UNIT II - PLANNING

Nature and purpose of planning – planning process – types of planning – objectives – setting
objectives – policies – Planning premises – Strategic Management – Planning Tools and
Techniques – Decision making steps and process.

2.1 PLANNING:
✓ Deciding in advance a future course of actions to achieve common objective.

Definition
✓ According to Koontz and O’ Donnell,” Planning is deciding in advance what, how, when and who
is to do it”.
✓ Planning involves selecting missions, objectives and the actions to achieve them.
✓ It requires decision making that is, choosing among alternative future course of action.

2.1.1 NATURE AND PURPOSE (OR) CHARACTERISTICS OF PLANNING

Q1. Discuss in detail about the nature and purpose of planning. [Dec 2014, May 2016] (or)
Explain the nature and purpose of planning. [Dec 2007] (Or)Explain the principle of planning.
[May 2012]
Various characteristics or features are identified as follows
Planning
✓ A primary function.
✓ A dynamic process.
✓ An intellectual process.
✓ Based on objectives and policies.
✓ Selective process.
✓ Pervasiveness of planning.
✓ An intellectual process.
✓ Directed towards efficiency.
✓ Focus with future activities.
✓ Activities based on facts.
✓ Flexibility of planning.

a) Planning – a primary function:

❖ Planning is the first and foremost function of management.
❖ It precedes all functions such as organizing, directing, controlling, etc.
❖ All other functions of management largely depend on planning.
b) Planning – a dynamic process:
❖ Planning is a continuous managerial function.
❖ It is a never-ending activity of a manager of an enterprise.
❖ Most of the plans are modified, revised according to the changes in the circumstances.
c) Planning – based on objectives and policies:
❖ Planning process involves setting of objectives to be achieved and determining the technique for
achieving those objectives.
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 ❖ The various techniques such as polices, programmes, procedures are formulated.
d) Planning – selective process:
❖ For achieving a particular objective, there are number of alternatives available.
❖ The planning manager has to select only one alternative which is best suited to the firm.
e) Pervasiveness of planning:
❖ Planning is generally considered as function of top-level management, but it is not true.
❖ Planning function should spread or make available throughout the organization.
f) Planning – an intellectual process:
❖ Planning is a mental activity.
❖ It is process where a number of activities are to be taken to decide the future course of action.
g) Planning is directed towards efficiency:
❖ Planning is directed to increase the efficiency of the firm.
❖ Planning is an intellectual activity that aims the best way of doing things.
h) Planning – Focus with future activities:
❖ It forecasts the future situation in which the organization has to function.
i) Flexibility of planning:
❖ Planning is always dynamic.
❖ Therefore, an adjustment needed between various factors and planning.
j) Planning is based on facts:
❖ Planning is not a guess work or trial and error method.
❖ Planning is based on objectives and forecasts.

2.1.2 Objectives / Importance

Q2. Discuss the importance of Planning. What are the objectives of planning? [May 2016]
✓ Planning has a great importance in all types of organizations.
✓ Organizations often fail not because of lack of resources but because of poor planning.
✓ It is necessary to plan due to the following reasons,
❖ Planning is a primary function of organization.
❖ Planning guides in decision-making.
❖ It helps in achieving objectives.
❖ It is done to cope with uncertainty and change.
❖ It helps in facilitating control.
❖ It also helps in coordination planning increases organization effectiveness.

i. Planning-Primary function:
• Planning is a primary function of an organization which precedes all other functions.
ii. To achieve objectives:
• Planning is directed towards the attainment of organization objectives.
• Planning serves as a bridge between present and future objectives.
iii. To cope up with uncertainty and change:
• There is a continuous change in the environment.
• A good organization has to work in accelerating change.
• This change is reflected in both tangible and intangible forms.
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 • Tangible changes are in the form of changes in technology, market forces, government regulations
etc.
• Intangible changes are in the form of changes in attitude, value, culture etc.
iv. To facilitate control:
• Planning provides the standards with which actual performance can be measured.
• Corrective action can be taken wherever necessary.
• Without planning, we do not know what to control.
v. To help in coordination:
• All the managerial functions lead to coordination in the organization.
• But real coordination begins with the planning stage.
vi. To increase organizational effectiveness:
• The term effectiveness means that the organization is able to achieve its objectives within the given
resources.
• Planning states the objectives of the organization in the context of given resources.
vii. To guide decision – making:
• Planning creates a better relation among various decisions.
• It serves as framework for making national decisions.

