time frame than tactics that can be implemented quickly and consequently must also
be tested for validity under a range of different future scenarios.
3. The time period that provides senior management, board members, and other
stakeholders with enough information to approve plans and expenditures. Roberto
Goizueta, the successful CEO of Coca-Cola who managed a rise in the companys
market value from $4 billion to $145 billion, was adamant in his views on the role and
time horizon for tactical planning. David Greising described Goizuetas philosophy in
this way: Five-year plans, he felt, were a waste of time. No one could predict with
any accuracy what the world would look like in five years. He wanted three-year
plans, and he told the executives that he would hold them accountable for meeting
their three-year targets.
Balancing the needs of the business with the organizations predictive capability defines the
most practical time horizon.

Operational Planning:
Operational plans identify the specific procedures or processes needed at lower levels
of the organization, such as individual departments and employees. Front-line managers and
supervisors develop operational plans that focus on specific tasks and processes and that help
meet tactical and strategic goals.
The results expected from departments, work groups, and individuals are the
operational goals. They are precise and measurable. Process 150 sales applications each
week, achieve 90 percent of deliveries on time, reduce overtime by 10 percent next
month, and develop two new online courses in accounting are examples of operational
goals.
Operational plans are developed at the lower levels of the organization to specify
action steps toward achieving operational goals and to support tactical plans. The operational
plan is the department managers tool for daily and weekly operations. Goals are stated in
quantitative terms, and the department plan describes how goals will be achieved.
Operational planning specifies plans for department managers, supervisors, and individual
employees. Schedules are an important component of operational planning. Schedules define
precise time frames for the completion of each operational goal required for the
organizations tactical and strategic goals. Operational planning also must be coordinated
with the budget, because resources must be allocated for desired activities.
Operational goals need to be specific and measurable. When possible, operational
goals should be expressed in quantitative terms, such as increasing profits by 2 percent,
having zero incomplete sales order forms, or increasing average teacher effectiveness ratings
from 3.5 to 3.7. Not all goals can be expressed in numerical terms, but vague goals have little
motivating power for employees. By necessity, goals are qualitative as well as quantitative.
The important point is that the goals be precisely defined and allow for measurable progress.
Effective goals also have a defined time period that specifies the date on which goal
attainment will be measured. School administrators might set a deadline for improving
teacher effectiveness ratings, for instance, at the end of the 2009 school term.
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Planning process:

The overall planning process, illustrated in Exhibit 6.2, prevents managers from thinking
merely in terms of day-to-day activities. The process begins when managers develop the
overall plan for the organization by clearly defining mission and strategic (company-level)
goals. Second, they translate the plan into action, which includes defining tactical plans and
objectives, developing a strategic map to align goals, formulating contingency and scenario
plans, and identifying intelligence teams to analyze major competitive issues. Third,
managers lay out the operational factors needed to achieve goals. This involves devising
operational goals and plans, selecting the measures and targets that will be used to determine
if things are on track, and identifying stretch goals and crisis plans that might need to be put
into action. Tools for executing the plan include management by objectives, performance
dashboards, single-use plans, and decentralized responsibility. Finally, managers periodically
review plans to learn from results and shift plans as needed, starting a new planning cycle.

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TYPES OF PLANNING
Parameters

Classifications

Activity Covered

Corporate
Functional

Importance

Strategic
Operational

Period

Long Term
Medium Term
Short Term

Usage

Multi use
Single use

Specificity

Directional
Specific

TYPES OF PLANNING
Big Organizations use literally hundreds of plans. Some are of paramount importance; others
are not. These are classified on the basis of Activity Covered, period, Usage, importance and
specificity.
Planning on basis of Activity Covered
Planning is classified as corporate and functional planning based on Activity.
1. Corporate Planning:
a. Planning for the company as a whole is known as corporate planning. It lays
down objectives, strategies and policies for the entire organization.
b. Done at top level of management. It is very broad and general in nature e.g.
increasing the companys market share by ten percent in next five years,
12

