DEPARTMENT OF COMPUTER SCIENCE

Semester VII

GE3751 – PRINCIPLES OF MANAGEMENT

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UNITII– PLANNING

Topics List

1. Nature and Purpose of Planning

2. Planning Process
3. Types of Planning
4. Objectives
5. Policies
6. Planning Premises
7. Strategic Management
8. Planning Tools and Techniques
9. Decision Making Steps and Process

1. NATURE AND PURPOSE OF PLANNING

Every enterprise which strives to survive and grow must place heavy emphasis upon planning. A planner
foresees opportunities and devises ways and means to take advantage from them.

INTRODUCTION TO PLANNING: In designing an environment for the effective performance of

individuals working together in a group, a manager's most essential task is to see that everyone understands
the group's mission and objectives and the methods for attaining them. If group effort is to be effective,
people must know what they are expected to accomplish. This is the function of planning. It is the most basic
of all the managerial functions.
 Planning involves selecting missions and objectives and deciding on the actions to achieve
them; it requires decision-making, i.e., choosing a course of action from among alternatives.
Plans thus provide a rational approach to achieving preselected objectives.

Planning bridges the gap from where we are to where we want to go. It is also important to point
out that planning and controlling are inseparable-the Siamese twins of management (See figure
below). Any attempt to control without plans is meaningless, since there is no way for people to
tell whether they are going where they want to go (the result of the task of control) unless they
first know where they want to go (part of the task of planning). Plans thus furnish the standards
of control.

Definitions
Geogre Terry: Planning is the selecting and relating of facts and the making and using of assumptions
regarding the future in the visualization and formulation of proposed activities believed necessary to achieve
desired results.” According to Terry planning is based on certain assumptions which are required to
formulate policies of the business. The purpose of planning is to achieve business objectives.
Hart: “The determination in advance of a line of action by which certain results are to be achieved.”
Planning is the deciding of a course required for reaching organisational goals. The line of action is decided
in advance so that actual execution becomes easy later on.

Purpose of Planning
1. Planning contributes to Objectives: Planning starts with the determination of objectives. We cannot
think of planning in absence of objective. After setting up of the objectives, planning decides the methods,
procedures and steps to be taken for achievement of set objectives. Planners also help and bring changes in
the plan if things are not moving in the direction of objectives.
For example, if an organisation has the objective of manufacturing 1500 washing machines and in one month
only 80 washing machines are manufactured, then changes are made in the plan to achieve the final
objective.

2. Planning is Primary function of management: Planning is the primary or first function to be performed
by every manager. No other function can be executed by the manager without performing planning function
because objectives are set up in planning and other functions depend on the objectives only.
For example, in organizing function, managers assign authority and responsibility to the employees and level
of authority and responsibility depends upon objectives of the company. Similarly, in staffing the employees
are appointed. The number and type of employees again depends on the objectives of the company. So
planning always proceeds and remains at no. 1 as compared to other functions.

3. Pervasive: Planning is required at all levels of the management. It is not a function restricted to top level
managers only but planning is done by managers at every level. Formation of major plan and framing of
overall policies is the task of top-level managers whereas departmental managers form plan for their
respective departments. And lower-level managers make plans to support the overall objectives and to carry
on day-to-day activities.
4. Planning is futuristic/Forward looking: Planning always means looking ahead or planning is a futuristic
function. Planning is never done for the past. All the managers try to make predictions and assumptions for
future and these predictions are made on the basis of past experiences of the manager and with the regular
and intelligent scanning of the general environment.
5. Planning is continuous Planning is a never ending or continuous process because after making plans also
one has to be in touch with the changes in changing environment and in the selection of one best way. So,
after making plans also planners keep making changes in the plans according to the requirement of the
company. For example, if the plan is made during the boom period and during its execution there is
depression period then planners have to make changes according to the conditions prevailing.
6. Planning involves decision making: The planning function is needed only when different alternatives are
available and we have to select most suitable alternative. We cannot imagine planning in absence of choice
because in planning function managers evaluate various alternatives and select the most appropriate. But if
there is one alternative available then there is no requirement of planning.
For example, to import the technology if the licence is only with STC (State Trading Co-operation) then
companies have no choice but to import the technology through STC only. But if there is 4-5 import agencies
included in this task then the planners have to evaluate terms and conditions of all the agencies and select the
most suitable from the company’s point of view.

7. Planning is a mental exercise: It is mental exercise. Planning is a mental process which requires higher
thinking that is why it is kept separate from operational activities by Taylor. In planning assumptions and
predictions regarding future are made by scanning the environment properly. This activity requires higher
level of intelligence. Secondly, in planning various alternatives are evaluated and the most suitable is
selected which again requires higher level of intelligence. So, it is right to call planning an intellectual
process.

2. PLANNING PROCESS

Planning involves a number of steps ranging from determining the objectives to follow-up action as detailed
below.The main steps that are taken in planning process are as follows:
1. Establishing Objectives: Establishing the objectives is the first step in planning. Plans are prepared with a
view to achieve certain goals. Hence, establishing the objectives is an important step in the process of
planning. Plans should reflect the enterprise’s objectives. Objectives should clearly define as to what is to be
achieved by policies, procedures, rules, strategies, budgets and programmes. Plan must make sure that every
activity undertaken contributes to the achievement of objectives.

The objectives fixed must clearly indicate what is to be achieved, where action should take place, who is to
perform it, how it is to be undertaken and when it is to be accomplished. That is, managers should be able to
restate the objectives of the firm in definite and clear terms that will motivate examination and evaluation of
performance against targeted performance in the plan. Objectives should be measurable.

2. Determining Planning Premises : This is the second step in planning. Premises include actual forecast
data, policies and plans of the enterprise. Planning involves looking into the future which necessitates the
enterprise to know, how future conditions will affect its activities. Thus, forecasting is an important step in
planning. There are two types of forecasting namely,

 Prediction of general economic conditions.

 Prediction of market conditions for a specific product or service dealt with by the enterprise.

