1 Introduction

1.1 Research Background

The business industry, in this era is evolving day by day. And with every passing day the
challenges in the competitive markets have also evolved. In such competitive environment
the mangers focus to build a strong internal system of their organization, so that they can
achieve a competitive edge in the industry. Managers play an important role in uplifting an
organization. Around the world in every business corporation the managers follow various
management strategies. Adopting the POLCA-management strategy is one of the basic
management functions that every manger adopts. POLCA is an acronym for Planning,
Organizing, Leading, Controlling and Assurance. The managers have to perform all these
functions to make the organization a stand out amongst the others. Planning is the first and
foremost important function of any manager which plays a key role in aligning all the other
managerial functions.

1.2 Purpose
Planning integrates various tools and techniques that are used to make it effective for the
organization. The purpose of the research is to discuss the use and application of certain
techniques in detail. Moreover, the subject matter of the research is to provide a sound
analysis of the techniques for a deeper understanding for the corporate sector.

1.3 Scope
The findings of this paper will be taken into consideration and put forward some
recommendations that how certain planning tools and techniques can be utilized for the
betterment of an organization. Moreover, the paper also discusses that the strategic planning
is supportive for the corporate sector.

1.4 Research Questions

For the purpose of this research, the researchers will try to explain;

The planning function in context of the work of the manger

Explaining the use of budgeting and forecasting, PERT, Gannt Charts, Sensitivity Analysis
and Scenario Analysis.

1.5 Research Objective

The objective of the research is to
Understand the importance of planning and integrating strategic planning in the business
environment.

Identifying and applying various planning tools and techniques. Understating their usage and
importance.

2 Literature Review (Summary)

2.1 Planning
Planning is deciding in advance what to do and how to do it. The managers must formulate an
idea of how to perform a particular task, before doing it. Planning is, therefore, closely
related with innovation and creativity. It acts as a bridge between where the organotin is and
where the it wants to be, in a prescribed timeframe. So, planning involves setting clear
objectives and developing a particular course of action for achieving those objectives.

2.1.1 Benefit of Planning

The objectives are deemed as the organizational goals that are needed to be achieved and the
actual performance is then measured. Planning is considered as a futile activity if it is not
acted upon. There are many benefits of the planning function for the organization. Some of
the major benefits are discussed as under

Planning provides direction to an organization.

Planning reduces the risk of uncertainty.

Planning reduces overlapping and wasteful activities.

Planning facilitates decision making.

Planning established standards for controlling.

Planning promotes innovative ideas.

2.1.2 Limitations of Planning

Though planning is an essential function of the managers and is most important for the
business, yet there are certain limitations which are attached with it. Unforeseen events and
changes, environmental changes, rise in prices, increase in the production cost, legal
regulations, government intervention, all affect the business planning’s adversely. Under such
circumstances plans need to be modified in light of the altered circumstances. Some of the
common limitations of the planning function are as under
Planning leads to rigidity.

Planning may not work in a dynamic environment.

Planning involves huge costs

Planning is a time-consuming Process.

Planning reduces creativity.

Planning may not guarantee Success.

2.2 Strategic Planning

During the last three decades strategic planning has gained exceptional importance, in the
business industry. The strategy scholars advocate the use of strategic planning tools as an
essential element of the strategic planning. Strategic planning is defined as

2.2.1 Definition
‘The devising and formulation of organisational level plans which set the broad and flexible
objectives, strategies and policies of a business, driving the organisation towards its vision of
the future’ (Stonehouse and Pemberton, 2002, p. 854).

Strategic planning takes into account the strategic thinking ability. The main purpose of such
planning is drive innovation and creativity into the business. In traditional planning
techniques the staff planners were involved in planning the budgets, future events, dealings
and other related matters of the organization (Al Ghamdi, 2005). However, staff planners are
never able to devise an optimal for the businesses. To etch out an optimal plan for the
business strategic planning was introduced in the year 1980’s. Strategic planning is
undertaken by top level managers, line managers and involvement of experienced employees,
which yields more sophisticated planning techniques (Abdul Moyeen, 1997).

2.2.2 Importance of Strategic Planning

Strategic planning is an organization management activity that is used to determine priorities,
focus energy and resources, strengthen business, ensure that employees and other
stakeholders work toward common goals, establish agreements on expected outcomes /
results, and evaluate and adjust the organization's direction in response to a changed
environment (Al Ghamdi, 2005). It is a disciplinary effort that provides decisions and basic
actions that shape and govern what an organization is, who it earns, what it does and why it
does, focusing on the future (Abdul Moyeen, 1997). Effective strategic planning not only
articulates where an organization goes, and the actions required to develop, but it also devises
ways to determine whether the planning were fruitful or not.