becoming a technological leader in industry, earning, a 25 per cent rate of

return on investment, a live example can be the company apple that have a
corporate plan of being technological leader in creating devices that make life
easy by the use of technology etc. Such Planning serves as the basis for
departmental or divisional planning.
c. It can be defined as a systematic and comprehensive process of laying down
the objectives, strategies and policies for the organization as a whole in the
light of the capabilities of the organization and its environment
2. Functional planning:
a. It is also known departmental and divisional planning. It includes plans
formulated for various departments or divisions of an enterprise.
b. It determines the scope and activities of a particular department. For example,
sales budget, production budget, finance budget are departmental plans. In a
multi-product company, there may be several product divisions e.g. sugar
division, textile divisions etc.
c. These are formulated at the middle level of management and approved by the
top management.
d. These are known as functional plans because every department or division is
concerned with one particular major function of business.
Planning on the basis of importance
Plans are classified strategic and operational planning
1. Strategic Planning
a.
b.
c.
d.
e.
f.
g.

These plans cover long period of time ranging in more than a year time period
These plans have a scope covering the entire enterprise.
These are formulated at the top level of the management.
These are based on organizational wide objectives.
These are relatively broad and general in nature.
They involve acquisition and allocation of resources
They involve analysis and forecasting of external environment

2. Operational Planning
a. These plans are relatively of shorter time period with a time span of one year
b. These plans cover a specific department or a functional area of the enterprise.
c. These are formulated at the middle and the lower levels of management in the
enterprise.
d. These are based on strategic plans.
e. These are relatively detailed and specific in nature.
f. They involve the utilization of given resources efficiently
They involve analysis of internal environment
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 Planning on the basis on period.

Planning is classified as long term and short term planning.
1. Long term planning:
a. These cover a long period future. It is prepared for a period of 5, 10 or 15
years or more. It provides the overall targets towards which all activities of the
organization are to be directed.
b. It results in long-term commitment of resources. It great deal of uncertainty
because the period involvement is several years.
2. Medium term Planning:
a. These cover a period more than one year but less than five years.
b. They are more specific and detailed than long term planning.
c. These are designed to implement strategic plans by coordinating the work
of different departments.
d. They are drawn up for short term moves and maneuvers within the broader
and more stable strategic plans.
e. For ex.: A medium term or tactical plan may be devised to meet the sudden
slump in demand, shortage of power etc.
3.

Short term Planning:

a. These plans are prepared for a period up to one year. They are generally
specific and detailed.
b. These plans provide form and content to long term plans.
c. The main purpose of these plans is to maximize efficiency in day-to-day
operations and to ensure uniformity of actions.
d. For ex: repair and maintenance plan, purchase plan, product plan
Planning on the basis of use

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Planning is classified as single use and multi-use.

1. Multi use planning
a. These plans are also known as standing plans. These are made for repeated use
in the business.
b. They are formulated to guide managerial decisions and actions on problems
which are of recurring nature.
c. These plans include: objectives, policies, procedures, methods, and rules and
regulations.
2. Single use Planning
a. These plans are made for handling non-recurring problems. They are also
known as specific plans as they are tailored to fit the specific situations.
b. Every single- use plan is formulated to handle a non-repetitive, novel and
unique problem. The examples of such plans are strategies, programs, projects,
and budget.
Some examples of multi-use plans are:
Objectives: these are goals, aim and purposes that an organization wishes to achieve over a
period of time. All the organization activities are aimed toward its objectives. Planning is
useless unless it is related to some pre-determined objectives.
Objectives are important not only in planning but also in organizing, staffing, directing and
controlling. Peter drucker is of opinion that objectives are essential to:
Organize and explain the whole range of phenomenon by such objectives,
Verify the objectives in actual business objectives,
To predict employee behavior,
To vouchsafe the soundness of decisions, and
To
improve
the
performance
of
decisions.
Policies: They are guiding principles which govern action usually of routine and repetitive
nature. A policy tells the organizational members how to deal with a particular situation.
A policy is a verbal written or implied overall guide setting up boundaries that supply the
general limits and direction in which managerial action will take place
Procedures: They involve a series of related tasks that make up the chronological
sequence and the established way of performing the work to be accomplished.