Keeping the general economic conditions in mind, a study of the industry is made. Then the manager
proceeds to make a study of his company’s share of the market. Forecasting will reveal those areas where
control is lacking. Planning will be reliable when the forecast methods are accurate. Hence, the success of the
planning depends very much upon the forecasts.

3. Determining Alternative Courses: Determining alternative courses is the third step in the planning
process. The planner should study all the alternatives, consider the strong and weak points of them and
finally select the most promising ones.

4. Evaluating Alternative Courses : Alternative courses so selected should be evaluated in the light of
premises and goals. Evaluation involves the study of performance of various actions. Various factors such as
profitability, investment requirements, etc., of such alternatives should be weighed against each other. Each
alternative should be closely studied to determine its suitability.

Many other factors such are uncertain future trend, problems faced financially, future uncertainties render the
evaluation process, complex and difficult. Usually, alternative plans are evaluated against factors such as
cost, risks, benefits, organizational facilities, etc. Computer based mathematical plans and techniques can
also be utilized to identify best course of action.
5. Selecting the Best Course: After having evaluated the various alternatives, the most suitable alternative is
selected. With this, the plan can be considered to have been adopted. It is exactly the point at which decisions
are made. Sometimes, in the best interests of the enterprise, several alternative courses can be adopted.

6. Formulating Derivative Plans: Planning is not complete as soon as the best course is selected. The main
plan should be supported by a number of derivative plans. Within the framework of a basic plan, derivative
plans are formulated in each functional area. Segregation of master plan into departmental, sectional and
individual plans, helps to understand the real nature of future uncertainties. To make the planning process
more effective, it should also provide for a feedback mechanism. These plans are meant for the
implementation of the main plan.

7. Implementation of Plans

Implementation of plans is the final step in the process of planning. This involves putting the plans into
action so as to achieve the business objectives Implementation of plans requires establishment of policies,
procedures, standards, budgets, etc.

3. TYPES OF PLANNING

Planning can be classified on the basis of following dimensions:

On the Basis of Content
I. Corporate Planning:
Planning can be undertaken at various levels of the organisation. It may be for the whole organisation or a
part of it. When it is done for the whole enterprise, it is known as corporate planning. It lays down the basic
goals, strategies and policies for enterprise as a whole. Corporate planning integrates various functional plans
and also provides for future contingencies.

The resources of the organisation (micro aspect) are matched to the opportunities and threats in the external
environment (macro aspect). Corporate planning is normally at the top-level management. Hussey defined
corporate planning as, “Corporate planning includes the setting of objectives, organising the work, people
and systems to enable those objectives to be attained, motivating through the planning process and through
the plans, measuring performance and so controlling progress of the plan and developing people through
better decision making, clearer objectives, more involvement and awareness of progress.”
Hussey has given a broad definition of corporate planning. It covers various functions of management
besides defining planning. Corporate planning is related to total planning activity and not to various
managerial functions.

Corporate planning is original and is the starting point of planning process. Corporate planning is not
synonymous to long term planning even though it is related to future activities of the organisation. Long term
planning is not possible without the backing of short-term plans. So corporate planning should not be tied to
a specific period. Normally, corporate planning is divided into strategic planning or long-range planning and
operational, tactical or short range planning.

II Strategic Planning
Strategic planning is the process of planning as to how to achieve organisational objectives with the available
resources and is undertaken by the central management of the business. It is an exercise by the top
management to fix the objectives of the organisation and then plan to achieve them. An assessment of
available resources is made at the top and then things are planned for a time period of upto 10 years. It

basically deals with the total assessment of the organisation, strengths, capabilities and weaknesses and an
objective evaluation of environment is made for future pursuits.

Features of Strategic Planning

The basic features of strategic planning are described as follows:
(i) The basic mission and goals of the organisation, nature of business and the nature of customers are clearly
stated.

(ii) Strategic planning is a long term planning.

(iii) It provides cohesiveness in company’s policies and activities over a long period.

(iv) The more the functions of an organisation affected by plans the more the strategic these are.

(v) It is concerned both with the formulation of goals and the selection of the means by which they are to be
attained.

(vi) Since it determines basic policies and programmes, it is a top management activity.

(vii) It is designed to improve organisation’s relations with environment.

(viii) It is comprehensive and unified plan for the deployment of scarce organisational resources.

(ix) It sets the direction of organisation’s activities for the attainment of goals.

Need for Strategic Planning

Strategic planning is required for the following reasons:
1. Impact of External Factors: There are a number of factors which affect the operations of the business.
These factors include international environment, political and government policies, economic trends,
technological and social changes. Strategic planning must have provisions for the impact of these situations.

2. Proper use of Resources: The natural resources are becoming scarce and human resources are changing
every day. Strategic planning is needed for procuring these resources and allocating them properly. The

traditional work force is giving way to more educated workers. The computers have taken over the routine
jobs. The proper use of various resources requires a proper planning on the part of top management.
3. Ensuring Success: An explosion in information technology has increased the knowledge and better
methods of planning. Since strategic planning helps in achieving success, there is a need to undertake it in
most of the companies.

III. Operational Planning:

Operational planning is also known as tactical or short- term planning normally covering one year or so.
Operational planning involves the conversion of strategic plans into detailed and specific action plans. These
plans are designed to sustain the organisation in its current products and existing markets. Operational
planning is done at the middle or lower level of management.

These plans are to support strategic plans whenever some difficulty is faced in its implementation. Any
changes in internal organisation or external environment have to be met through tactical plans. For example,
there is a sudden change in prices of products, difficulty in procuring raw materials, unexpected moves by
competitors, tactical plans will help in meeting such unforeseen situations.

