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Chapter - 4

Planning

Q-1 What is planning? state its characteristics. (T.B.)

(March 06,08) (2 marks any 4 charac)

Ans.

INTRODUCTION:-

In various business activites, it is to be decided beforehand what it wants to

achieve and how. For this various alternatives are to be considered for

future,planning is pathway to future uncertainities and to adopt best one for

achieving its objectives. Planning is forecasting for the future in the present.

MEANING :-

There are different concepts or definations of planning of the following are as below :-

Planning is a function of preference.

Planning is to select facts establish interrelation with them and make forecasts

about the formulation and review of various activities to be undertaken to

achieve the expected results.

Or

Planning is to collect information for the activities to be undertaken in

business, consider them in andvance and plan how to do theseactivities is known as planning.

CHRACTERISTICS :-

Following are some important characteristics of planning.

(1) Universal :-

Planning is function of preference and is all pervasive. It is universal and

required at every level and in every field to achieve decided objectives.

(2) Planning is primary function :-

Planning is the primary function of management other functions like

organising,directing and control can be considered only on the basis of

planning.

(3) Continuous :-

Planning is continuous process and permanent activity. At the time of

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starting business planning is made and it is continued till business activity till

it does not ends.

(4) Conscious and mental process :-

Planning is conscious and intellectual process where decisions are taken

with inrelligence and consciousness.

(5) Planning is flexible :-

Planning contains various calculations and assumptions for e.g :- if sales

increase,production will increase and if production increases then the

purchase of raw material also will increases because of possibilty of such

changes planning becomes flexible.

(6) Planning is precise :-

Planning is done for future and thus matters to be considered are to bestudied exactly. Thus precision is the precondition for planning.

(7) Forecasting is essential for planning :-

For planning it is necessary to calculate what will happen and what is

likely to happen in future which would affect the accomplishment of

objectives. Assumptions are made for the future in the present. Henry fayol

has considered forecasting and planning as the first steps in business.

(8) Planning is the first of alternatives :-

Planning in any field includes various types of plans. There are variousalternatives e.g :- what if sales decreases or if sales increases? or sales

remain constant? Thus planning contains various alternative and buisness

and finds best alternative amongst them which is a test of the decision

making ability of management.

(9) Planning is concerned with future :-

Planning takes into consideration past experiences and future

uncertainities and choose the best alternatively by throwing light of degree of

risk in future and accepts certain assumption and takes decision. Thus it is for

future.

(10) Planning is an objective oriented activity :-

Planning prepares a specific outline for future before deciding this

outline management has to decide future target. Accomplishment of

objectives becomes easy if the targets are pragmatic. Thus planning is with

reference to objectives.

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(11) Planning requires decision process :-

we have seen earlier, that accomplishment of objectives depends on

planning various alternatives are considered and then a decision is taken.

Thus, this is a question of ideal selection.

CONCLUSION :-

Planning is pathway and primary function for any business activity and thus is

compared with brain in human body.

Q -2 State the importance of planning?

Or

State Benefits (Advantages) of planning.

(T.B.) (March 07,08 & 3

marks)

Ans.

INTRODUCTION :-

It is beyond doubt that planning is necessary for management

because it is an outline for future. In India the central government has

accepted the importance of planning and has constituted a planning

commission which includes experts from various fields.

Following is the importance of planning in Business.

MEANING :-

Same as Ans - 1

IMPORTANCE :- (Advantages)

(1) In planning all activities are done in an orderly manner :-

Planning is a map of the future, it gives an idea of what is to be

done,how and when. Risk and alternatives are known by planning,so

activities are undertaken in an orderly manner and question of deviation does

not arise.

(2) Wastages avoided,economy made possible :-

Planning is for future. It is possible to use resources to the maximum by

planning, so that wastages and unproductive expenses are reduced and

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economy is achieved.