15

They are operational guides to action as they routinize the way certain recurring jobs are
performed. The establishment of various procedures tends to impart order in place of
confusion in the organization. They help in management by exception.
Methods: They are sub units of a procedure. They show how a step of procedure should be
performed. They indicate the techniques to be employed to make a procedure effective.
A method is the manual or mechanical means by which each operation is performed.it means
an established manner of doing an operation.
Some examples of single-use plans are:
Strategies: It means preparing oneself for unforeseen and unpredictable events. In other
words it is like placing oneself in the position of competitors and seeing what ones own
reaction will be in a similar situation.
They are useful framework for guiding an enterprises thinking and action. They are single
use plans because they change quite frequently with changes in the market conditions.
Programmes: It is a single use plan laid down for a new and competitive activity. It lays
down definite steps in proper sequence that will be taken for the purpose of achieving a
specific objective.
The success of the programme depends on the ability of the manager to divide total activity
into distinct steps, fixing responsibility for each step, establishing coordination among
different steps and fixing time for accomplishing each step.
Projects: It is a distinct cluster of functions and facilities for a definite purpose. It is a part of
general programme which can be designed and executed as a distinct plan in itself.
The task of executing a project is put under the charge of a project manager. The project
manager formulated plans, programmes and policies which are necessary to execute the
project.
Budgets: It is a statement of expected results expressed in numerical terms like rupees,
product units, or man-hours. As it is a statement of expected results, it is largely used as an
instrument of managerial control.
Budgeting is essential for control, but it cannot serve as a control mechanism unless it reflects
plans. As a means of effective planning, the process of budgeting may involve the preparation
of budgets of sales, purchase, materials, labour, manufacturing and other expenses
g.

Planning on the basis of Specificity

1. Specific Planning
a. These plans are clearly defined and communicate the entire interpretation.
b. They have clearly defined objectives; hence there is no ambiguity and no
problem of misunderstanding.
c. For. Ex: A manager seeking to increase his output by 10 percent in next 12
months period may establish specific procedures, budget allocations and
schedules of activities to reach that goal.
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2. Directional planning
a. These are somewhat flexible plans that set out the general guidelines.
b. They promote focus without locking the mangers into specific goals or course
of action.
c. For ex. Sylvia Rhone, president of Motown records, said she has a simple goal:
to sign great artists. So in order to achieve this instead of creating a specific
plan to produce and market 10 albums from the new artists this year, she might
formulate a directional plan to use a network of people around the world to
alert her to new and promising talent so she can increase the number of new
artists she has under contract.
d. The flexibility of the directional plan must weigh against the lack of clarity of
specific plans.

Role of Planning:
Following are some important roles of planning:

It focuses attention on mission and objectives

It reduces uncertainty and change

It provides sense of direction

It helps in coordination

It guides decision making

It provides a basis for decentralization

It provides economy in operation

1. Focuses attention on mission and objectives:

Planning concentrates attention on the dominant goals of the group and organization. A
managers essential task is to make sure that everyone within the team knows about the
objectives and mission. Also he/she should have the methods for attaining them. People must
what they are trying to accomplish. So planning becomes important. Planning involves
deciding missions and objectives and actions to accomplish them.
Decide which actions will tend toward the ultimate objective and missions and which are
irrelevant. No decision should be made today without some idea of how it will affect a
decision that might have to be made tomorrow. If the planning function is not well executed,
planning can have several disadvantages for the organization. While deciding objectives and
mission, it must be taken care that the process does not take too much of time.
17

