TOPPERS COMMERCE ACADEMY

Class 12 Business Studies

Notes
CHAPTER – 4
PLANNING

Meaning:

• Deciding in advance what to do& how to do it. It is one of the basic

managerial functions.

• It involves 2 aspects:
Setting of aims and objectives of the organization + Selecting and developing
an appropriate course of action to achieve these objectives.

• Koontz and O‘Donnell - ―Planning is deciding in advance what to do, how to

do, when to do, and who to do it. Planning bridges the gap from where we are
to where we want to go. It makes it possible for things to occur which would
not otherwise happen.

• Involves setting of objectives & developing an appropriate course of action to

achieve these objectives

Importance of Planning

1. Planning provides directions: By stating in advance how the work is to be

done planning provides direction for action. If there was no planning,
employees would be working in different directions and the organization would
not be able to achieve its goals efficiently.

2. Planning reduces the risk of uncertainity: Planning is an activity which

enables a manager to look ahead, anticipate change, consider the impact of
change and develop appropriate responses.

3. Planning reduces wasteful activities: Planning serves as the basis of

coordinating the activities and efforts of different departments and individuals
whereby useless and redundant activities are mentioned.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 1

 TOPPERS COMMERCE ACADEMY

4. Planning promotes innovative ideas: Planning is the first function of

management. Managers get the opportunity to develop new ideas and new
ideas can take the shape of concrete plans.

5. Planning facilities decision making: Under planning targets are laid

down. The manager has to evaluate each alternative and select the most
viable option.

6. Planning establishes standards for controlling: Planning provides the

standards against which the actual performance can be measured and
evaluated. Control is blind without planning. Thus planning provides the basis
for control.

Limitations of Planning

(A) Internal Limitations

1. Planning leads to rigidity: Planning discourages individual’s initiative

&creativity. The managers do not make changes according to changing
business environment. They stop taking or giving suggestions and new ideas.
Thus detailed planning may create a rigid framework in the organization.

2. Planning may not work in dynamic environment: Planning is based on

anticipation of future happenings and since future is uncertain and dynamic
therefore, the future anticipations are not always true.

3. Planning involves huge costs: When plans are drawn up, huge cost is
involved in their formulation.

4. Planning is time consuming: Sometimes plans to be drawn up take so

much of time that there is not much time left for their implementation.

5. Planning does not guarantee success: The success of an enterprise is

possible only when plans are properly drawn and implement. Sometimes
managers depend on previously tried successful plans, but it is not always
true that a plan which has worked before will work effectively again.

6. Planning reduces creativity: In planning, work is to be done as per pre-

determined plans. It is decided in advance what is to be done, how it is to be
done and who is going to do it. Moreover, planning is done by top
management which leads to reduction of creativity of other levels of
management.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 2

 TOPPERS COMMERCE ACADEMY

(B) External Limitations

They are those limitations of planning which arises due to external factors
over which an organization has no control.

1. Changes in Government policies way leads to failure of planning.

2. Natural calamities such as flood, earthquake etc. also adversely affect the
success of planning.

3. Changes in the strategies of competitors also leads to failure of planning

many times.

4. Regular technological changes may affect planning.

5. Changes in the Economic and Social Conditions also reduces the

effectiveness of planning.

Planning Process

1. Setting Objectives:
- Objectives specify what the organization wants to achieve.
- Objectives can be set for the entire org. & stated to each dept. within the org.
very clearly, to determine how all depts. would contribute towards overall
objectives.
-Then these have to percolate down to all employees at all levels so that they
understand how their actions contribute to achieving objectives.
- E.g. Objective could be to achieve sales, expansion of business etc.

2. Developing Premises:
- Plans are made on the basis of some assumptions.
- These assumptions, which provide the basis for planning, are called
premises.
- All managers involved in planning should be familiar w/ them, cuz plans are
expected to operate & reach their destination subject to these. They can be:
• Internal premises: Cost of products, capital, machinery, profitability etc.
• External premises: Changes in technology, population growth, competition,
govt. policies etc

3. Identifying Alternative Courses Of Action:

- After setting the objectives, managers make a list of alternatives through
which the org. can achieve its objectives as there can be many ways to

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 3

 TOPPERS COMMERCE ACADEMY

achieve the objectives & managers must know all of them.

- E.g. Sales could be increased through any of the following ways:
• By enhancing advertising expenditure
• Appointing salesmen for door-to-door sales
• By offering discounts
• By adding more product lines.

4. Evaluating Alternative Courses Of Action

- Positive & negative aspects of each &every proposal need to be evaluated to
determine their feasibility and consequences in the light of each objective to
be achieved.
- E.g. In financial plans, risk-return trade-off are imp. Riskier the investment,
higher the returns it is likely to give. To evaluate such proposals, detailed calc.
of earnings, taxes, earnings per share etc. should be done.

5. Selecting The Best Alternative

- Real point of decision-making→ Best plan has to be adopted and
implemented.
- The ideal plan = most feasible, profitable and with least negative
consequences.
- Most plans may not be subjected to mathematical analysis. In such cases,
subjectivity & manager‘s experience, judgment and intuition are important to
select the most viable alternative.
- Sometimes a combination of plans may be selected instead of one best
course.

6. Implementing The Plan

- Concerned with putting the plan into action.
- For implementing the plans, managers start organizing & assembling
resources for it.
- E.g. If there is a plan to ↑ production, then more labour, more machinery will
be reqd. This step would also involve organizing for more labour and
purchase of machinery.