Strategic planning contributes to the improvement and betterment of the corporate

performance. It brings together all the business unit strategies within an overall corporate
strategy (Abdul Moyeen, 1997). There are a variety of tools and techniques that have been
developed to help the corporate level managers to identify and deal with strategic planning
and decision making. The techniques help the managers to convert valuable data into forms
suitable for strategic decision making (Al Ghamdi, 2005). These also help in presentation of
complex problems and act as valuable tool of communication.

2.3 Tools and Techniques

There are certain tools and techniques that the entities utilize to measure their progress of
their successful planning. These help the organizations to identify flaws and shortcomings of
the entire organization and then work accordingly to ensure a steadfast implementation of the
plans. Following are some of the major tools and techniques that the companies can
undertake are as briefly discussed as follows:

2.3.1 Forecasting and Budgeting

Forecasting is used to predict the future events to facilitate the decision-making process. Both
qualitative and quantitative techniques are utilized to forecast the future outcomes. Forecasts
are most accurate in relatively stable environments than seasonal and unusual occurrences.
Budgets are the numerical plans for allocation of resources to any specific activity that force
financial discipline in an organization. Mainly budgets are prepared for large capital
expenditures, revenues and expenses. Remember budgets are only tools/ Goals should drive
budget, budgets shall not determine goals. Because profits result from smart management, not
because of smart budgeting.

2.3.2 PERT
PERT is acronym for Programme Evaluation Review Technique, it is defined as ‘a precise
knowledge of the sequencing of activities’ and ‘a careful time estimate for each activity,
ideally with a probability estimate of the times the activity might require’. It uses arrow
diagram technique (ADM) to schedule techniques and assume each activity finishes at a node
from which others start – there is no concept of overlapping activities. It is one of the most
common techniques used by the managers in achieving targets in an elapsed time.
2.3.3 Gannt Charts
A chart in which a series of horizontal lines shows the amount of work done or production
completed in certain periods of time in relation to the amount planned for those periods.
These are very helpful in determining when the required tasks are to be completed. The
charts allow comparison with the actual progress on each task and serve as a control tool of
for different activities. The progress of activities can be tracked easily using the Gannt Chart
approach.

2.3.4 Sensitivity analysis and Scenario Analysis

Sensitivity analysis is a process of varying input parameters of a model within allowed area
and observing the resulting changes in the model solution. The purpose of sensitivity
analysis is to indicate the sensitivity of simulation to uncertainties in the values of input data
in the model. On the other hand, scenario planning is bit different from sensitivity analysis.
Scenario planning simplifies the avalanche of data into a limited number of possible states.
Each of these states is then identified and outcomes are determined.

3- Planning tools and Techniques

The purpose of the research is a detailed analysis of the aforesaid planning tools and
techniques. The major techniques are explained below with the help of practical cases, and
illustrative examples for a better and deeper understanding of the planning function.

3.1- Forecasting and Budgeting

Planning, budgeting and forecasting go side by side while creating an effective business plan.
Detailed plans in both small and large organizations are the supreme requirement. For a better
corporate performance, the executive managers have to plan each and every step of the
business. forecasting helps the organizations to predict the future requirements of the
business for its stability and constant growth. While the budgeting process aids the managers
to perceive an actual outlook of the forecasted data, and how it will work (Welsch et. Al,.
1988).

3.1.1 Forecasting
Forecasting typically uses the actual performance data of the past years to project the future
period outcomes. Usually a future period of 12 to 18 months is predicted using different
forecasting techniques. These predictions help the managers to develop a strategical plan to
achieve the set goals and objectives. Forecasts focus on what is happening from a revenue
and income statement perspective. Three of the major forecasting techniques are stated as
under:

1. Top-Down Forecasting
The top-down forecasting approach is primarily focused on the current demand and the
current operational conditions of the business. The revenue related predictions are translated
here. Managers that have a passive nature often opt for the traditional top-down approach.

2. Bottom-up Forecasting
The bottom-up approach is often followed by the mangers who are willing to take risks. This
approach relies on business managers to enter current and specific line item details as per the
revenue budget.

3. Hybrid
The top-down approach when coupled with the bottom-up approach, makes it a Hybrid
Forecasting approach. Most of the managers apply the hybrid approach according to the
needs of the business and requirement of the competition in the market.