(3) Uncertainites are reduced :-

During the implementation stage there may be changes in the plan due

to political, economical reasons and market conditions. This may be called

future uncertainities. e.g :- with the increase in price of petro and

diesel,prices increases in every field. Uncertainities can be reduced if such

factors are studied at the stage of planning.

(4) Use of planning for accompishment of objectives :-

Planning is outline for future. Thus it considers each and every aspect

of business in well organized manner functions are performed in comformity

to the plan and accomplishment of objectives becomes easy.

(5) Exactness increases :-

Planning prepares business for future and in this type of preparation the

advice of experts of various departments is taken. Various long and short

term programmes are prepared . Thus this is a mental process and because

of exactness imlementation becomes easy. Any work without planning is like

a house of cards.

(6) Smoothness in other managerial functions :-

Planning is the basic function of business. It gives answers to what is to

be done? How and when? Thus on basis of all these, functions of organising,

directing and controlling are performed.

(7) Effective control :-

After planning,it is also to be observed whether the business units

function according to the objectives. For this standards of comparision to be

decided and solution is to be found out. Thus planning is the first function

while controlling is the last.

(8) Clear picture of business conditions :-

Planning is a programme which considers how much to produce and sell.

The programme of production depends on sales forecasting. e.g :-pharmaceutical companies prepares sales budget on the basis of

assumptions of which medicines will sell during season and etc.

(9) Planning increases employees co-operation :-

The sucess of business depends on co-opreation of its employees.

Planning makes clear to them,which work is to be done, when,how,taking

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how much time. This increases their job satisfaction and businedd gets their

co-operation.

(10) Planning co-ordinates various activities :-

The profit of business depends on sales, production and employee co-

operation. All this may be well planned but if every department rigidly

adheres to plannef target, there may be no profit. So, every department has

to maintain co-ordination for getting the benefit of its increased sales and

production. Thus,planning co-ordinates various activities.

CONCLUSION :-

Thus planning is primary function and has various benefits and there is no

alternatives for planning so its importance is highle accepted.

Q - 3 State the limitations of planning. (T.B.) (March 07 & 3 marks)

Ans.

INTRODUCTION :-

No person, family, society,city, state or country can exist without

planning. It is neither perfect nor imperfect. It is a conscious process. Many

critics and experts attack planning but there is no alternative for planning.

MEANING :-

Same as Ans - 1

LIMITATIONS :-

Following are limitations of planning :-

(1) The basis of planning is uncertain :-

Various assumptions are to be done for future planning and this

assumptions may prove wrong.

(2) Planning is costly process :-

Planning involves man,material, time, machinery etc. Thus it isexpensive process.

(3) Planning is Time Consuming :-

Much time is taken in collecting information for planning. Alternatives

are consider which may give new ideas and may take a long time. That is why

the critics say that planning is time consuming process.

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(4) Planning is Unnecessary :-

It is said that cost of planning is more than its benefits. Planning creates

many problems and at times it fails completely.

(5) Planning tends towards inflexibility and rigidity :-

In planning, even in adverse conditions due to political, social, economic

and religious reasons,executives, managers and employees do not take the

risk of deviation from the plans, as they are afraid of increase in loss and

criticism. Thus, it tends to inflexibility and rigidity.

(6) Uncertainy of External Factors :-

In planning we think of the future on the basis of the present and utilise

all the resources to the Optimum. Yet changing conditions at various state,

national and international levels obstruct the impementation and success of

planning.

E.g :- increase in the prices of petrol and diesel, which is an international

factor.

(7) Incomplete Information :-

The decision process of planning depends on information. This

information can be primary information or any other type of information. If it

is incompete or unclear,then,adverse results may be seen.

E.g :- In india the use of credit card has not increased. Which does not mean

that it is unnecessary. But it means that necessary information is not

available.

(8) Planning is an attack on the freedom of the employee :-

An efficient employee is an asset to the enterprise but he cannot make

any changes in the plan, even if he finds something odd in it because he is a

mere employee. He has no right to correct the plan. Thus, his freedom is

attacked.