7. Follow Up Action
- This involves monitoring the plans and ensuring that activities are performed
according to the schedule.
- Whenever there are deviations from plans, immediate action has to be taken
to bring implementation according to the plan or make changes in the plan.

TYPES OF PLAN

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 4

 TOPPERS COMMERCE ACADEMY

Plan

A Plan is a specific action proposed to help the organization achieve its

objectives. It is a document that outlines how goals are going to be met. The
importance of developing plans is evident from the fact that there may be
more than one means of reaching a particular goal. So with the help of logical
plans, objectives of an organization could be achieved easily.

SINGLE USE PLAN

A Single use plan in a business refers to plan developed for a one-time project
or event that has one specific objective. It applies to activities that do not
reoccur or repeat. It is specifically designed to achieve a particular goal. Such
plan is developed to meet the needs of a unique situation. The length of a
single use plan differs greatly depending on the project in question, as a
single event plan may only last one day while a single project may last one
week or months. For example, an outline for an advertising campaign. After
the campaign runs its course, the short term plan will lose its relevance except
as a guide for creating future plans.

Types of Single Use Plan

1. Programme: A programme is a single use plan containing detailed

statements about project outlining the objectives, policies, procedures, rules,
tasks, physical and human resources required to implement any course of
action.

2. Budget: A budget is a statement of expected result expressed in numerical

terms for a definite period of time in the future.

STANDING PLANS

Standing plans are used over and over again because they focus on
organizational situations that occur repeatedly. They are usually made once
and retain their value over a period of years while undergoing revisions and
updates. That is why they are also called repeated use plans. For example,
Businessman plans to establish a new business Entrepreneur drafts business
plan before opening the doors to their business, and they can use their plan to
guide their efforts for years into the future.

Types of Standing Plans

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 5

 TOPPERS COMMERCE ACADEMY

1. Objectives: Objectives are defined as ends for the achievement of which

an organization goes on working. They may be designed as the desired future
position that the management would like to reach. The first and foremost step
of the planning process is setting organizational objectives. Examples
increasing sales by 10%, Getting 20% return on Investment etc. Objectives
should be clear and achievable.

2. Strategy: Strategies refer to those plans which an organization prepares to

face various situations, threats and opportunities. When the managers of an
organization prepare a new strategy for the business it is called internal
strategy and when some strategies are prepared to respond to the strategies
of the competitors, then such strategies are called external strategies.
Examples, selection of the medium of advertisement, selection of the channel
of distribution etc.

3. Policy: Policies refers to the general guidelines which brings uniformity in

decision-making for achievement of organizational objectives. They provide
directions to the managers of an organization. They are flexible as they may
be changed as per requirement. Example, selling goods on cash basis only,
reserving some post for women in the organization.

4. Procedure: Procedures are those plans which determine the sequential

steps to carry out some work/activity. They indicate which work is to be done
in which sequence/way. They help in the performance of work. Procedures
are guides to action. Example: Process adopted in the Selection of
Employees.

5. Rule: Rules are specific statement that tell what is to be done and whatnot
to be done in a specified situation. They help in indicating which points are to
be kept in mind while performing task/work. Rules are rigid which ensure
discipline in the organization. Example : ‘No smoking in the office premises’.
Violation of rules may invite penalty.

6. Method: Methods are standardized ways or manners in which a particular

task has to be performed. There may be many ways/method of completing a
task but that method/way must be selected by which work can be done early
at the minimum possible cost. Methods are flexible. Example, various
methods of training are adopted by an organization to train its employees like
apprenticeship training, vestibule training etc.

Basis of
Single use plans Standing Plans
Difference
GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 6
 TOPPERS COMMERCE ACADEMY

A single use plans in a A standing plans in a business

business refers to plans refers to plans developed for using
1. Meaning developed for a one time over and over again because they
project or event that has focus on organizational situations
same objective. that occur repeatedly.
Single use plans is
developed to carry out a Standing plans however is
2.
course of action that is not developed for activities that occur
Objective
likely to be repeated in future regularly over a period of time.
time.
Single use plans generally Standing plans generally
encompass a narrow scope encompass a wider scope involving
3. Scope
targeting a specific project or more than one department or
event. business function.
Standing plans are relatively stable
Single use plans are
and used over and over again with
4. Stability discarded when the situation,
necessary modifications or
project or event is occur.
updations.
Recruitment and selection
Budget for Annual General
5. Example procedure for a particular post in a
Meeting of Shareholders.
company.

Important Questions

VERY SHORT ANSWER TYPE QUESTIONS (1 MARK)

1. What is planning?
Ans. Planning is deciding in advance as to what needs to be done in future.

2. Which function of management bridges the gap between where we are

and where we want to go to?
Ans. Planning.

3. Name the primary function of management.

Ans. Planning.

4. One of the functions of Management is considered as base' for all

other functions?Name that function.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 7

 TOPPERS COMMERCE ACADEMY

Ans. Planning

5. What all qualities are required for doing planning?

Ans. Intelligence, Imagination, Foresight, Sound Judgment.

6. Name the feature of planning which says planning is a forward

looking function?
Ans. Planning is futuristic.

7. How does planning create rigidity?

Ans. Planning creates rigidity by putting adverse effect on initiative taken by
the managers.

8. What is the basis for creating future course of action?

Ans. Forecasts.

9. Give one limitation of planning function.

Ans. Planning does not guarantee success.

10. Which is the most crucial step in planning process?

Ans. Setting objectives.

11. Define 'Objective'?

Ans. Objectives are desired future position that the management would like to
reach.