By focusing on mission and objectives, there is an increase in chances of organizational

success. Successful businesses have an established plan, a formal statement that outlines the
objectives the organization is attempting to achieve.
Planning reminds of Managers what organization is trying to accomplish. Because
organizational objectives are the starting points for planning, managers are continually
reminded of exactly what their organization is trying to accomplish.
2. Reduces uncertainty and change:
Uncertainty and risks are inevitable and planning cannot eliminate them but planning enables
an organization to cope with uncertainty and change . Planning does not eliminate risk but it
does help managers identify and deal with organizational problems before they cause havoc
in a business.
With the help of planning, an enterprise can predict future opportunities and threats and make
due provision for them. Plan identifies future opportunities and suggests how to take
advantage of them. Plan emphasizes both internal and external environments.
Planning helps to identify potential threats and opportunities and also provides additional
strength in the face of turbulence. The protective purpose of planning is to minimize risk
by reducing the uncertainties surrounding business conditions and clarifying the
consequences
of related management actions. The affirmative purpose is to increase the degree of
organizational success.
3. Provides sense of direction:
Planning saves an organization from drifting and avoids aimless activities. By asking
following questions we can make sure that the organization is on the course and is not
drifting from the planned activities.
a. In what direction should the organization be going?
b. In what direction is the organization going now?
c. Should something be done to change this direction?
d. Is the organization continuing in an appropriate direction?
Planning directs human efforts into activities that contribute to the accomplishment of goals.
Planning programs continually emphasize what should be done in an organization to achieve
organizational goals. Planning process secures employee commitment to attaining
organizational goals.
It bridges the gap between where we are and where we want to go. Planning creates a path
which helps organization to reach its mission and objectives.
Without planning action is likely to become random activity, producing only havoc. Planning
does not eliminate risk, of course, but it does help managers identify and deal with
organizational problems before they cause havoc in a business.

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4. Helps in coordination:
Planning is the best stage for the integration of diverse forces at work. Planning establishes a
coordinated effort within the organization. Planning ensures integration among various
business units. Without integration, managers of these units would pursue their own
objectives.
Sound planning inter relates all the activities and resources of an organization and also helps
to relate internal conditions and processes to external events and forces. It helps in making
sure that resources are utilized in an efficient way with coordination, otherwise there would
be too much use of resources which might not be good for the organization.
Planning leads to a consistent and coordinated structure of operations

5. Guides decision making:

Planned targets serve as the criteria for the evaluation of different alternatives so that the best
course of action may be chosen. It helps in evaluating each and every alternative to check its
consistency of reaching the organizational objectives. Evaluation of alternatives must include
evaluation of premises on which alternatives are based. A manager usually finds that some
premises are unreasonable and can therefore be excluded from further consideration. This
elimination process helps the manager determine which alternative would best accomplish
organizational objectives.
Planning helps in taking decisions that are consistent with and contribute to objectives. A
planning program enhances decision coordination. No decision should be made today without
some idea of how it will affect a decision that might have to be made tomorrow. The planning
function pushes managers to coordinate their decisions. Organizational objectives are the
starting points for planning, managers are continually reminded of exactly what their
organization is trying to accomplish.
Helps decide how a issue can be tackled before it becomes a problem and make it
unnecessary to analyze the same situation every time it comes up. Planning in the form of
policies help in defining area in which decision is to be made and ensure that decision would
be consistent and contribute to an objective. Planning as policies help decide issues before
they become problems, make it unnecessary to analyze the same situation every time it comes
up, and unify other problems. This helps managers to delegate authorities and still keep the
working of subordinates organization in check.

6. Provides a basis for decentralization:

Planning helps in coordination of decisions among different groups. Planning function makes
sure that complex work can be sub divided and assigned to different competent groups and
still make sure that each and every group would work together to accomplish the objectives
of organization.
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Well-established plans serve as guides to subordinates and reduce the risk involved in
delegation of authority. Planning makes sure that each and every subordinates area of work
is defined and the work is delegated in such a way that there is no conflict between them.
Planning also helps in setting objectives of employees and improves the motivation and
morale of employees by involving them in the process. By assigning responsibility to each
employee his expertise is fully utilized and the relevant work is assigned to him. His job
function helps him determine what is expected from him/her. As employee is aware of his
expertise, he can have a say in determination of his role so that he is happy doing his work.