3.1.2 Budgeting
Budgeting provides the actual execution path for the plans with detailed, short-term and
operational view. Planning provides business the outcomes about “what is possible”, while,
the budgets provide an outline on “what is expected” from the business (Welsch et. Al,.
1988). The budgets play a significant role in monitoring the historical progress of the
business and adjusting activities to meet the budgeted profitability goals. It may also integrate
new ideas in the business to achieve the expected turnaround.

1. Sales/Gross Margin Budget

Sales budget is the major budget for the organizations that shows the overall profitability of
the strategic plan. The budget not only shows the expected increase in the revenues but it also
outlays the expected expenses that might occur due to the significant increase or decrease in
the sales/gross margin. The Exhibit 1.0 shows an illustrative example of sales budget.

2. Operating Expense Budget

The operating expense budget outlays the expected expenditures that will aid in generating
the budgeted revenue over the specific period of time (Welsch et. Al,. 1988). Exhibit 1.0 also
shows an illustrative example of the operational budget.

1st January 2019 1st February 1st March 2019

 2019
Sales $ 18,000 $ 25,000 $ 23,000
Less: Cost of goods sold $ 550 $ 560 $ 570
Gross Margin $ 17,450 $ 24,440 $ 22,430
Expenses:
Payroll expense $ 5,000 $ 6,000 $ 6,000
Marketing/Promotion $ 2,500 $ 2,500 $ 2,000
Insurance $ 520 $ 520 $ 520
Supplies $ 600 $ 600 $ 600
Other Expenses $ 7,219 $ 12,970 $ 11,523
Less: Total Expenses $15,839 $22,590 $20,643
Net Profit Margin $ 1,611 $1,850 $1,787
Exhibit 1.0

The above shows the sales budget and the operational budget of a Mobile Shoe Repair
business, for the year 2019. The data represent the sales forecast of the first three months of
the financial period staring from 1st of January. It also outlays the budgeted expenditures for
the same period.

3. Capital Expenditure Budgets

The capital expenditure budget shows the number of investing activities, their budget and the
total budget that the business needs to account for. The Exhibit 1.1 shows the capital
expenditure of a Mobile Shoe Repair business, for the year 2019.

Activity Cost
Bank Loan to start the business $ 100,000
License, for the mobile van $ 6,000
Advertisement cost $ 500 per month
Equipment and Material $ 9,000
Total Capital Expenditure $ 121,000
Exhibit 1.1

3.2 PERT
PERT is one of the oldest techniques / way to model the uncertainty associated with duration
estimate used in the schedule. The managers use PERT to estimate the number of days
required for the completion of a specific task or project.

3.2.1 Definition
‘A precise knowledge of the sequencing of activities’ and ‘a careful time estimate for each
activity, ideally with a probability estimate of the times the activity might require’.
(Fulkerson, 1962)
3.2.2 The basics of PERT
PERT originated from the Arrow Diagramming Method (ADM), scheduling technique and
assuming that each activity will finish at a node from which the other activity will start. There
is no concept of overlapping of activities (Fulkerson, 1962). The activities of business
structure are not mingled rather each activity starts with a different node. There are three
basic steps to apply a PERT schedule (Dodin, 1985).

Firstly, a logic network is developed with different activities. Each activity is subjected to 3
time estimates.

The critical path is then determined using the PERT critical path.

This longest path is then analysed using the PERT calculations. These calculations determine
the probable date for the completion of schedule.

Exhibit 1.3

3.2.3 PERT calculation

The objective of the PERT calculations is to estimate an elapsed duration from start to end of
an activity or project and establish the probability of achieving that end date (Dodin, 1985).
To achieve this three durations are estimated for each activity in the network; they are:

Optimistic – the least time needed for the work (called either to or a)

Most Likely – the expected time needed for the work (called either tm or b)

Pessimistic – the maximum time needed for the work (called either tp or c)
From this data, we can see the longest path through the above network, the most likely
duration for this chain of activities is: 14 + 11 + 15 + 7 = 47. Pert is a weighted average Mean
of time calculated by following formula:

Mean = ¿)

Exhibit 1.4

Based on the PERT formula, the calculations, for the PERT Critical Path to determine the
likely duration for event 90 that has a 50% probability of being achieved is:

Exhibit 1.5

In this example the project has a 50% probability of completing during the 49th day and a
50% probability off finishing later.

3.3 Gannt Charts

Gantt charts are a project planning tool that can be used to represent the timing of tasks
required to complete a project. Because Gantt charts are simple to understand and easy to
construct, they are used by most project managers for all but the most complex projects
(Maylor, 2001).