12. Define 'Strategy'.

Ans. A strategy refers to future decision action, defining the organisation's
direction and
scope in the long run.

13. Define 'Policy'.

Ans. Policy is a general statement which guides decision making in a given
set of situations

14. Define 'Rules'.

Ans. Rules are specific guidelines for behavior and action.

15. Give anyone example of 'budget'.

Ans. Cash budget.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 8

 TOPPERS COMMERCE ACADEMY

SHORT ANSWER TYPE QUESTIONS (3 OR 4 MARK)

1. What do you mean by planning?
Ans. Planning is deciding in advance about work to be done in future. It is that
function of management which lays down the objectives and various actions
to be taken for the achievement of those objectives. According to Koontz and
O'Donnel "Planning is an intellectual process, the conscious determination of
courses of action, the basing of decision on purpose, facts and considered
estimated".

2. What do you mean by a plan?

Ans. A plan is a formulation of certain steps and actions which are essential
for achieving certain specific results. Plans can be classified on the basis of
what they focus to achieve and the methods adopted viz. objectives, strategy,
policy etc. For example, if the planned output for a week is 1,000 units and
actual output is 580 units only, the planners have to critically review their
plans and modify: them, if need be, so as to achieve the planned output.

3. Enumerate six points of importance of planning.

Ans. Importance of planning is as under:
(i) It provides direction for action.
(ii) It reduces the risk of uncertainty
(iii) It facilitates decision making.
(iv) It establishes standards for controlling.
(v) It promotes innovative ideas.
(vi) It reduces overlapping and wasteful activities.

5. How is planning a pervasive function of management?

Ans. Planning is not the function of top management or any particular
department only. It is required at all the levels of management and in all
departments of an organisation. However the scope and nature of planning is
different at different levels and in different departments. For example the top
management lays down the plans for the organisation as a whole. Middle level
management has to make plans for each department and the plans regarding
the daily operations of an organisation are laid down by operational
management.

6. How is planning forward looking?

OR

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 9

 TOPPERS COMMERCE ACADEMY

Planning is futuristic' explain?

Ans. Planning is always for the future and never for the past. It involves
peeping in to future, analyzing and preparing plans accordingly. Thus,
planning is futuristic as it helps in meeting likely future events effectively and
efficiently to best advantage of the organisation.
For example, on the basis of sales forecasts, annual plans for production and
sales are drawn.

7. Planning involves decision making". Explain.

Ans. Planning is essentially a process of making choice from among various
alternatives. There will be no need for planning, if there is only one course of
action, because there will be no choice. Hence need for planning depends on
the availability of alternatives. A manager, after examining and evaluating the
various alternatives, chooses the most appropriate one.

8. 'Planning reduces creativity'. How?

Ans. Usually in an organisation, planning function is performed by the top
management and the rest of the members are required to implement these
plans. As a result, middle management and other members are neither
allowed to deviate from plans nor are they granted authority to act on their
own. Hence most of the initiative and creativity in them gets reduced.

9. 'Planning does not guarantee success'. Comment.

Ans. An organisation is successful only when the plans are effectively drawn
and implemented.
A plan must be converted into action otherwise it becomes meaningless.
Generally, it is seen that managers are in the habit of depending on previously
tried and tested successful plans. But this practice sometimes does not work
and may actually lead to failure instead of success.

10. Enumerate the steps involved in the planning process.

Ans. Steps of planning are as follows:
(i) Setting up of objectives
(ii) Developing premises.
(iii) Identifying alternative courses of action.
(iv) Evaluating alternative courses
(v) Selecting an alternative.
(vi) Implementation of plan.
(vii) Follow up

11. What do you mean by objectives?

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 10

 TOPPERS COMMERCE ACADEMY

Ans. Objective can be defined as a position where the management wants to

reach in the future. These are the ends which an organisation wants to
achieve through its operations. They are measurable in quantitative terms. For
example, one objective of an organisation may be to increase sales by 20%
and return on investment by 10% in the forthcoming year.

12. Explain the meaning of policies.

Ans. A policy can be defined as a general statement that provides guidelines
for constructive thinking. They act as a guide to managerial actions and
decisions in implementing the strategy. A well defined policy helps in solving
the complex problems easily. For example, an organisation may have a credit
policy, pricing policy etc. on the basis of which objectives are decided and
decisions are made.

13. What is meant by procedures?

Ans. Procedures are routine steps framed to carry out activities. These are
plans that determine the order of any work performance. Procedures are
generally meant for insiders and define the chronological sequence of doing
any work for attaining predetermined objectives.

14. What do you mean by methods?

Ans. Methods are standard ways of doing planned jobs for attaining the
objectives. They are more detailed than procedures. Methods are helpful in
simplification, standardization and systematization of work. For doing different
jobs, different methods can be adopted. For example, for imparting training to
employees at different levels, different methods of training can be used viz for
higher level lectures or seminars and for supervisory level on the job training
can be used.

15. What do you mean by rules?

Ans. Rules can be defined as statements that tell us what is to be done and
what is not to be done. Deviations from rules are not permitted unless a policy
decision is taken. They enforce rigidity and there is fine or penalty if they are
not followed. For example, prohibition on sale of tobacco within certain radius
of an educational institution is a rule to be followed by all.

16. What do you mean by programmes?

Ans. Programmes are a solid combination of goals, policies, procedures,
rules, tasks, assignments, steps to be taken, resources to be employed and
other elements necessary to carry out a given course of action. Programmes
interlink the objectives, policies and procedures. They work out even the

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 11

 TOPPERS COMMERCE ACADEMY

minutest detail within broad policy framework of the organisation.