7. Provides economy in operation:

Planning facilitates optimum utilization of available resources. Planning makes sure that
resources are utilized effectively and efficiently. This helps in making sure that resources are
not wasted. There is appropriate utilization of it between various groups who want to use
them. In effect, the cost of resources comes down substantially.
It improves the competitive strength of an organization by helping it to discover and exploit
opportunities a rational solution to problems, planning results in the use of most efficient
methods of work. By planning it is made sure that the work that is to be done is carried out in
such a way that there would be minimum cost involved and the quality of work is not
compromised.
Planning improves organizational effectiveness. It promotes growth by increasing profits.

Long Range Planning

19/31

Planning can also be differentiated based on the time frame. Because of uncertainty in
business and economic environment, the number of years used to define short term and long
term plans has declined.
Long term plan: Those plans which are implemented for more than 3 years are called long
term plans.
Short term Plan: Those plans which exist for a year or less are classified as short term plans.
Long range planning can be formally defined as a process that organizations use to determine
the best strategy for success and to ensure they have the capabilities needed to support their
business objectives. It identifies the opportunities for growth in market and works on
expanding its capacity to fulfill the demand and gain as much as profit.
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Major steps involved in long range planning are as below:

Sets long term targets for the organization
Formulates specific planning for the accomplishments of these goals
Need for long range planning
20/32
1. To determine a desired future state for a business entity
Every organization has certain mission and vision for which it exists. The long range
planning is necessary for achieving those business objectives and find out where the firm
stand in future.
2. To define overall strategies for accomplishing the desired state
Once the desired future state is obtained its essential to draw a strategy to achieve the desired
outcome. Long range planning process helps in long term decision making process.
3. Specific direction and purpose to short term decisions
Short term plans must be coordinated with long term planning strategy. With the long term
plan already in place, short term decisions can be made efficiently and in synchronized with
long term plan. It also gives specific to the short term decision made.
The planning period would be longer or shorter depending on the flexibility of the project to
be under consideration. For example an airplane company working on new jet aircraft would
plan some 12 years ahead with 5/6 years of conceptualization, designing, engineering and
few more years for selling, incurred the cost and gaining reasonable profit. Whereas, an
Instrument manufacturer with already developed product would need short term plan for
revenue, calculating expenditure and providing the order specified by customer.
Planning areas and time periods
20/33
The figure describes how the time allocated to each of the phases in planning and execution
varies. Initial tasks like provision of infrastructure facilities , organizing, product designing ,
financing consumes more time than final tasks like raw material procurement, operating
expenses budgeting.
More are the planning decision taken by considering future conditions, managers need to
have a regular check on those plans, evaluate the same and redraw it in order to align with the
objectives, vision of the company.
Criticality in long range planning
20/35
1. Coordination of short term plans with long term
Short term plans should be always integrated with long term planning. Often short term plans
are sketched with no reference to long term strategies. This might implicate to a serious effect
in later stage. Short term plans made in haste sometimes not only fail to contribute to long
term plan but also cause to change the well organized long term strategy.
For example, if a small electric switch making company accepts a large order without

21

considering the overall productive capacity and liquidity of the firm it may hamper its
expansion process to fulfill large demands as such in future.
Responsible managers should evaluate their decision on a regular basis to ensure if they are
on track with long term plans while subordinate managers should be well informed with these
long term plans which would enable them to make correct short term decisions.
2. Building Flexibility into plans
The principle of flexibility states that, if the plan built is more flexible it would have less
danger of incurring losses due to unexpected errors. However, this cost of flexibility is
measured on the basis of risks involved in commitments made in future. Consider a company
introducing new product might use temporary tooling rather than expensive permanent
tooling. This is to avoid the huge losses if the manufacturing costs increased and product
failed in market.
One more example would be in early times of Unilever, the company put extra $5 million to
build soap and detergent making factory which can also be converted to chemical
manufacturing plant.
Strategic Planning
21/35
It deals with planning a structure to implement the strategies made by the company to
accomplish the desired goals. The formal definition is; it is a long range planning process
analyzing overall corporate objectives, policies strategies that regulate the utilization of
resources to achieve organizational goals. Managers can adjust their business plans according
to the fast changes in business Environment. Strategic planning involves forecasted
profit,capital expenditure required, expansion plans,growth in management and
organizational structure, technical advancement. In recent times strategic planning has gained
importance due to below reasons:
With the fast changing technology new opportunities have been opened for growth.
The job profile of managers has become very dynamic, proactive due to changing
factors such as economic instability, social responsibilities, inflation, focus on rural
market banking and government regulations
Strategic planning cycle
The process of planning initiates with formulation of goal statements which also specifies
what is the desired outcome at the end. The expected outcome tells us where does the
company want to land up at the end of specified time frame. To achieve it, proper strategies
should be designed to direct the people on right path. The intermediate outcomes would be
measured, evaluated in a timely manner. The results are then criticized to work on loopholes
in the planning process and redesigned the strategy if required.
Strategic and tactical planning
Strategic Planning