The success of tactical plans depends upon the speed and flexibility with which management acts to meet
sudden situations. Operational planning is mainly concerned with the efficient use of resources already
allocated and with the development of a control mechanism to ensure efficient implementation of the action
so that business objectives are achieved.
On the basis of time period
 Long term planning
o Time frame beyond five years. Long term Plans: >5yrs
o It specifies what the organization wants to become in long run.
o It involves great deal of uncertainty.
o Higher management levels focus on longer time horizons.
o Cover a longer time
o May include a variety of different types of training
 Some examples Long term Plans:
 An annual plan, including Fast Start and basic training
 Makeup training sessions
 Den chief training
 Regular monthly roundtables
 Supplemental training
 Personal coaching
 Self-study
 We should not overlook the importance of long-range plans in providing a total leadership
growth and development program for leaders.

 Intermediate term/ Midterm planning

o Time frame between two and five years. Medium Term Plans: >1 yr but <5yrs
o It is designed to implement long term plans.

 Short term planning

o Time frame of one year or less. Short term Plans: Upto one year
o It provide basis for day to day operations.
o Meet a particular objective in the near future
o Cover a limited area of training
o Answer the question: Are we doing things, right?
o Should fit well within and contribute to long-range plans
 4. OBJECTIVES

Objectives: Objectives were defined earlier as the important ends toward which organizational
and individual activities are directed. Since writers and practitioners make no clear distinction
between the terms goal and objectives, they are used interchangeably in this book. Within the
context of the discussion, it will become dear whether the objectives are long term or short term,
broad or specific. The emphasis is on verifiable objectives, which means at the end of the period
it should be possible to determine whether or not the objective has been achieved. The goal of
every manager is to create a surplus or profit. Clear and verifiable objectives facilitate
measurement of the surplus as well as the effectiveness and efficiency of managerial actions.

Hierarchy of objectives

Objectives form a hierarchy, ranging from the broad aim to specific individual objectives. The
zenith of the hierarchy is the purpose or mission, which has two dimensions.
1. Social purpose: Contributing to the welfare of people by providing goods and services at a
reasonable price.
2. Mission or purpose of the business: To furnish convenient, low-cost transportation for the
average person. The stated mission might be to produce, market, and service automobiles. The
distinction between purpose and mission is a fine one, and therefore many writers and
practitioners do not differentiate between the two terms. At any rate, these aims are in turn
translated into general objectives and strategies, such as designing, producing, and marketing
reliable, low-cost, fuel-efficient automobiles.
3. Specific objectives: Objectives in the key result areas. These are the areas in which
performance is essential for the success of the enterprise. Although
there is no complete agreement on what the key result areas of a
business should be-and they may differ between enterprises.
Objectives state end results, and overall objectives need to be supported by sub objectives. Thus,
objectives form a hierarchy as well as a network. Moreover, organizations and managers have
multiple goals that are sometimes incompatible and may lead to conflicts within the organization,
within the group, and even within individuals. A manager may have to choose between short- term
and long-term performance, and personal interests may have to be subordinated to organizational
objectives.

Examples of Non-Verifiable and Verifiable objectives

Non-Verifiable Objective

 To make a reasonable profit

 To improve communication
 To improve productivity of the production department
 To develop better managers
 To install a computer system

Verifiable objective
 To achieve a return on investment of 12% at the end of the current fiscal year
 To issue a two-page monthly newsletter beginning July 1, 2005, involving not more than 40
working hours of preparation time (after the first issue)
 To increase production output by 5% by December 31 without additional costs while
maintaining the current quality level
 To design and conduct a 40-hour in-house program on the "fundamentals of
management," to be completed by October 1, involving not more than 200
working hours of the management development staff and with at least 90% of
the 100 managers passing the exam (specified)
 To install a computerized control system in the production department by
December 31, 2005, requiring not more than 500 working hours of systems
analysis and operating with not more than 10% downtime during the first three
months or 2% thereafter.

Advantages of Objectives
 Clear definition of objectives encourages unified planning.
 Objectives provide motivation to people in the organization.
 When the work is goal-oriented, unproductive tasks can be avoided.
 Objectives provide standards which aid in the control of human efforts in an organization.
 Objectives serve to identify the organization and to link it to the groups
upon which itsexistence depends.
 Objectives act as a sound basis for developing administrative controls.
 Objectives contribute to the management process: they influence the
purpose of the organization, policies, personnel, leadership as well as
managerial control.

Process of Setting Objectives

Objectives are required to be set in every area which directly and vitally effects
the survival and prosperity of the business. In the setting of objectives, the
following points should be borne in mind.
• Objectives are required to be set by management in every area which directly
and vitally affects the survival and prosperity of the business.
• The objectives to be set in various areas have to be identified.
• While setting the objectives, the past performance must be reviewed, since
past performance indicates what the organization will be able to accomplish
in future.
• The objectives should be set in realistic terms i.e., the objectives to
be set should bereasonable and capable of attainment.
• Objectives must be consistent with one and other.
• Objectives must be set in clear-cut terms.

5.POLICIES

A policy in Management is a general statement which is formulated by an organization for

the guidance of its personnel. The objectives are first formulated and then policies are

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

planned to achieve them. Policies are a mode of thought and the principles underlying the
activities of an organization or an institution.

Policies acting as principles provide rules of action for achieving organization’s specific
objectives. The coordinating links in the organization are provided by policies. They govern
and guide the actions of an organization’s overall performance and its objectives in the
various areas of operation-production, finance, marketing and personnel.

Features of a Policy
The above discussion reveals the following features of a policy:
(i) A policy is a standing plan which provides answers to recurring problems of a similar

nature. It provides answers/guidelines to the members of an organization for deciding the

future course of action. A policy provides and explains what a member should do rather than
what he is doing.

(ii) A policy limits an area within which a decision is to be taken for the achievement of
organizational goals. It avoids repeated analysis of situations and allow delegation of powers
and still retaining control over actions.

(iii) Policies are models of thought and principles underlying the activities of an organization.
They guide the behaviour and decisions of the executive.

(iv) Policies are framed by all managers in the organization. There is a need for giving

guidelines for future course of action at every level of management. However, the importance
of policy differs according to the level of management. At higher level of management
important policies are decided while at lower level some less important or minor policies are
required.