17. What is meant by budget?

Ans. Budget is a plan in numerical terms which quantifies desired facts and
figures. It is a statement of expected results expressed in quantitative terms.
For example, a sales budget helps in forecasting the sales of a particular
product in different areas during a particular month. Similarly, a budget may
be prepared to show the number of workers required in factory at the time of
packing the products.

LONG ANSWER TYPE QUESTIONS (5 OR 6 MARKS)

1. Defining 'organizational objectives' is the first step in the process of
planning.
Explain, in brief, the other steps of this process.

OR

Explain the steps involved in the process of planning.

Ans. It has been rightly said that defining organizational objectives is the first
step in the
process of planning. Other steps in the process of planning a as follows:
(i) Establish planning premises
This step involves the establishment of planning premises in which plans are,
expected to operate. Planning premises are assumptions relating to future
conditions and events which are likely to have an effect on achievement of
goals
(ii) Identifying alternative courses of action
Under this step, various possible alternatives for reaching objectives should
be identified by managers.
(iii) Evaluating Alternative Courses
This step involves deep evaluation of various alternative courses of action in
light of the various objectives to be achieved. The positive and negative
aspect of each alternative is evaluated.
(iv) Selecting an alternative
This step involves the selection of the most optimum and realistic plan with
least negative results.
(v) Implement the plan
Under this step the best selected plan is put in to action.
(vi) Follow up
Under this step, it is monitored whether the plans are being implement and
whether the activities are being performed according to the schedule.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 12

 TOPPERS COMMERCE ACADEMY

2. Differentiate between procedures and rules.

Ans.
DIFFERENCE BETWEEN PROCEDURES AND RULES

Basis Procedures Rules

Rule is a code of conduct
Procedure is a guide for action in
1. Meaning governing or restricting
a given situation.
flexibility or discretion
Procedures are specified in Rules do not place activities in
2. Nature
chronological order. chronological order
The purpose of procedure is to The purpose of rule is to
3. Purpose facilitate and simplify the operation s maintain discipline in an
and eliminate duplication. organization.
The scope of procedures is wide
4. Scope because it has Its own rules and A rule has no procedure.
regulations.

QUESTIONS WITH DIFFERENT DIFFICULTY LEVELS

1. How does planning reduce the risk of uncertainty?(1)
Ans. Planning reduces the risk of uncertainty by visualizing/assessing future
events and providing remedies/ courses of action for such kinds of events to
the extent possible.

2. A company wants to increase sales; the alternatives may be reducing

prices hanging packaging, improving packaging, etc. Which step of
planning process
relates with the above example? (1)
Ans. Identifying alternative courses of action.

3. Write anyone difference between policies and procedures. (1)

Ans. Procedures consist of series of steps whereas policies are guidelines for
decision making.

4. A company needs a detailed plan for its new project? ‘Construction of

a Shopping
Mall'. What type of plan is it? (1)
Ans. Programme

5. Give anyone difference between Policy and Rule. (1)

Ans. Policy is flexible whereas rule is rigid.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 13

 TOPPERS COMMERCE ACADEMY

6. "These are general statements that guide thinking and channelize

energise
towards a particular direction and help in solving routine problems”.
Identify
the type of plan. (1)
Ans. Policy

7. 'Planning promotes innovative ideas’. Explain? ( 3 or 4)

Ans. Planning considered to be the most, challenging function of the
management as it guides all Future actions and facilitates growth and
prosperity of the business organization. Planning encourages managers to
think creatively generate innovative ideas; improve methods for Work
execution etc. Dealing with uncertainties of future, planning is the most
challenging function, which provides basis for growth and Prosperity of the
business enterprise

8. 'Planning focuses on achieving objectives'. Explain. (3 or 4)

Ans. Planning is a goal oriented process which helps in defining objectives,
and preparation of necessary action plans to achieve goals. Thus, planning is
focused on clarifying what is to be done and how is that to be done. The
planning holds no purpose if it does not focus on achievement of preset
organizational or corporate objectives.

9. 'Planning is the basic function on of management'. Comment. (3or4)

Ans. Every management starts with planning. All other functions like
organizing, staffing, directing and controlling are based on planning. It
precedes the execution of all other managerial functions and allows mangers
to organized, staff, direct and control the activities in a better way so as to
achieve organizational goals. All the activities are created in such a way that
plans are easily carried out. This is also referred to as primacy of planning.

10. Why is planning considered as a mental exercise? (3or4)

Ans. Planning is an intellectual activity requiring application of the mind,
imagination and sound judgment. It is a thinking function rather than a doing
function as it determines the actions to be taken. Moreover, planning requires
logical and systematic thinking based on the analysis of facts and figures.

11. Give an example each of any three limitations of planning which are
beyond the
control of an organization.(3or4 )

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 14

 TOPPERS COMMERCE ACADEMY

Ans. Limitations of planning on which the organization does not have a

significant control
are as follows:

S.No. Limitations Examples

Frequent changes in the political or
Planning may not work
1. economic environment may upset in
in dynamic environment.
the financial plans.
Following a pre-decided plan when
2 Planning leads to rigidity
circumstances have changed.
Incidental expenses such as expenses on
boardroom meetings and discussions
3. Planning involves huge costs
with professional experts involve huge
cost.