2.1.3 Advantages of Planning

Q3. What are the advantages and limitations of planning? (or) Mention any four advantages
and limitations of planning. [May 2011]

i. Helps in achieving objectives:

• Planning concentrates more on setting goals or objectives of an organization.
ii. Better utilization of resources:
• Planning gives clear cut direction on what to produce and how to produce.
• Therefore, there is a possibility of utilizing the resources effectively.
iii. Economy in operation:
• Better utilization of resources leads to economy in operation.
iv. Reduces uncertainty and risk:
• Planning enables the enterprise to make an adequate adjustment to adapt to future changes.
v. Improves competitive strength:
• Planning helps management to adopt modern methods of operation and to improve the quality of the
product to attract the customer.
vi. Effective control:
• Planning determines the time for starting and completing the projects, set standards of performance.
• It enables the mangers to control the activities.
vii. Coordination:
• Planning enables effective coordination of all managerial fractions well-defined objectives.
• Unity of direction well established policies, procedures and programmes.

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viii. Encourages Motivation:
❖ A well-prepared plan encourages the employee’s morale and confidence of the managers and also it
gives them a sense of effective participation.
ix. Guides in decision-making:
❖ Planned targets serve as the criteria for the evaluation of different alternatives so that the best
course of action may be chosen.
x. Provides decentralization:
❖ a well-prepared plan will always facilitate the delegation of authority to lower levels of
management.
xi. Anticipation of crisis:
❖ Careful planning can reduce their internal organizational conflicts.

2.1.4 Limitations of Planning:

In spite of various advantages of planning, it suffers from the following limitations.
➢ Lack of accurate information:
✓ Planning is done for future.
✓ The accuracy and reliability of forecasts are doubtful.
✓ If the forecasting period increases because future is quite uncertain.
➢ Time and Cost:
✓ Planning is time-consuming process.
✓ It involves many courses of action, such as collection of necessary information, careful analysis
and interpretation etc.
➢ Inflexibility:
✓ Planning may result integral rigidity in managerial work.
✓ Such rigidity leads to delay in work performance.
✓ Many times, changes are not accepted even though they are unavoidable.
➢ Delay during emergency period:
✓ During emergencies, immediate and on the spot actions are necessary which are not possible
under planning.
➢ False sense of security:
✓ It makes the management having a false sense of security unless the plans are reviewed and
revised periodically.

2.1.5 Features of a good plan

✓ Based on clearly defined objectives.
✓ Simple, easily understandable.
✓ Flexible or adaptable to changing conditions.
✓ Must provide standards for the evaluation of performance and actions.
✓ It should be economical.
✓ It should be practicable.
✓ Prepared with the consultation of concerned persons.
✓ Should be clear, specific and logical.

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2.2 PLANNING PROCESS:
Q4. Explain the steps involved in planning process. [Dec 2007, May 2011, Dec2012, May 2014,
Dec 2014] (or) Explain the general planning process adopted by the business organization.
[May 2017][May 2019]