Purpose of Policies:
Policies are regarded as important for realizing the objectives of the organization. They also
ensure co-ordination of efforts and activities in the enterprise.

The policies are formulated for the following purposes:

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

1. The main purpose of policies is to ensure that there is no deviation from the planned course
of action. The framework is set within which everybody is expected to work. Policies ensure
that the broad guides for action are adhered to.

2. Since policies chalk out a framework for each and every person, it ensures proper
delegation of authority also. A manager knows the extent of authority required by a
subordinate to undertake the work allotted to him. Policies serve the purpose of delegating
adequate authority downwards.

3. Policies allow the scope for interpretation. The main aspects are given in a policy but the
actual mode of implementation is decided by the concerned person.

4. Policies are helpful for future planning also. The impact and influence of policies help in
thinking about the future.

5. Policies also ensure consistency of action. The guidelines are similar for everybody and
actions must conform to the broad outlines.

Considerations in Policy Formulation:

1. Organizational Goals:
The policies are formed to achieve organizational goals. The goals are the targets which are
to be achieved and policies devise ways of reaching them. Policies should assist by basing
them on relevant facts and figures and not on mere guess work.

2. Proper Participation:
Policies should be framed by the participation of persons at various levels of management. If
policies are framed at top level without knowing the views of those for whom these are meant
then there is likelihood that policies may not achieve the desired results. To ensure successful

implementation of policies, there is a need for joint participation at the time of formulating
them.

3. Reflect Business Environment:

The policies should be based on the internal and external environment. The situation
prevailing inside and outside will provide a realistic base for policies. The policies should

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

have the flexibility for adjustment if there is a change in business environment. Any type of
rigidity followed in policies will defeat their purpose.

4. Consistency:
Various policies of an enterprise should conform to each other. There should be no
inconsistency among various policies. If there is inconsistency among policies then these will
not be implemented. It must be ensured that policies are related to enterprise objectives and
do not give conflicting guidelines.

5. Proper Communication:
The policies should be properly communicated to each level of management. If the policies

are not properly known by those who are to implement them then there will be no use of such
policies. Sometimes policies may not be well understood, there may be some doubt in the
minds of persons, it will be the duty of management to clarify them and provide proper
clarification.

6. In Writing:
The policies should always be in writing. This will ensure their proper and correct
implementation. If the policies are not in writing then a dispute may arise about their contents

and purpose. The language of policies should also be simple so that it is well understood by
concerned persons.

Process of Policy Formulation:

Policy formulation is an important aspect of planning. The smooth
working of an organization requires the formulation of policies. A
well thought exercise is essential to formulate sound policies.

Following process should be followed for formulating a

policy:
1. Defining Policy Area:
The area for which a policy is to be framed should be defined. The objectives and needs of
the organization should be kept in mind while specifying the policy area. While framing a
marketing policy, the marketing expectations and thrust areas should be kept in mind. The
scope of the policy will depend upon the area which it is supposed to cover. So first thing in
policy framing is to decide the area which it will cover.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

2. Identifying Policy Alternatives:
The second step in policy formulation is the identification of policy alternatives. The
alternatives should be decided on the basis of an analysis of external and internal
environment. The internal environment will tell about the strengths and weaknesses of the
organization while external environment will reveal opportunities and level of competition.
Every alternative must ensure that the objective of the policy will be achieved.

3. Evaluating Alternatives:
All the alternatives are evolved in the light of organizational objectives. It should be analysed
as to what contribution these alternatives will make in helping the organization for achieving
its objectives. The factors like cost, benefits, resource requirement of each alternative should
be properly assessed. The effect of various alternatives on the environment of the
organization should also be analyzed.

4. Selection of a Policy:
After proper evaluation, most appropriate alternative is selected. The selection of a policy is a
long-term commitment. In case the alternatives do not look satisfactory then efforts should be
made to develop other alternatives.

5. Trial Run of a Policy:

The policy should be implemented on a trial basis. It should be assessed if the policy is
achieving the desired objectives. There may be suggestions during the test run, these should
be used to modify the policy. Ultimately the policy should achieve the desired results
otherwise a new policy alternative should be thought of.

6. Implementing Policy:
If the policy is finally alright it should be implemented. The policy should be explained to
those who are to implement it. There should be a proper discussion about the implications
and impact of various clauses or provisions of the policy. Proper communication of the
purpose and objective of the policy will help it in its implementation.

6.PLANNING PREMISES

Classification of Planning Premises

Planning premises, in the context of business management may be classified in several
ways.
From the standpoint of the existence of assumptions and predictions, both inside and
outside the business enterprise, the planning premises may be classified as:

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

(i) Internal and External Premises:
The important internal premises which are internal to the enterprise are the resources and
abilities of the enterprise in the form of men, machines, money and methods, competence of
the management personnel and skills of the labour force; commitment to certain plans, wage
incentive schemes; the sales forecasts of the enterprise and so on.

(ii) External premises are based on factors that prevail outside the enterprise:
In other words, external premises are those assumptions that centre round the various types of
marketing, viz. the product market, materials market, the capital market, the labour market
and so on.

The important external factors which act as important determinants of all such markets are—
(i) the political stability; (ii) sociological factors; (iii) business and economic environment ;
(iv) cultural factors ; (v) population growth ; (vi) government policies and regulations ; (vii)
trade cycles ; and (viii) technological changes and the like.

2. From the standpoint of the possibility of measuring such premises quantitatively, we

can classify planning premises into:
(i) Tangible; and (ii) Intangible planning premises.

Tangible planning premises are those which can be measured quantitatively in one way or the
other, whereas Intangible planning premises defy quantitative measurements because of their
qualitative character.

3. From the Standpoint of the Various Forces and Factors:

We can classify the premises as (i) constant factors and (ii) variable factors.

Constant factors are ignored in planning because they behave in the similar way/fashion,
irrespective of the course of action adopted. Variable factors on the other hand, have a
significant bearing on the sources of planning. Accordingly planning premises is expected to
have a wide coverage so as to encompass all the variable factors.