3.3.1 Definition
A chart in which a series of horizontal lines shows the amount of work done or production
completed in certain periods of time in relation to the amount planned for those periods
(Maylor, 2001).

3.3.2 Gannt Chart Basics

In Gannt Charts, each task or activity takes up the row. Dates for the proposed period run
along the top of chart in increments of days, weeks or months, it depends upon the total
length of the project. The tasks may run sequentially, in parallel or overlapping (Wilson,
2003). The completed schedules/task are shown by colours along with the starting and ending
dates.

3.3.3 An Illustrative example of Gannt Chart

Tasks Activities Start date End date week1 week2 week3 week4 week5 week6 week7 week8
Bank loan getting the loan July/1/2018 July/7/2018
choose the place July/8/2018
Location
rent contract July/14/2018
take agreement (Fujairah Commerce, civil
License July/15/2018 July/21/2018
defence, fujairah municipality)
employee advertisment July/1/2018 July/7/2018
Staffing intrviewing July/8/2018 July/14/2018
visa+ medical insurance for (2 staff) July/15/2018 July/21/2018
choose a decoration Foundation July/22/2018
paint the wall
Decoration
floor ceramic switching July/28/2018
put accessories July/29/2018 Aug/4/2018
choose furniture July/22/2018 July/28/2018
Furniture
furniture delivering and arrangement July/29/2018 Aug/4/2018
choose equipment and purchase it July/22/2018 July/28/2018
Equipment and material
transferring process and arrangement July/29/2018 Aug/4/2018
deal with supplier, supermarket Aug/5/2018
Ingredients
ingredients identifying Aug/11/2018
brochures Aug/11/2018
Advertisement
sign board Aug/12/2018 Aug/18/2018
Customer registration start registering Aug/19/2018 Aug/30/2018
Final finishing Check availability Aug/24/2018 Aug/30/2018

Exhibit 1.6

The above shows a series of activities of a Mobile Show Repair Business. It shoes a start date
and an end date for each task/activity. The weeks are shaded with different colours subject
their completion.

3.4 Sensitivity Analysis and Scenario Planning

3.4.1 Sensitivity Analysis
1. Definition

Sensitivity analysis can be defined as “a process of varying input parameters of a model

within allowed area and observing the resulting changes in the model solution”. (Barkovic,
2002) It also explores how changes in the model output can be qualitatively and
quantitatively attributed to different change sources (Bonini et al., 1997).

2. Purpose of Sensitivity Analysis

The sensitivity analysis is an important tool for the planning purpose. it is used to increase the
reliability of the given business model and its prediction by providing a detailed model of
variables that react to the input changes (Barkovic, 2002). Sensitivity analysis is used to
determine the following (Bonini et al., 1997):

 Similarity of the model with the observed process,

 Quality of the model definition,
 Factors contributing the most to output variables,
 Areas in the input factor space for which there is maximum variation,
 Optimum area in the space of factors, which are used in subsequent exploration of
adjustments,
 Interaction between factors.

The sensitivity analysis can be used in the model-based policy assessments. It is popular in
financial applications, neural networks and risk analysis.

3.4.2 Scenario Planning

1. Definition

It is defined as “the avalanche of data into a limited number of possible states. Each of these
states is then identified and outcomes are determined”. (Schnaars, 1989)

2. Help for the Organizations

The scenario analysis can be used by the organizations to cast out different possibilities of the
expected events and then plan accordingly. The organizations facing the following conditions
might benefit from the scenario planning technique (Schnaars, 1989):
Businesses where the level of uncertainty is high relative to managers ability to adjust or
predict.

Too many costly unforeseen events have occurred for the business.

The company that is not willing to generate or perceive new opportunities.

The quality of strategic thinking is quite low, and managers have a routinized business mind
set.

3. The process of Scenario Analysis

The following flow chart illustrates the basic process of scenario planning (Cerf & Navasky,
1974).

Develop
Identify Research
Define the Scope Quantitative
Needs
Models

Evolve Towards
Identify the Major Develop Learning Decision Scenario
Shareholder Scenarios

Check for
Identify Basic
Consistency and
trends
Plausibility

Identify Key Construct Initial

Uncertanities Scenario Theme

Exhibit 1.6

4- Conclusion
Thus, Strategic planning is an organization management activity that is used to determine
priorities, focus energy and resources, strengthen business, ensure that employees and other
stakeholders work toward common goals, establish agreements on expected outcomes /
results, and evaluate and adjust the organization's direction in response to a changed
environment. The research discusses various tools and techniques that are helpful for the
business organization around the globe.
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