12. How can (i) Political climate and (ii) Policies of competitors obstruct
planning?
(3or4)
Ans. (i) Obstruction in planning due to political climate
When the government regulates the business practices or introduces new
trade policies, the plans of business enterprises may get upset. Also political
instability affects business plans. For example, change in the taxation policy.
(ii) Obstruction in planning due to policies of competitors
The policies of competitors may lead to change in business policies. For
example, discounting policies of the competitors may lead to change in pricing
policy of a business enterprise.

13. What do you mean by planning premises? (3or4)

Ans. Planning premises are assumptions relating to future conditions and
events which are likely to have an effect on achievement of goals. These are
the bases upon which the entire structure of planning is built. Every plan is
drawn with certain assumptions. To make planning effective, it is necessary
that the premises should be based on accurate forecasts, existing plans or
any past information about policies etc. For example, demand for a product,
cost of raw materials, interest rates, state of technology, intensity of
competition, government policies etc.

14. 'Though planning is an important tool of management, yet it is not a

remedy for
all types of problems", Do you agree with this statement? Give any five
reasons in support of your answer. (5or6)

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 15

 TOPPERS COMMERCE ACADEMY

OR

Explain the limitations of planning.

OR

Why do plans fail in spite of the best efforts of management?

Ans. Limitations of Planning:

(i) Planning creates rigidity

In an organization, a well-defined plan is drawn to achieve some specified
goals within a specified period of time. These plans lay down the future course
of action and it is not possible for the managers to change them. Hence, it is
not in the organizational interest to follow a particular plan when
circumstances have changed.

(ii) Planning does not work in a dynamic environment

The various forces of business environment like social, economic, political,
technological and legal keep on changing and the organizations have to adapt
themselves to these changes. Thus, it becomes very difficult to forecast when
there is change in government policies, natural calamity, political instability in
the country etc.

(iii) Planning reduces creativity

Usually in an organization planning function is performed by the top
management and the rest of the members are required to implement these
plans. As a result, middle management and other members are neither
allowed to deviate from plans nor granted authority to act on their own. Hence
most of the initiative and creativity in them gets reduced.

iv) Planning involves huge cost

Huge cost is involved in the formation of plans. This cost is in terms of money
and time. For example, a lot of time is involved in scientific calculations to
certain facts and figures and to check the accuracy of facts while formulating a
plan. Likewise, a lot of money is spent on boardroom meetings, discussions
with experts and preliminary investigations to find out the effectiveness of the
plans Moreover sometimes the cost incurred in formulating plans is higher
than the benefits received from these plans.

v) Planning is a time consuming process

Sometimes top level management consumes a lot of time in formulating the

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 16

 TOPPERS COMMERCE ACADEMY

plans as a result of which very less time is left with them to implement these
plans.

vi) Planning does not guarantee success

An organization is successful only when the plans are effectively drawn and
implemented. Managers are in the habit of depending on previously tried an
tested successful plans, but this practice sometimes does not work and may
lead to failure instead of success.

15. Distinguish between Policies and Rules.( 5or6)

Ans.
DIFFERENCE BETWEEN PROCEDURES AND RULES

Basis Procedures Rules

A rule is a specific statement,
1. Meaning
A policy is a guide for thinking. which restricts the
flexibility or
discretion
Rule lays down any specific
Policy lays down the broad areas
2. Nature sequence of actions in an
of action in an organization.
organization
Rules are used to maintain
Policy is framed to achieve
3. Objective discipline and command in
objectives of the organization.
any organization.
Policy provides some scope for the Rules provide no scope for
4.
manager’s discretion in his course manager’s discretion and
Manager’s
of they
Discretion
action are binding for all.

Important Questions

Q1) “Planning involves choice “Elaborate

Ans. Planning involves choice from among various alternatives and activities.

Q2) “No smoking in office “ is an example of which type of plan?

Ans. Rules

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 17

 TOPPERS COMMERCE ACADEMY

Q3) Name the function of management is considered a base for all other
function
Ans. Planning

Q4) Name the plan which specifies a detail step by step presentation of a
job?
Ans. Procedure

Q5) A company allows only eight leave for his employees during one
year .Which type of plant is it?
Ans. “Rules”

Q6) Without one function of management the controlling function is not

possible. Name the concerned function.
Ans. “Planning”

Q7) ‘No enterprises can achieve its objectives without systematic

planning’.
Do you agree with this ? Give any five reasons in support of your
answer.

OR

Is planning actually worth the huge costs involved ? Give 4 reasons[4]

Ans. Yes ,it is worth every amount spent on its .A company needs to plan
because of the following benefits.(Explain 4 important of planning).
(a) Provides Directions
(b) Reduce risk of uncertainity
(c) Promotes innovative ideas.
(d) Facilitate controlling.

Q8) “planning is not a guarantee of success of a business”. Comment

OR

“sometimes planning fails in spite of the best efforts of management’.

do you agree? Give any 5 reasons in support of your answers.

OR

Why is it that organizations are not always able to accomplish all their
objectives? [5]
GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 18
 TOPPERS COMMERCE ACADEMY

Ans. Hint: Yes, I agree with the statement ,planning though an important tool
of management is not a remedy for all types of problems because it suffers
from following limitations; [Explain any 4 limitation]
(a) Rigidity
(b) Does not work in a dynamic environment
(c) Reduces creativity
(d) Involves huge costs.

Q9) Name the type of plan in which expected results are expressed in
numerical term
Ans. Budgets.

Q10) Name any two external factors due to which planning may not
work.
Ans. (a) Political factors
(b) Economic factors

Q11) MC Donald’s Co. Does not give its franchise to any other co. which
is running food business. this is related to which type of plan?
Ans. It is related to policy of the company.