Generally internal premises are associated with constant factors which are definite, known
and well understood. For instance, the capacity of men and machines and the amount of
capital investment are completely controllable factors and they fall within the powers of
management.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

Their variations are dependent upon the decisions of the management. As such, no prediction
or forecast is necessary to ascertain their position, in the years to come. Sales volume of the
business unit can be partly controlled by the activities of the management.

We also come across many other factors which lie beyond the controlling powers of
management. The managerial personnel can only look into the future to assess their variations
in the years to come.

In other words, forecasting gives the managers an idea or knowledge of their variations. But
no forecasting is required in the case of constant factors, even though they are included on the
list of planning premises. That is why it is claimed that the scope of premising is larger than
the scope of forecasting.

4. From the Standpoint of the Possibility of Exercising Control over the Planning
Premises, they may be classified into three types, viz:
(i) Fully controllable premises

(ii) Partly controllable premises

(iii) Absolutely non-controllable premises

(i) Fully controllable premises: refer to the assumptions about those factors pertaining to the

enterprise like the products; rules etc. which the company management is expected to follow
over the future period and the ways in which these are likely to affect the plans of the
enterprise. These factors are known as controllable premises, because these are subject to the

decision of the management.

(ii) Partly controllable premises: include assumptions about those factors which are only
partially controllable through suitable management policies and decisions, but cannot be fully
controlled by the management.
For instance, industry demands the share of the firm in the market, union-management

relations or factors which must be considered partially as being given and partially as being
subjected to decision-making on the part of the management. The plans for any business
enterprise will naturally have to be based on proper assumptions with regard to these factors.

(iii) Absolutely non-controllable premises: refer to the assumptions about the economy, the
political situations, strikes, wars, natural calamities, new discoveries and inventions,

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

emergency, legislation and other similar events during the coming years, which cannot be
predicted and controlled at all by the management, although they can upset all well-thought
out calculations on many occasions.

These cannot be influenced and controlled through management policy and decisions.
Although a management cannot do anything about these factors, it must take them into
account while planning for expansion of the existing capacity. It should not forget the fact
that the efficacy of the present command policy is becoming increasingly restricted and
should think of appropriate alternative changes promptly. If such factors are not considered,
the plans will remain as mere wishes.

7. STRATEGIC MANAGEMENT

strategy of an organisation or sub-unit of the larger organisation is a conceptualisation

expressed or implied by the organisation’s leader of:
(a) The long-term objectives or purposes of the organisation;
(b) The broad constraints and policies either self-imposed by the leader or accepted by him
from his superiors that currently restrict the scope of the organisation’s activities; and
(c) The current set of plans and near-term goals that have been adopted in the expectation of
contributing to the achievement of the organisation objectives.
Strategic planning or strategy formulation can be understood in terms of a decision
framework given by Herbert A. Simon. According to him, strategic planning may be
characterised in terms of three phases – Intelligence, Design and Choice.
Intelligence activity aims at doing brainstorming in identification of problems after
environmental analysis and diagnosis. Design activity aims at structuring of criteria to make
selections. Choice activity leads to finally making the selection.

1. Formal Structured Approach:

Under this approach, systematic procedures and planning programmes are set since it is
formal and structured approach; planners are making the best use of different types of
planning system. Such as – strategic, long-range or corporate planning, depending on the
variables of the situation.
This being the first approach, in the process of strategic decision making, it is classified
into a three-tier process:

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

i. Diagnostic Phase – It is devoted to identify the company’s aims and objectives.
ii. Directions Phase – In this stage, necessary direction are given adhering to the strategies
and the preferential choice as laid down in the alternative strategies.
iii. Implementation Phase – Lastly, the process deals with the implementation of the action
plan so as to achieve the goal.

2. Entrepreneurial Approach:
Under this approach, every attempt is made to exploit the available opportunities in the best
interest of the company. The strategist anticipates opportunities and based on this assumption,
he takes strategic decisions after carefully diagnosing them to his best capacity. With such a
necessary precaution; he will select the course of action best suited to get maximum benefits.
He, being responsible for good or bad results, should analyse the probable consequences of
the decisions taken. This approach is by nature of self-interest and self-oriented and, hence, is
commonly adopted by individual entrepreneurs and small business houses. It is seldom
practiced in the corporate sector.
3. Incremental Approach:
Also known as muddling through Approach. The management under this types of approach is
least interested to have strategies one after the other as a regular process but prefers to have
one strategy or an alternative only when it is compelled by unavoidable circumstances. The
main aim of the management is to settle the issues of negotiation with different groups
concerned in the organisation.

Even when alternatives are suggested, the management will see that they are simple. Easily
understandable and important from the point of view of employees so that changes made will
prove non- disruptive. The whole emphasis under this approach is laid on negotiated
settlement and hence whatever strategic decisions seldom taken are for remedial nature.

This type of approach is largely adopted by public companies which are generally supposed
to work under social and political pressure and deal with the human behaviour that goes on
changing with the passage of time.
4. Initiative-Anticipatory Approach:
This approach is largely built up on forecasting the future by the promoter or chief executive,
who accordingly makes the strategic decisions. The success of this approach depends upon
the promoter’s intuition, experience, judgment and methods absorbed by him to deal with a
variety of strategic problems.
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COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

It is a promoter’s personal approach and he is responsible to do and undo business strategies
in the organization he is handling such an approach is generally adopted in the promotional
stage of the company.

5. Adoptive Approach:
Under this approach, strategic decisions are taken on the basis of how a change in the
environment is going to have impact at a given time. Hence, no decision can be for a
considerably long time as environment under which the company operates is likely to change.
So, in order to keep pace with the changing environment, the strategy decisions must be
reviewed with reference to the current positions of the company, its objectives and
effectiveness of the existing strategy. When the management finds that the situation is
unstable, risky and the future is gloomy, it may adopt contingency planning instead of
adopting long-term strategies, which may not fit in the changing situations.
So, in an uncertain environment, the whole emphasis is on adoptive approach to face the
changes effectively. Taking the nature into consideration it may also be called as integrated
approach, varying from situation to situation. In this way, under the adoptive approach, there
will be different approaches to strategic decision making.