(9) Use of faulty matters :-

For formulating plans, mathematical methods , statistical information

and computers are widely used. In this process, at times faulty decisions are

taken.

CONCLUSION :-

Technological changes affect business which hamper its utility. It includes

prejudices of planners, incomplete information or preparedness for

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impementation etc. Yet it is a fact that there is no alternative for planning.

One writer has said," Planning Allows us to Master the Change".

Q - 4 Write a note on Type of components of planning. (T.B.)

Or

Write a note on elements of planning (T.B.)(March 07 & 3 Marks)

Ans.

INTRODUCTION :-

Planning is a mental exercise for the future in any area and it has

certain types of consideration. So it because necessary to understand

the elements,components or types of this outline. The components of

planning include various small plan,programes etc.

E.g :- If the budget for the entire business is to be prepared.first of all budgets

of every department are to be made.

MEANING :-

Same as Ans. 1

Types/ Elements/ Components of planning :-

The elements or components of planning can be explained as follows :-

(1) Objectives ;-

The purpose of every business is to determine and fulfill

objectives. Well considered objectives are determined for determining of

objectives all factors are to be considered. What should be done to

accomplish the objectives has to be clarified. The objectives should not be

over ambitious.

(2) Policies :-

Whatever decisions and strategies are decided foraccomplishment of objectives,are called policies. Policies create distinct

image of the managers, executives and employees of the company. They give

an idea of the efficiency of the company. Like the objectives,policies also

should be pragmatic.

(3) Methods :-

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Method is the arrangement for carrying out programmes. Method

shows the actual procedure for fulfilling the objective.

E.g :- Company gets an idea of the actual situation by preparing quarterly

and half-yearly balance-sheets, so that objectives can be fulfilled. Thus,

method is a road, a path, following which, problems as to the success ofenterprise do not arise.

(4) Rules :-

Rules establish order for getting discipline, co-ordination, co-

operation and how to do the work for fulfilling a programme, These rules

regulate any deviation. Discipline is established and accompishment of

objectives become easy, when rules are followed.

E.g :- 'Smoking at work is prohibited' is a rule. Rules establish standards for

results and employee- behaviour. Their purpose is accomlishment of

objectives and effective implementation of methods. Rules make supervision

easy.

(5) Programmes :-

For accomlishment of objectives, business decides policies and plans.

These plans are called programmes. If the work is done according to the

programmes, problems do not arise in accomplishment of objectives. The

function of management is not merely to see that the work is carried out

according to programme,but also to compare it with standards and correct its

deviation.

(6) Budgets :-

The purpose of any business is economic prosperity, to achieve which

management performs various types of functions. Budget has to be prepared

to find out whether policies and programmes would be viable. For this, certain

assumptions are made.

E.g :- Problems of liquidity. In business money might be invested unnecessary

in fixed assets. For avoiding this cash budget is the key.

CONCLUSION :-

Thus components of planning are necessary part of business activities and

these elements plays important role in success of business.

Q - 5 Define planning and describe its stages (T.B)(July 06 & 5 marks)

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Ans.

INTRODUCTION :-

Planning is a map of the future and future is uncertain. Planning is a

mental process and its failure is harmful. So, the plan is to be implemented

stagewise.

MEANING :-

Same as Ans. 1

STAGES :-

Following are the stages of planning :-

(1) Establishing Objectives :-

Every business plans for increase in economic gain. For thisincrease, it is first to be decided, what is to be done, how, when and with

what resources. This clarifies the objectives. Whether the business wants to

increase profit, sales, job satisfaction etc are to be clarified.

(2) Clarifying Planning Premises :-

Premises are to be considered for the fulfillment of plans. These

premises can be in the nature of assumptions or forecasts in the form of a

programme. If the premises are not clear and precise there is a possibility of

the failure of planning. So, alternatives are also to be considered.