Identification of Establishing Developing Identification

opportunities objectives planning of alternatives
premises

Quantifying Formulating Selecting an Evaluation of

in terms of derivative alternative alternatives
budget plan
Steps involved in planning process.
✓ Planning is a process that contains number of steps within it.
✓ The planning process or steps given here is mostly applicable for major programmes.
a) Identification of opportunities:
✓ We should identify the possible future opportunities and analyze them early and completely.
✓ Where we stand, What is our strength and weakness
✓ What problem we wish to solve and why, and What we expect to gain
b) Establishment of objectives or goals:
✓ The next step in planning is to establish objectives for the entire organization and then for each
subordinate unit.
✓ Overall objectives give directions to the nature of all other plans of the major departments.
✓ Departmental objectives confirm the overall objectives in the organization.
c) Developing planning premises:
✓ It is the assumption about the environment
✓ It provides the basic framework in which plans operate.
✓ These premises may be internal or external.
d) Identification of alternatives:
✓ The next step is to identify the alternate course of action
✓ Based on organizational objectives and planning premises various alternatives of plans can be
identified.
e) Evaluation of alternatives:
✓ Each alternative course of action is evaluated on the basis of profitability, capital investment, risk
involved etc.
✓ There is no certainty about the outcome of the alternative because it is related with future and
future is uncertain.
f) Selecting alternatives:
✓ If more than one alternative is suitable, then many alternatives may be chosen for execution.
✓ When the situation changes and the selected plan does not provide to be the best, the other
alternative may be tried.
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 g) Formulation of derivative plans:
✓ There are several minor plans required to support and execute the major plan.
✓ These plans are known as derivative plans.
✓ It includes buying raw materials, equipment, recruiting and training personnel, developing new
product etc.,
h) Quantifying in terms of budget:
✓ After decisions are made and plans are set, the meaning to it is to quantify them by converting to
budget.
✓ Budget – expected results expressed in numerical terms.
✓ The overall budget represents the sum total of income and expenses.

2.3 TYPES OF PLANS

Q5. What are the different types of plan? (Or) In detail explain the importance of planning in
the present Indian business environment and highlight the different types of plan. [May 2008]
(or) Explain in detail the various types of planning. [Dec 2016, Dec 2017] (or) Classify the types
of goals organizations might have and the plans they use accomplishment. [May 2018]
Four major types of plans can help mangers achieve their organization’s goals.
➢ Operational plan
➢ Tactical plan
➢ Strategic plan
➢ Contingency plan
✓ Operational plans lead to the achievement of tactical plan which in turn lead to the attainment of
strategic plan.
✓ In addition to these three types of plans, mangers should also develop a contingency plan in case
their original plans fail.
2.3.1 Operational plan
✓ Plans that specify goals, actions, and responsibility for individual functions.
✓ The specific results expected from departments, work groups, and individuals are the operational
goals.
✓ An operational plan is one that a manager uses to accomplish his job responsibilities.
✓ Operational plans can be a single-use plan or an on-going plan.
✓ Standing or ongoing plans are usually made once and retain their value over a period of years while
undergoing periodic revisions and updates.
i) Single-use plans
✓ These plans apply to activities that do not recur or repeat.
✓ A one-time occurrence, such as a special sales program
Program:
✓ Program consists of an ordered list of events to be followed to execute a project.
Budget:
✓ A budget predicts sources and amounts of income and how much they are used for a specific project.

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ii) Standing plans
✓ Standing plans are usually made once and retain their value over a period of years while
undergoing periodic revisions and updates.
Policy:
❖ Policies are general statements that guide manager to handle routine management
responsibilities.
Procedure:
❖ A procedure is a set of step-by-step directions that explains how activities or tasks are to be
carried out.
❖ Most organizations have procedures for purchasing supplies and equipment.
Rule:
❖ A rule is an explicit statement that tells an employee what he or she can and cannot.
❖ Rule is a statement of action specified by top level management.
❖ For e.g. rules concerning the discipline, unauthorised absence from duty.

2.3.2 Tactical plan

✓ A tactical plan is concerned with the lower level units within each division.
✓ Tactics are the means needed to activate a strategy and make it work.
✓ These plans usually span one year or less because they are short-term goals.

2.3.3 Strategic plan

✓ A strategic plan is an outline of steps designed with the goals of the entire organization as whole in
mind.
✓ Strategic planning begins with organization’s mission.
✓ Strategic plans look ahead over the next two, three five or seven more years.
✓ To move the organization from where it is currently to where it wants to be.

Mission:
❖ Mission may be defined as“ a statement which defines the role that an organization plays in
the society”
Objectives or goals:
❖ Both goal and objective can be defined as statements that reflect the end towards which the
organization is aiming to achieve.
Strategies:
❖ Strategy is the determination of the basic long term objectives of an organization.
❖ Adoption of action and allocation of resources necessary to achieve these goals.

2.3.4 Contingency plan

✓ A contingency plan is a plan for a specific situation when things could go wrong.
✓ It is devised by governments or businesses.
✓ During time of crisis, contingency plans are often developed.

On the basis of time period planning is classified as

➢ Long term planning
– Time frame is beyond five years.