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It ensures long term effectiveness and growth of the company. It deals with how to survive
and compete in a fast changing world. As said earlier, it is a long term planning process.
Strategic planning is performed usually with a gap of 1 to 3 years. It involves uncertainty and
high risk while planning. Middle to top management performs strategic planning.
Tactical Planning
This kind of planning does step by step implementation of a strategic plan. It focuses on how
to accomplish specific goals. Due to short life span it is a short term planning process.
Usually, it is carried out every 6 mm/1 yr. Tactics are performed by employees or middle
management. It involves low to moderate risk.

Benefits of long range planning

22/37
As the long range planning is widely spread across a longer time frame (more than 3 years)
the cost involved in implementation also gets spread. Also the impact due to risk factor gets
reduced. If anything goes wrong at any stage the long term plan can be rolled back with
minimum effort.
Long term planning helps in test marketing. It makes roll out of changes possible in phased
manner. For example, if you change the price of a product or add a new item to your line, do
so in only one or two geographic areas to check the results. This cuts your losses if the
initiative doesn't work, or allows you to make a change to your strategy before you commit
all of your funds.
Outcome is much more controllable and flexible. Due to quick adaptability of long term
planning, output is possible modify and improve at any stage.

Short essay on the Planning of Business Management

Management thought Planning is the first management function to be performed in the

process of management. It is concerned with deciding in advance what is to be done, where,
how and by whom it is to be done. Thus it is a predetermined course of action to achieve a
specified goal.
Definitions:
1. Alfred and Beatty: "Planning is the thinking process, the organised foresight, the vision
based on facts and experience that is required for intelligent action.".
2 Koontz and 0'Donne: " Planning is deciding in advance what to do , how to do it, who is to
do it. Planning bridges the gap from where we are, to where we want to go. It makes it
possible for things to occur which would not otherwise happen".

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3. George R Terry: "Planning is selecting and relating of facts and making use of assumptions
regarding the future in the visualisation and formulation of proposed activities believed
necessary to achieve the desired results".
Nature or characteristics of Planning
1. Planning is an intellectual process: Planning is an intellectual process. In other words,
planning is mental exercise. It requires thinking, reflection and judgement.
2. Primacy of planning: Planning is a primary function. A manager must do planning before
he can undertake the other management functions.
3. Goal - oriented: Planning is goal oriented. A plan starts with the setting of objectives and
then developing policies, procedure, strategies, etc., to achieve the objectives.
4. Pervasiveness of planning: Planning is a pervasive function. It is done at all the levels of
management i,e., top, middle, and supervisory level.
5. Essentialy a decision making process: Planning is essentially a decision making process,
since it involves careful analysis of various alternative courses of action and choosing the
best.
6. Integrated process: Planning is an integrated process, i.e., it facilitates all other functions of
management.
7. Selective process: Planning is a selective process, i.e., it involves the selection of the best
course of action after a careful analysis of the various alternative courses of action.
8. Flexible: Planning is flexible. The process of planning should be adaptable to the changes
that take place in the environment.
9. Directed towards efficiency: The main purpose of planning is to increase the efficiency of
the enterprise. That means, planning is directed towards efficiency.
10. Continuous process: Planning is continuous process. According to Koontz and O'
Donnell, "Effective planning requires continuous checking of events and forecasts, and the
redrawing of plans to maintain a course towards a desired goal"

The Strategy And Corporate Planning Definition

It can be defined as the particular pattern of decisions and/or actions taken by the managers
with the help of core competence to gain an advantage and perform better than competitors.