Strategic Components and Contents of Marketing Plan: Executive Summary, Situation

Analysis, Opportunity Analysis, Objectives and More…
In professionally managed companies, marketing planning is a formal exercise undertaken on
an annual basis. There is no uniformity in the contents of marketing plans of different firms.
Generally, marketing plans have the following contents:
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i. Executive summary – This is an overall bird’s eye view of the marketing plan. It tells the
focus of the plan and is generally targeted to the top management.
ii. Situation analysis – This component presents data on sales, costs, profits, the market,
competition and the macro environment.
iii. Opportunity analysis – Here the marketer identifies the major opportunities/threats and
strengths/weaknesses.
iv. Objectives – The marketer must decide on the plan’s financial and marketing objectives.
v. Marketing strategy – The marketer now outlines the broad marketing strategy.
vi. Action programmes – The marketing plan must specify the broad marketing programmes
for achieving the business objectives.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

vii. Projected profit and loss account – Action plans allow the marketer to build a supporting
budget. The budget becomes the basis for developing plans for material procurement,
manpower planning and production scheduling.
viii. Control systems – In order to ensure that performance is as per planned schedule, it is
necessary to evolve control systems which can help management take corrective mid-course
action.

1. Use:
Once a strategic marketing plan is in place, the company can use the plan as a guide in
conducting its daily business as well as making short-term and long-term decisions.
Implementation of the strategic marketing plan typically leads companies to the tactical
marketing portion of conducting business.
The strategic marketing plan transitions into the company’s plan for product and service
development; the communication plan on how the company intends on promoting the
business offerings; developing the sales plan; and finally putting together the customer
service plan on how the company intends on interacting with current and potential customers.
2. Benefits:
The primary benefit of a strategic marketing plan is that it puts a written guide in place for a
business to follow to reach its goals and objectives. The second major advantage of strategic
marketing planning is that is allows the business to create and utilize consistent messaging
internally and externally.
Consistent messaging in marketing creates efficient companies because employees and
customers understand what the company offers and how the company offers it. They work
toward a common goal. Efficient companies typically see an increase in revenues and market
share, while it sees a decrease in expenses. Ultimately, it all leads to an increase in company
profitability.
3. Time Frame:
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Strategic marketing planning is not a one-time action, but rather an ongoing process.
Typically, a company creates a strategic marketing plan that covers short-term (one year) and
long-term (two year, three year and five year plans) periods. When a strategic marketing plan
is put in place, the company uses it as a guide for six months to one year at a time.
The company then evaluates the strategic plan by measuring the results of the marketing
programs the plan put in place. After evaluating the strategic marketing plan on a six- month

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

or one-year basis, the company may tweak the plan to improve efforts that didn’t go as
planned or to mimic the results of plans that achieved success.
4. Considerations:
Effective strategic marketing planning requires companies to conduct a great deal of research
and to really get to know its target market. Companies need to fully get to know who the
target market is, how they think and feel, what they do, how old they are, where they live,
what their hobbies are and more.
Companies need to be able to live, think, breathe and feel like their target market to develop
products and services that fit the needs of the target market. Companies need to remember
that product and service development needs to have an existing marketing to sell, rather than
developing products and services, and then seeking out a target market in which to sell it.

As you think about strategic directions, consider the following:

i. What are distinctive areas of expertise?
ii. What business should you be in over the next three to five years or long term?
iii. What types of categories of customers will you serve?
iv. What customer functions are you likely to satisfy as you see the market evolve?
v. What technologies will you see to satisfy customer/market needs?
vi. What changes are taking place in the markets, consumer behavior, competition,
environment, culture and the economy?
The point of this exercise is that the responsibility for defining a strategic direction no longer
belongs only to the upper management. Managers from various departments like marketing,
product development, manufacturing, finance and sales, contribute to the overall strategic
direction of a business by asking, “What business should I be in for my individual product?”
The major work in this area of strategic thinking is attributed to Theodore Levitt, of the
Harvard Business School, in his classic article, “Marketing Myopia”. Using the railroad as a
prime example, Levitt shows how the railway system declined in use as technology
advanced, because managers defined their product too narrowly. He explains that to continue
growing, companies must determine customer’s needs and wants and not rely simply on the
longevity of their products.
According to Levitt, a myopic view is based on the following four beliefs that begin in a
manager’s mind and permeate in an organization that may be explained as:
(i) Growth is guaranteed by an expanding and affluent population;
(ii) There is no competitive substitute for the company’s major products;
(iii) Excessive belief in mass production and rapidly declining units coats as output rises; and

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

(iv) Preoccupation with a product that lends itself to experimentation, manufacturing cost
improvement.
The strategic marketing planning process for an organization. Looking out the window
toward inevitable changes, not into a mirror that reflects existing patterns, is the
distinguishing characteristics of a market-driven, rather than a product driven, organization.
A strategic direction for one of Dow Chemical’s agriculture herbicide products formally
reads: “Chemical control of brush on right-of-way.” This product driven orientation was too
“myopic” and came across more as a product definition than a strategic vision.
When revised to reflect a border market driven focus that would drive future product and
market development, it reads: Provide high-quality products and services to meet vegetation
management goals on right-of-way, industrial, municipality and aquatic/wetland sites at a
profit. Products and services may include chemical, mechanical, application, distribution,
consultation and establishment of desirable vegetation.
It may be analyzed as how expansive the statement is and how it defines potential and
product/markets development. In other words, it summarizes a vision. In another example,
Becton Dickinson, a health care firm, originally described the strategic direction for one of its
hypodermic needles as, “Our strategic direction is to be the leading manufacturer of
hypodermic products for the health care field.”
Here, too, this narrow focus of good intentions was broadened to provide a forward-looking
orientation. The revamped statement reads as- Our strategic direction is to meet the needs of
consumers and health care providers for drug-delivery devices by offering a full line of
hypodermic products and products systems.
Our leadership position will be maintained through acquisition to provide alternative
administration and monitoring systems. Guided by such a statement, managers could expand
their vision and direct the product line into innovative product systems, technologies, and
ultimately expand their holds on existing markets and launch into new markets.
Planning is the approach to making decisions concerning systematic allocation of resources.
It is worth emphasizing that planning is a process, not an event. It is organic and ongoing and
it is a key element of the overall management process. Planning is a way of defining your
own future and if you don’t like what you see, you are able to change your plan. With the
above in mind, it is possible to define a strategic plan as a formal written document of what
you intend your firm to become, the vision of its future position and value.
A strategic plan is a detailed, specific declaration of your intentions with regard to customers,
competitors, suppliers, investors, equipment, location, employees and the future of your firm.
It is a way of getting commitment from management, key employees and other key persons
associated with your firm.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