(3) Collecting and analysing information :-

Planning always considers the future and depends on forecasting.

So, necessary information has to be collected either directly or indirectly, it

has to be analysed to find out to what extent it will be useful. Only plans can

be formulated and perfect results can be obtained.

(4) To prepare alternative plans :-

Plans depends on information and its analysis. Decision is taken

thereafter. This decision is with reference to the future. If the decisions

appear to be practical, alternative plans are formulated, for which expert

advice and guidance are taken.

E.g :- make or buy decision.

(5) Evaluating of alternatives :-

Planning itself is a selection. Selection can be made from

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alternatives and plans are to be prepared from which the best plan is to be

considered. The consideration would be with respect to

profitability,productivity,consumer's cashflow etc. For this a mental or

intellectual process,such as research, articles, seminars etc may be adopted.

(6) Choice of Alternatives :-

Planning reduces uncertainities. For this plans are evaluated by

studying alternatives and to know their exactness, mathematical and

statistical methods are used such as company view, operations research

(O.R.) and accept an ideal plan as a model.

(7) Formulation of supporting plan :-

To reduce risk and for economic & growth, a systematic attempt is

made and after a langthy evaluation, a specific plan is brought out. A

supporting plan is prepared on experimental basis to find out whether the

plan would be successful or not, on basis of which improvement and

modifications can be made in the original plan.

(8) Evaluation of Supporting Plan :-

After the supporting plan is prepared, it is necessary to evaluate the

same. Such evaluation increases the possibility of success.

E.g :- If a scooter manufacturing company wants,to manufacture motorbikes,

it will be a new enterprise for it. It will from a plan and introduce it in the

market on experimental basis.

(9) Evaluation of Plan :-

Planning is a continuous, all pervasive and mental process. We have

to proceed step by step to observe the principle of look and leap. At every

stage evaluation is necessary. For which help of experts and consultants is

required so that correct opinion is received and risk reduced.

CONCLUSION :-

If planning steps are impemented stagewise the success of business

enterprise to achieve objectives become easy.

Q - 6 What is budgeting? Describe the stages in the process of budgeting ?

Ans.

INTRODUCTION :-

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Budget contain various types of figures. Thus it is called the Magic

web of figures. In large business enterprise income and expenditure for future

are considered. Thus departmental budgets are prepared to convey all

activities of business and then main or final budget of enterprise is prepared.

MEANING :-

Budget is financial statement showing the expected income and

expenditure for a specified time period in future.

Stages/ Process of budget

For facilitating budget making process, a budget commitee is formed

and budget for the business is made stage wise.

The stages and process are as follows :-

(1) Budget committee is formed. This includes heads of alldepartments. They prepare plans according to the policies of the board of

directors and proceed to make budget.

(2) Budget commitee asks departmental heads to prepare

departmental budgets.

(3) Every departmental head prepares departmental budgets on the

basis of information.

(4) After the departmental budgets are prepared, a meeting of the

departmental heads is called to discuss departmental budgets and to take a

final decision.

(5) Various department budgets are co-ordinated and an overall

budget of enterprise is prepared.

(6) The success of budget depends on efficient staff and it is arranged

accordingly. Alternative arrangement is made to avoid any obstruction in the

implementation.

(7) Budget commitee presents final budget before the top

management and gets it confirmed.

CONCLUSION :-

Thus budget commitee is formed which combines various budget and

prepared final or master budget which shows expected financial income or

expenditure for a specified future time period.

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Q - 7 Explain briefly uses of Budget. ( March 06,08 & 5 marks)

Ans.

INTRODUCTION :-

Business activities considers the income and expenditure for futureand present decisions are made. For this budget is prepared which contains

various figures and assumptions.

MEANING :-

Budget is a statement showing expected financial income and

expenditure for specified time in future.

Following are rises Benefits of Budget :-

(1) Budget clarifies objectives policies and procedures of enterprise.