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The first step involves the analysis of a company's current mission along with its strategies.
Generally, the tool used for this process is the SWOT (Strengths, weaknesses, opportunities,
threats) analysis model. The external environment comprising of threats and opportunities is
analyzed by the examinination of threats to the company's current position and newer
opportunities. The analysis is carried forward by examining the company's internal
environment and finding out its strengths and weakness. A formulation of missions and
strategy is needed, that matches opportunities to the strengths and planning is done to
strengthen areas of weakness.

Step two involves the development of functional strategies which support the overall
business level competitive strategy.These involve Marketing, Human Resource, Financial,
Operations, Information Systems, and R & D strategies, which are developed to support the
business unit strategy.

In the third and final step a control system or structure is designed in order to insure that
operational decisions are made consistent with the business. When daily decisions are not
inline with the business and functional strategies, the Intended Strategy turns into an
Unrealized Strategy.

Emergent Strategies result from incremental decision-making that are more or less consistent
over time and launch the organization into a direction. When decisions are made or solutions
to problems are reached,they have potential to create a strategic impact on the business.

Three Levels of Strategy

Corporate Level Strategy-

The Strategic planning phase begins with the process of corporate planning. This phase
consists of all the management approaches to an agreement as to the strategic objectives of
the company. Generally the strategic plans are made in order to deal with market targets,
product development issues and competitive issues.

Competitive or Business Level Strategy25

Competitive strategies involve determining the basis of costumer or client decision-making.

Generally, they are based on some combination of quality, service, cost, time, and quality of
the experience. There are many typologies of competitive strategies. Porter's generic strategy
typology has received the most attention.
Cost Leadership Strategies
With this strategy you are competing on price. Your various functional strategies all
emphasize cost reduction. This is an effective strategy when the market is comprised of many
price sensitive buyers.
Some risks involved in this strategy are that competitors may imitate the strategy, hence
driving overall industry profits down. The low cost leader in any market gains competitive
advantage of lowest cost production.
However, low cost does not always lead to low price there by exploiting the benefits of a
better margin than competitors. E.g. Toyota, are good not only at producing high quality cars
and at a low price but they also have the brand and marketing skills to use a premium pricing
policy.
Differentiation Strategies
Differentiation strategies rely on some basis of product differentiation such as flexibility,
specific features, service, time and availability, low maintenance, etc. as the basis for
competition. Product development and market research are generally necessary components
of a differentiation strategy.
Generally, a successful differentiation strategy allows a firm to charge a higher price for its
product. Organizations generally need strong R & D departments with strong coordination
between R & D and marketing departments.
Focus or Niche Strategies
A successful focus strategy depends upon an industry segment that is of sufficient size, has
good growth potential, and it not crucial to the success of other major competitors. Focus
strategies are pursued in limited markets in conjunction with cost leadership and/or
differentiation strategies.
Focus strategies are the most effective when consumers have distinctive preferences or
requirements and when rival firms are not attempting to specialize in the same target
segment. Risks of pursuing a focus strategy include the possibility that numerous competitors
recognize the successful focus strategy and copy the strategy, or that consumer preferences
drift towards those of the market as a whole. Customer groups, geographic areas, and specific
product lines are some bases of focus strategies. Firms using the focus strategy are Red
Lobster, Federal Express, MCI, Coors, and URI (EMBA).
Where an organization can afford neither a wide scope cost neither leadership nor a wide
scope differentiation strategy, a niche strategy could be more suitable. Here an organization
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focuses effort and resources on a narrow, defined segment of a market. Competitive