Strategic planning is systematic means of making the firm successful through the discipline
of strategic thinking and vision used as a framework for all other decisions in the firm.
Strategic planning requires an honest evaluation of the company’s current situation and where
it has been in the past.
Finally, strategic planning demands the commitment of the owner/CEO for it to be
successful. It requires commitment of resources, both financial and personnel, for its
development. It demands complete follow up. A plan that is not carried out due to lack of
leadership or the required tools needed for completion is a total failure and a waste of time
and money.
The four critical planning steps for managers to observe in this process area are as
follows:
Step 1- Strategic Directions:
Define the scope of company, business unit, or product line. Establishing a strategic direction
forces you to think of unit’s competencies, the customers want to be served over the next
three to five years, the technologies you will need, and the environment and competition you
will face. Westinghouse redefined its strategic directions from a defense contractor to a
provider of products and services for the total surveillance business.
Step 2- Objectives and Goals:
As illustrated in the auto parts and the electric utility cases, indicate the performance
expectations such as sales, profits and other quantitative objectives. Also list non-quantitative
objectives, including upgrading distribution channels, building specialty products, upgrading
field services, and launching new or upgrading old products.
Step 3- Growth Strategies:
Select strategies to reach objectives. These relate to product positioning, product quality,
distribution, pricing, packaging, value-added services, and customer/technical services.
Step 4- Business Portfolio:
Develop a product and market portfolio strategy that defines the following:
i. Existing products into existing markets.
ii. Existing products into new markets (Westinghouse focused on law enforcement markets).
iii. New products into existing markets.
iv. New products into new markets.
The strategy to market the product can be processed in many ways such that you can position
the existing products into existing markets and the process is identified as- (i) market
penetration. You can also view the existing products for new markets, which you can define
as (ii) market development. Also look at introducing new products into existing markets, a
process known as (iii) product development. Finally look at new products for new markets,

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

expressed as (iv) diversification. To use the grid, list products and markets in each of the
quadrants.
The listing will then serve as a guideline for product-market growth for long term. Review of
the strategic portion of the strategic marketing plan makes it apparent that you can no longer
think narrowly about a product.

8. PLANNING TOOLS AND TECHNIQUE

Techniques of Forecasting
There are various methods of forecasting. However, no method can be suggested as
universally applicable. In fact, most of the forecasts are done by combining various methods.

1. Historical Analogy Method:

Under this method, forecast in regard to a particular situation is based on some analogous
conditions elsewhere in the past. The economic situation of a country can be predicted by
making comparison with the advanced countries at a particular stage through which the
country is presently passing.

Similarly, it has been observed that if anything is invented in some part of the world, this is
adopted in other countries after a gap of a certain time. Thus, based on analogy, a general
forecast can be made about the nature of events in the economic system of the country. It is
often suggested that social analogies have helped in indicating the trends of changes in the
norms of business behaviour in terms of life.

Likewise, changes in the norms of business behaviour in terms of attitude of the workers
against inequality, find similarities in various countries at various stages of the history of
industrial growth. Thus, this method gives a broad indication about the future events of
general nature.

2. Survey Method:
Surveys can be conducted to gather information on the intentions of the concerned people.
For example, information may be collected through surveys about the probable expenditure
of consumers on various items. Both quantitative and qualitative information may be
collected by this method.

On the basis of such surveys, demand for various products can be projected. Survey method
is suitable for forecasting demand—both of existing and new products. To limit the cost and
time, the survey may be restricted to a sample from the prospective consumers.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA

3. Opinion Poll:
Opinion poll is conducted to assess the opinion of the experienced persons and experts in the
particular field whose views carry a lot of weight. For example, opinion polls are very
popular to predict the outcome of elections in many countries including India. Similarly, an
opinion poll of the sales representatives, wholesalers or marketing experts may be helpful in
formulating demand projections.

If opinion polls give widely divergent views, the experts may be called for discussion and
explanation of why they are holding a particular view. They may be asked to comment on the
views of the others, to revise their views in the context of the opposite views, and consensus
may emerge. Then, it becomes the estimate of future events.

4. Business Barometers:
A barometer is used to measure the atmospheric pressure. In the same way, index numbers
are used to measure the state of an economy between two or more periods. These index
numbers are the device to study the trends, seasonal fluctuations, cyclical movements, and
irregular fluctuations.

These index numbers, when used in combination with one another, provide indications as to
the direction in which the economy is proceeding. Thus, with the business activity index
numbers, it becomes easy to forecast the future course of action.

However, it should be kept in mind that business barometers have their own limitations and
they are not sure road to success. All types of business do not follow the general trend but
different index numbers have to be prepared for different activities, etc.

5. Time Series Analysis:

Time series analysis involves decomposition of historical series into its various components,
viz. trend, seasonal variances, cyclical variations, and random variances. When the various
components of a time series are separated, the variation of a particular situation, the subject
under study, can be known over the period of time and projection can be made about the
future.

A trend can be known over the period of time which may be true for the future also.
However, time series analysis should be used as a basis for forecasting when data are
available for a long period of time and tendencies disclosed by the trend and seasonal factors
are fairly clear and stable.