(2) If there are any defects while preparing the budget and if it

cannot be implemented effectively then, the weaknesses of the enterprise

are revealed in the budget.

(3) Budget provides statistical information.

(4) It gives an idea of capital,labour,material and production.

(5) Loans and credits are easily available due to budget.

(6) Process of the enterprise can be controlled.

(7) It facilitates introspection.

CONCLUSION :-

Thus Budget is very necessary for the progress of business and a

flexible budget developes business.

Q - 8 Describe benefits and limitations of planning?

Ans.

Refer Ans.2 and Ans.3

Q - 9 Explain the statements (T.B.)

(1) Planning is the basis of managerial functions.

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Ans.

Planning is the first step of management. After formulation of planning,

the thinking and implementation for other functions of management is

possible.

Such other functions are organizing, directing, co-ordinating, control

etc. the very first step is to decide objectives of business by planning.

Then the other functions of management can be impemented.

On the basis of this activities of different departments problem of

staffing and directing is considered. By taking into consideration

objectives of planning, activities of co-ordination is done.

Thus, 'Planning is the basis of management functions' .

(2) Planning allows us to master changes.

Ans.

The knowledge about possible changes and difficulties of future can be

made with the help of planning.

Many factors affect planning in which changes in technology,

incomplete information, incomplete preparation for implementation,

bias of planner absence of leadership etc are included.

This changes present the utility of planning.

But through premises advances preparation can be made to remove

adverse effect of possible changes of all these factors.

According to Henry fayol

' Planning is to obseved future and to prepare properly

for same' .

(3) Planning is a key to success in business :-

Ans.

Planning is one type of programme. As per that if work procedure is

adopted achievement of objectives become easy and possible in stage

wise manner.

Planning thinks about all the faces of business enterprise and functions

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are undertaken accordingly.

Thus with changes, achievement of objectives become easy.

Planning shows the path and finds solution to the obstacles coming on

the way. The achievement becomes easy by working as per planning.

Thus it can be said that

' Planning is the key to success in business' .

(4) Budgeting is a magical web.

Or

Budget is web of figures

Ans.

Various budgets are prepared like budget for capital expenditure,

production budget, budget for production expenditure, sales budget,

sales distribution, expenditure budget, cash budget etc.

After finalizing all these budgets the master budget for the entire

business enterprise is prepared.

Thus, in budget production, expenditure sales distribution expenditure,

cash etc various figures are given.

In order to be valued higher, sometimes the officer show high figures in

the budget, which are impracticable.

Thus Budget is ' Web of figure' or ' Magical web' .

Q - 10 Explain the term :- O.R.

Ans.

O.R. is the abbreviated form of Operational Research. The meaningof which is functional research. In planning after thinking various alternatives

all those are measured to know how much they are useful for the firm. Thus

all different alternatives are required to be evaluated. For this different

method of Operational Research are used and ideal plan model is prepared

for the same.

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Q - 11 Extra Answers :-

(1) State the characteristics of Budgeting

Ans.

INTRODUCTION :-

Same as Ans. 7 Uses of Budget

MEANING :-

Same as Ans. 7 Uses of Budget

Following are benefits of budget

(1) It means comparison easy.

(2) Co-ordination amongst various departments is possible.

(3) As the final budget is prepared on the basis of various

departmental budget unnecessary expenses and wastage are avoided.

(4) In every department demarcation of authority and

responsibility of employees is made possible.

(5) Budget gives an opportunity to correct hasty and erroneous

decisions.

(6) As the authority and responsibility of employee is made clear

employee cooperation is made possible.

(7) Budget is useful tool for directing.

(8) Budget makes planning more effective.

(9) Budget makes management effective.

(10) Budget is an indication of progress of business.

(11) It is possible to get advances on the basis of the information of

the budget.

(12) A flexible Budget develops business.

CONCLUSION :-

Same as Ans. 7 uses of budget

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