Q12) In which step of planning process the planner make predictions

and assumptions regarding future?
Ans. “Setting up of planning premises for all alternatives” predictions are
made.

Q13) IN which type of plan the sequence of activities to complete a job is

determined
Ans. under procedure

Q14) name the type of plan in which the moves of competitors is

considered
Ans. it is strategy

Q15) a company needs a detailed plan for its new project ‘construction
of a shopping mall’ what type of plan is it?
Ans. it’s a programme

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 19

 TOPPERS COMMERCE ACADEMY

Important Questions

1 MARK QUESTIONS

Q1. “No Smoking in the Work shop”. This statement is related to which type of
plan.

Q2. “We do not sell on credit”. This statement is related to which type of plan.

Q3. Write the meaning of strategy.

Q4. What do you understand single use plan?

Q5. What do you understand by standing plans?

3-6 MARKS QUESTIONS

Q.1. ABC Ltd. has a plan of profit maximization, for which it has invested lot of
finance and time. But, with increase in competition, it could not change its plan
as it had already invested lot of finance in it. This has lead to occurrence of
losses for ABC Ltd. which limitation of planning is highlighted here? Explain.
(3)

Q2. In Chak De movie, Shahrukh Khan becomes the coach of the girls hockey
team. He knows that he has to prepare the girls for the international hockey
matches and win the cup. For this he prepares a long term plan and thinks of
ways of how to beat the opponent team. He coaches the girls to play in
different ways like defensive, offensive, etc. At the outset of the match, he
explains who will open the match, and how the ball will be passed by one
player to another step by step. What are all the types of plans mentioned
above? State them along with lines which refer to them in the above
paragraph. (4)

Q3. ABC Limited prepares budget for its Annual General Meeting for Financial
Year 2013-14. What kind of plan is it? Justify your answer. (1+2=3)

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 20

 TOPPERS COMMERCE ACADEMY

Q4. “No enterprise can achieve its objectives without systematic planning”.
Comment? (6)

Q5. Procter and Gamble Ltd. is offering a free bucket on every purchase of
Tide washing powder. In response to this Hindustan Unilever Ltd. Started a
new scheme of giving free one kg of Rin Washing Powder with every
purchase of five kg of Rin washing powder. Identify the plan stated in above
paragraph and explain it. (3)

Q6. “KOHINOOR FOODS Ltd. has banned smoking in the factory premises.”

Identify the plan stated in above lines.

State the features of this plan.

Diffferentiate between policy and this plan. (5)

Q7. “Though planning is an important tool of management, yet it is not remedy

to all problems”. Explain this statement (4)

Q8. PK Ltd. has been well known for delay in decision making and
overlapping of work done. Identify management function the organization is
lacking and state importance of this function? (6)

Q9. Rahul, a worker is given a target of assembling two computers per day.
Due to his habit of doing things differently, an idea struck him which would not
only reduce the assembling time of computer but also reduce the cost of
production. But instead of appreciating his idea his supervisor scolded him
and asked him to complete the work as per prescribed technique. Identify &
describe the limitation of planning stated here? (3)

Q10. Which type of plan has the least flexibility and why? (3)

Q11. A company gave its sales executives, the directives that they would sell
goods on credit but told the employees to strictly inform the customers that if
they will not make payment within 1 month they will have to pay an interest of
10% per annum. In the above given paragraph 2 types of plans have been
mentioned. Identify them and explain them their features. (5)

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 21

 TOPPERS COMMERCE ACADEMY

Value Based Questions

Q.1 Which quality of employee is restricted by the act of planning?

Ans i) Decrease in the efficiency of Initiative ness

ii) Restriction on creativity

Q.2 Removal of mobile towers from residential area is being planned by

the government to promote which value?
Ans i) Environment protection

ii) Safety of birds

iii) Safety of Health of Society

Q.3 Government is planning to construct a ware house in remote area to

store necessary goods. So as to make them available even at the time of
bad weather regularly. Which values are being considered here to be
achieved by the government?
Ans i) Stability in prices

ii) Regular Supply of Goods

iii) Fulfilling social responsibility

iv) Control on hoarding & Black- Marketing

Q.4 In order to reduce the cost, an organization is planning the

following:

a) To reduce the charities to the social and religious institution.

b) To arrange skilled workers from outside inspite of semi-skilled local

employees.

c) To increase the working hours.

d) To increase the rate of remuneration.

Which value will be affected by the decisions?

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 22

 TOPPERS COMMERCE ACADEMY

Ans i) Reduction in social responsibilities due to non cooperation in social

work.

ii) Increase in production due to efficient employees

iii) Deterioration in Health of employees due to prolonged working hours.

iv) Reduction in employment opportunities for local persons

v) Increase in salary will increase social respect/standard of living

Q.5 Tobacco manufacturer is planning to sell its products outside the

School & colleges. Which values are violated here from your point of
view?
Ans. i) Bad effect on students health.

ii) Deprivation of Morality.

iii)Instigation of social evil.

Q.6 In an organization executive director takes all the decision himself.

He does give order only to the subordinates. Which value is overlooked
here?
Ans. i) Lack of Feeling of ownness in an organization.

ii) Lack of Manager’s faith in his employees.

iii) Wastage of time.

NCERT

1. How does planning provide direction?

Sol. Planning provides direction for action and helps managers:

• To decide in advance as what to do and how to do that.