advantage is generated specifically for the niche. Smaller firms often use a niche strategy.
A company could use either a cost focus or a differentiation focus. With a cost focus a firm
aims at being the lowest cost producer in that niche or segment. With a differentiation focus a
firm creates competitive advantage through differentiation within the niche or segment. There
are potentially problems with the niche approach. Small, specialist niches could disappear in
the long term. Cost focus is unachievable with an industry depending upon economies of
scale e.g. telecommunications.
Generic Business Strategies Model
Functional Strategies:
A plan of action to strengthen an organizations functional and organizational resources to
coordinate its abilities in order to create core competence.
These strategies answer as to how do organizational functional units contribute to the
business level strategies and how can functional strategies be integrated to achieve
competitive advantage.
Conclusion
In brief, a strategic planning requires simultaneous consideration of both external (business
strategy) and internal (consistency) requirement leads to superior performance of the firm.
This performance advantage is achieved by:
Marshaling resources that support the business strategy and implementing the chosen
strategy, efficiently and effectively.
Utilizing the full potential of the human resources to the firms advantage.
Leveraging other resources such as physical assets and capital to complement and augment
the human resources based advantage.

Phases of Corporate and Strategic Planning :

An effective strategic plan must contain three elements,which are
1. A clear definition of the business and its operation.
2. A plan that displays the main goals, objectives, and the means for achieving
those goals
3. A target set that guides operational execution and allows for the progress to be
tracked with respect to the overall goals and objectives
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In other words,strategic planning is a leadership tool which helps leaders in direction setting,
communicating intent, describing desired behaviors, and also guiding implementation. In
order to be effective, planning needs to describe both a framework for the organization and
provide guidance on execution
Corporate Planning Steps :
1.Being aware of opportunities The first step of planning involves being aware of both the
internal and external opportunities for a business. Managers should be farsighted about the
future problems and strength areas.

2.Establishing objectives Its very important to determine the objectives of the company as a
whole,and also each subgroup in particular.This has to be done both in case of Short Range
and Long Range planning. This helps in specifying end results that are desirable.

3.Considering Planning premises It basically involves the determination of the internal as

well as external environments in which the plans / strategies are to be operated. Forecasting is
an important activity in premise determination , where the volume of sales, prices, products
and market behaviour is assumed in advance.

4.Determining Alternative courses This involves the examination of alternative courses of

action which are not currently evident. Analysis of the most practical and feasible alternative
is the critical part in this step.

5.Evaluating Alternative courses Evaluating the alternative courses with respect to the goals
and objectives is done over here.The weighing of strong and weak points of the course is very
important in this analysis.

6.Selecting a Course The final selection of one or multiple alternative courses is done by
the manager.

7.Formulating Derivative plans Derivatives are required to support the chosen plan.
8.Quantifying plans by budgeting Suitability of a plan to a particular business can only be
determined with the help of instruments of measurement such as balance sheets.
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Benefits of Planning by setting objectives :

Improvement of management through result oriented planning

Clarification of organisational roles and structures apart from designation of authority
to people on the basis of how they perform in their roles
Encouragement to alignment of personal and organisational goals
Development of effective controls which are used to measure result

Drawbacks of setting objectives :

Shortcomings in applying Management by Objectives management concept

Failure to teach the philosophy of MBO in certain programs
Failure to give proper guidelines to the goalsetters
Managers may not be aware of company policies
Difficulty in setting verifiable goals with correct degree of flexibility
Overuse of quantitative goals where they are inapplicable
The Management By Objective (MBO) process :

Progress
monitored

Worker
objective
set

Performanc
e
evaluated

Organizatio
nal
objectives
reviewed

Rewards
given

MBO for
next normal
operating
period
begins

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Final Responsibility of Corporate Managers :

Chief executives have the final responsibility for organizational planning.
As planners, chief executives should try to answer the following broad questions:
1. In what direction should the organization be going?
2. In what direction is the organization going now?
3. Should something be done to change this direction?
4. Is the organization continuing in an appropriate direction?
Keeping updated and abreast about social, political, and scientific trends is of great
importance in
helping chief executives solve these questions.

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