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6. Regression Analysis:
Regression analysis is meant to disclose the relative movements of two or more inter-related
series. It is used to estimate the changes in one variable as a result of specified changes in
other variable or variables. In economic and business situations, a number of factors affect a
business activity simultaneously.

Regression analysis helps in isolating the effects of such factors to a great extent. For
example, if we know that there is a positive relationship between advertising expenditure and
volume of sales or between sales and profit, it is possible to have estimate of the sales on the
basis of advertising, or of the profit on the basis of projected sales, provided other things
remain the same.

7. Input-Output Analysis:
According to this method, a forecast of output is based on given input if relationship between
input and output is known. Similarly, input requirement can be forecast on the basis of final
output with a given input-output relationship. The basis of this technique is that the various
sectors of economy are interrelated and such inter-relationships are well-established.

For example, coal requirement of the country can be predicted on the basis of its usage rate in
various sectors like industry, transport, household, etc. and how the various sectors behave in
future. This technique yields sector-wise forecasts and is extensively used in forecasting
business events as the data required for its application are easily obtained.

9.DECISION MAKING STEPS AND PROCESS

To diagnose the problem

The first step in decision-making is to understand the exact problem.Just as a disease cannot
be cured without proper diagnosis, so also no decision-making is possible unless the problem
is properly diagnosed or known.

It is told that a disease is half cured if it is correctly diagnosed. Similarly, if the problem is
correctly understood, its solution will be easier.For example, when a company is faced with
declining profits, it shows the symptom and not the disease.

The managers may decide to solve the problem through intensive sales effort. But if the real
problem lies elsewhere which may need change or product lines, or reduction of price and
improvement of quality, the intensified sales effort will not bring the desired result.

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So, correct assessment of the real problem is essential for decision-making. Diagnosing the
real problem implies knowing the gap between what is and what ought to be, identifying the
reasons for the gap, and understanding the problem in relation to higher objectives of the
organisation.

2. To analyse the problem

After correct diagnosis of the problem, the next task is to analyse the problem. This means
splitting up of the problem into its different elements based on collection of facts, data and
relevant information. For instance, if there is a declining trend in sales, it should analyse its
extent in regard to market, price, product line, etc.

So, all possible facts and data relating to the situation must be gathered to find out the
revealing circumstances that may help the decision-maker to gain an insight into the problem.
The whole approach of analysis of the problem should be based around the limiting or critical
factors within minimum possible time and efforts.

3. To search for alternative solution:

After ascertaining and analysing the problem, different possible alternatives are to be found
out for its solution. A problem can be solved in several ways. However, all the ways cannot
be equally satisfying. Further, if there is only one way of solving a problem, no question of
decision-making arises.

That particular way is to be accepted. Therefore, the decision-maker must try to find out the
various alternatives available in order to get the most satisfactory result of a decision.

However, it should be borne in mind that it may not be possible to consider all alternatives,
because information about all alternatives may not be available, or some of the alternatives
cannot be considered for selection due to the obvious limitation of the decision-maker. While
determining alternatives, the concept of limiting factor should be applied.

A limiting factor is one that stand in the way of accomplishing a desired objective. If these
factors are identified, the managers will confine their search for alternatives to those which
will overcome the limiting factors. For instance, if an enterprise has limitation in raising
sizable finances, it cannot consider the projects involving high investment.

4. To evaluate the alternative:

After the various alternatives are identified, the decision-maker will go for evaluating them to
find out how each alternative may contribute towards the objectives supposed to be achieved

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by implementing the decision. In evaluating an alternative both tangible and intangible
factors have to be taken into account.

Tangible factors are those which can be quantified because they are quite obvious like the
cost per unit, investment required, output to be received, etc. Such factors can be measured
easily. As against these, intangible factors are mostly qualitative and cannot be measured in
terms of quantity.

For example, in a plant location, various non-economic factors like psychological problem
arising out of displacement of persons from the plant site, ecological balance, etc. have to be
considered which cannot be quantified

5. To select the best alternative:

The evaluation of various alternatives presents a clear picture as to how each one of them
contributes to the objectives under question. A comparison is made among the likely
outcomes of various alternatives and the best one is chosen. Choice aspect of decision-
making is related to deciding the most acceptable alternative which gives the greatest number
of wanted consequences to fit with the organisational objectives.

A manager with sound knowledge, long experience and considerable ability may choose the
best course of action easily. When there is any confusion, some criteria may be useful for
picking up the best solution.

These criteria are:

(i) Degree of risk against the expected gains;

(ii) Economy of effort;

(iii) Timing, and

(iv) Availability of resources.

6. To make the decision effective:

Once the alternative is selected, it is put into action. Truly speaking, the actual process of
decision-making ends with the choice of the best alternative through which the objectives can
be achieved. However, decision-making, being a continuous and on-going process, must
ensure that the objectives have been achieved by the chosen alternative. Unless this is done,
the managers will never know what result their choice has contributed.

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The decision, in order to be implemented must be communicated to the employees concerned
in clear and simple language and their acceptance of the decision must be secured. All
decisions affect the employees and their work. It is, therefore, necessary to secure their
willing support and whole-hearted participation.

7. To follow-up the decision:

When the decision is put into action, it brings certain results. If a good decision is taken and
implemented properly, its results should correspond with the objectives. So, results of the
decision indicate whether decision-making and its implementation are proper. But all
decisions cannot be said to be perfect and flawless.

Decisions are not always based on facts, some guesswork may be necessary for this purpose.
Moreover, there is the human limitation associated with each decision-making process. In
order to provide safeguards against incorrect, bad and inappropriate decisions, it is desirable
to introduce a system of follow-up in the light of feedback received from the results.

This provides the scope of rectifying the wrong decisions and modifying similar future
decisions to tune them up with environmental changes. It is clear from the above discussion
that decision-making is not a simple affair. Its formulation and effectiveness depend upon a
number of factors stated above.

COURSE FACULTY: MS. M. DEEPA, ASSISTANT PROFESSOR, MBA