• It ensures that the objectives of an organization should be clearly stated so that they act
as a guide for deciding what action should be taken and in which direction.
• Employees, departments, and individuals can work better if they are aware of the
organizational objectives and what is their role to achieve these objectives.
• If there is no planning then there will be ambiguity regarding work and it will lead to

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 23

 TOPPERS COMMERCE ACADEMY

chaos in the organization.

2. A company wants to increase its market share from the present 10% to 25% to have a dominant position in
the market by the end of the next financial year. Ms Rajni, the sales manager has been asked to prepare a
proposal that will outline the options available for achieving this objective. Her report included the
following options - entering new markets, expanding the product range offered to customers, using sales
promotion techniques such as giving rebates, discounts or increasing the budget for advertising activities.
Which step of the planning process has been performed by Ms Rajni?

Sol. The step of the planning process which has been performed by Ms Rajni is 'Identifying alternative courses of
action'.
In this step, the positive and negative aspects of each alternative need to be evaluated in the light of
objectives to be achieved.
Every alternative is evaluated in terms of lower cost, lower risks, and higher returns, within the planning
premises and within the availability of capital. There are many ways to act and achieve objectives laid by the
management.
Ms Rajni has listed down all the possible alternative courses of action which can be used to increase the
market share, choosing the best alternative with analysing all the pros and cons will help in achieving the
objectives.

3. Why are rules considered to be plans?

Sol. Rules are plans because they are specific statements that inform us what is to be done. They do not allow for
any flexibility or discretion. It reflects a managerial decision that a certain action must or must not be taken.
They are usually the simplest type of plans because there is no compromise or change unless a policy
decision is taken.

4. Rama Stationery Mart has made a decision to make all the payments by e-transfers only. Identify the type of
plan adopted by Rama Stationery Mart.

Sol. A policy is a general statement that aims at channelling the efforts of the organisation in a particular
direction, hence in the above question payments through e-platform is an example of a policy.

5. Do you think planning can work in a changing environment?

Sol. A business organisation survives within a business environment and factors of business environment keeps
on changing. The rapidly changing situations present a serious difficulty in the task of planning. Factors like
government policies, taste and preference of consumer, competitor policies, technological advancement etc
keeps on changing. Since plans are rigid so there is no scope for any changes to be made in them. Plans
which are made according to one specific situation may not work when the situation changes. Also, future
anticipations made by the managers are not always true. Therefore, it can be said that planning does not work
in the dynamic environment.

6. What are the main points in the definition of planning?

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 24

 TOPPERS COMMERCE ACADEMY

Sol. In the words of Koontz O'Donnell, Planning is deciding in advance what to do, how to do it, when to do it
and who is going to do it. Planning bridges the gap from where we are and where we want to go. It is a trap to
capture the future.
Main points involved are:

• Setting objectives
• Time period
• Formulating alternatives course of action
• Selecting a course of action.

7. If planning involves working out details for the future, why does it not ensure success?

Sol. If a plan is successful in one situation it does not mean that it will work again. Business is based on future
and future is full of uncertainty, hence accurate prediction about the future is not always possible. Managers
apply previously tried and tested plans which may not be valid or appropriate in the current environment.
Even if plans are well laid down, the extent to which these plans can be transformed into action determines
the level of its success. In simple words, planning does not provide any guarantee of success. It is the amount
of hard work that determines success.

8. What kind of strategic decisions are taken by business organizations?

Sol. • When a business firm formulates its strategy, the business environment i.e. social,
political, economic and legal factors should be kept in mind.
• Strategic decisions include decisions like whether a business firm will continue to be in
the same line of business or aim for a fixed position in a particular market or combine
new lines of activity with the existing business.
• A strategy is a comprehensive plan which includes:

i. Determining long-term objectives of the firm.

ii. Adopting an appropriate course of action.
iii. Allocating various resources i.e. financial, technical and human resources which are
necessary to achieve the organizational objective.

• A strategy takes into account the environmental opportunities and threats and fixes a
match between them and the organization's resources.
• It is a type of standing plans.
• Strategy provides a broad contour of an organization.

9. Planning reduces creativity. Critically comment. (Hint: both the points - Planning promotes innovative ideas
and planning reduces creativity – will be given).

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 25

 TOPPERS COMMERCE ACADEMY

Sol. Planning is the most challenging function. It encourages the managers to think creatively and out of the box
to generate innovative ideas. With the planning, the managers of the organisation start working rigidly and
they become the blind followers of the plan only. The managers do not take any initiative to make changes in
the plan according to the changes prevailing in the business environment. They stop giving suggestions and
new ideas to bring improvement in working because the guidelines for working are given in planning only.

i. Planning is an activity which is done by the top management. Usually the rest of the
members just implement these plans.
ii. As a consequence, middle management and other decision-makers are neither allowed
to deviate from plans nor are they permitted to act on their own.
iii. Thus, much of the initiative or creativity inherent in them also get lost or reduced. Most
of the time, employees do not even attempt to formulate plans they only carry out
orders.
iv. Thus, planning in a way reduces creativity since people tend to think along the same
lines as others. There is nothing new or innovative.

10. In an attempt to cope with Reliance Jio’s onslaught in 2018, market leader Bharti Airtel has refreshed its
Rs 149 prepaid plan to offer 2 GB of 3G/4G data per day, twice the amount it offered earlier. Name the
type of plan is highlighted in the given example. State its three dimensions also.

Sol. Bharti Airtel has adopted a Strategy. A strategy is created by keeping the business environment in mind. The
strategy includes three dimensions:

1. Determining long term objectives

2. Adopting a particular course of action
3. Allocating resources necessary to achieve the objective

11. State the type of plan and state whether they are Single-use or Standing plan:

i. A type of plan which serves as a controlling device as well. (budget)

ii. A plan based on research and analysis and is concerned with physical and technical
tasks. (method)

Sol. i. Budget- A type of plan which serves as a controlling device as well. A budget is a
Single-used plan which is developed for a one-time project or event, which is changed
almost every year.
ii. Method- A plan based on research and analysis and is concerned with physical and
technical tasks. Method is a Standing plan as it is used for activities which occur
regularly over a period of time and hence methods are generally fixed and an example
of standing plans.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 26

 TOPPERS COMMERCE ACADEMY

12. Why is it that organizations are not always able to accomplish all their objectives?

Sol. In spite of the best efforts of managers planning still fails. It is difficult to accomplish objectives all the time
because of certain limitations of planning. These are as follows:

i. Planning leads to rigidity: A plan is a norm or blueprints to achieve the desired

objectives. Therefore, changing plans too often is not possible. Besides, planning is
done in a preconceived and predetermined manner, where the little scope is left for the
managers and workers to use their experience and ability, resulting in rigidity in
planning.
ii. Planning may not work in a dynamic environment: The business environment is
dynamic, nothing is constant. The environment includes a number of factors i.e.
political, economic, social and legal factors. It is very difficult to judge the future
environment, for example, any time the government may modify its economic policies,
natural disasters or calamity, and political conditions etc. may change business
environment any time. Competition in the market can affect the financial planning and
sales targets of the firm. In simple words, planning cannot forecast everything. All plans
should be revised from time to time to meet the requirement of the business
environment.
iii. Planning reduces creativity: Under planning, all the activities connected to the
attainment of the objectives are predetermined. Consequently, everybody works as they
have been directed to do and it has been made clear in the plans. Managers are not
allowed to develop an innovative idea. Thus, it discourages creativity.
iv. Planning involves huge costs: Management spends a lot of money and time during the
planning process. Sometimes companies hire experts and professionals from outside to
carry on this process. A company pays a huge amount to these professionals and spends
a lot of time to collect accurate facts and figures. So planning is an expensive or cost-
consuming process.
v. Planning is a time-consuming process: Planning takes a lot of time and because of that
the action gets delayed. Sometimes plans to be drawn takes so much of time that there is
not much time left for their implementation.
vi. Planning does not guarantee success: Planning is completely based on forecasts.
Sometimes because of inaccurate forecasting plans become misleading. The success or
failure of an organization depends upon the success of plans. If plans are not properly
drawn up or not properly implemented then there is no chance of success. If a plan is
successful in one situation it does not mean that it will work again. In simple words,
planning does not provide a guarantee of success.

13. What are the steps taken by management in the planning process?

Sol. The steps involved in the planning process are as follows:

1. Establishing objectives: The first step in planning is to determine objectives.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 27
 TOPPERS COMMERCE ACADEMY

Objectives must be realistic, specific and clear so as to specify what is to be

accomplished by the organisation. The objectives stated must be expressed in
quantifiable terms.
2. Establishing planning premises: Planning premises are the anticipated environments
in which plans are expected to operate. They include assumptions or forecasts of the
future and known conditions that will affect the operation of plans. They provide useful
facts and information and facilitate the work of planning.
3. Identifying the alternative courses of actions: The next step in the process is to
identify the various alternatives available to achieve the objective. Most of the times
identifying various alternatives is a difficult task and it depends upon the creativity and
logical thinking of the planner which opens up different avenues for the firm.
4. Evaluating the alternative courses: The pros and cons of different courses actions are
evaluated in the light of the objectives to be achieved and their feasibility is judged
accordingly. Each alternative is studied with all its merits and demerits.
5. Selecting the best alternative: The next step is to find out the most suitable course to
be followed. Efforts are directed towards selecting that course which increases
efficiency in the organisation by maximising output and profits at minimum costs.
6. Implementing the plan: At this step, a plan is transformed from a thought (a dream) to
an action (reality) by activating other managerial functions.
7. Follow-up action: Due to uncertainties of future it is necessary that the plan should be
evaluated from time to time, to measure its effectiveness and to ensure that the
objectives are achieved.

14. An auto company C Ltd. is facing a problem of declining market share due to increased competition from
other new and existing players in the market. Its competitors are introducing lower-priced models for mass
consumers who are price sensitive. For quality conscious consumers, the company is introducing new
models with added features and new technological advancements.
Questions

1. Prepare a model business plan for C Ltd. to meet the existing challenge. You need not
to be very specific about quantitative parameters. You may specify which type of plan
you are preparing.
2. Identify the limitations of such plans.
3. How will you seek to remove these limitations?

Sol. 1. The type of plan, which the company needs to prepare, is “Strategy”.

• Steps involved in this plan are:

a) Determining the long-term objectives

b) Adopting a particular course of action
c) Allocating the resources

1. The limitations of such plan are:

i. It leads to rigidity

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 28

 TOPPERS COMMERCE ACADEMY

ii. It may not work in a dynamic environment

iii. It reduces creativity
iv. It involves huge costs
v. It is a time-consuming process
vi. It does not guarantee success
2. The above limitations can be removed through the following measures:

i. The company must specify its time limit to achieve the desired objectives.
ii. A proper budget should be prepared to meet the requirement of the plan.
iii. Business Environment should be carefully analyzed.
iv. SWOT Analysis(Strength, Weakness, Opportunities, Threats) should be applied
by the managers.
v. Plans made should be flexible.

GAYA COLLEGE MORE,KHELPARISHAR ,GAYA Page 29