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 – It specifies what the organization wants to become in long run.
– It involves great deal of uncertainty.
➢ Intermediate term planning
– Time frame is between two and five years.
– It is designed to implement long term plans.
➢ Short term planning
– Time frame is of one year or less.
– It provide basis for day to day operations.

2.4 OBJECTIVES
Q6. What are objectives? How will you set objectives for a manufacturing organization? [Dec
2006, May 2016, Dec 2018] (or) What are the significance and advantages of Objectives?

✓ Objective is the aim or goal or purpose which an organisation tries to achieve over a varying
periods.
✓ Objectives are described as the end- points of planning.
2.4.1 Definition:
✓ According to Koontz and O'Donnell, "An objective is a term commonly used to indicate the
endpoint of a management programme."

2.4.2 Features of Objectives

✓ The objectives must be predetermined.
✓ A clearly defined objective provides the clear direction for managerial effort.
✓ Objectives must be realistic.
✓ Objectives must be measurable.
✓ Objectives must have social sanction.
✓ All objectives are interconnected and mutually supportive.
✓ Objectives may be short-range, medium-range and long-range.
✓ Objectives may be constructed into a hierarchy.

2.4.3 Nature of Objectives:

1. Objectives have a hierarchy:
✓ Generally, a top level management of an organisation assigning is a part of mission to a particular
department.
✓ Then, the mission is subdivided into few parts and assigned among sections and individuals.
✓ Objectives at all levels in the organisation are interrelated and form a network.
✓ There are two approaches in which the hierarchy can be explained.
i) Top-Down Approach— total organisation is directed through corporate objective provided
by the top level management.
ii) Bottom-up Approach— top level management needs to have information from lower level
management.
✓ Both approaches have certain advantages and disadvantages, to utilize the advantages of both; a
combination of these two is followed.

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2. Objectives form a network:
✓ Objectives and planning, a network of desired results and events is formed. If goals are not
interconnected by a network, then it may not support one another.
✓ The top level management makes sure that the components of the objectives of the network fit one
another.

3. Multiplicity of objectives:
✓ An organisation may have multiple objectives.
✓ It helps to an organisation making balanced goals.
✓ The several objectives may be profit, survival, growth, service to society etc.
✓ For example, an educational institution is having education and research as objectives but it is not
enough.
✓ It would have some of the following objectives:
- Selected highly qualified students.
- Providing training and placement for their students
- Providing higher degrees, such as master degree and doctoral degrees.
- Interacting with industries, if it is engineering colleges.
- Attracting a highly qualified faculty.
- Discovering and organizing new knowledge through research.
✓ Similarly, at each and every level in the management, goals are likely multiple.

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 ✓ The multiplicity of objectives may create problem of giving priorities among different objectives and
harmonizing them.

4. Objectives have a time span:

✓ An organisation must have both short term and long term objectives.
✓ Some objectives may be achieved within a year, these objectives are called short term
objectives, where as other can be achieved over long time period called long term objectives.
✓ Both the objectives need to be integrated so that they reinforce each other.

5. Objectives may be tangible or intangible

6. Objectives must have social sanction since organizations are social units. Their objectives must
confirm to the general needs of the society.

2.4.4 Significance (or) Role (or) Advantages of Objectives

(i) Unified planning:
✓ Clear definition of objectives leads to unified planning.
✓ Various plans are prepared by several people in an organization.
✓ The unifying effect arises when these plans are adjusted to a common objective.
(ii) Direction:
✓ Objectives give a meaning to the activities of an organization.
✓ They provide direction to think and bring into action.
(iii) Individual motivation:
✓ The objectives of an organization specify the purpose of each job
✓ It fixes the individual goals along with the overall organizations goals.
(iv) Basis of decentralization:
✓ Decentralization means assigning some decision-making authorities to lower level people to
perform their work.
✓ It is necessary for large-scale organization.
(v) Basis for control:
✓ Objectives help to keep the activities on the right track.
✓ The actual performance is compared with standard performance.
✓ It will facilitate to control process.
(vi) Co-ordination:
✓ They adjust according to the needs of others, if they know their own and others objectives.

2.5 GUIDELINES FOR OBJECTIVE SETTINGS:

Q7. Illustrate how you will set objectives for a manufacturing organization. [May 2016] (or)
Explain the guidelines for setting objectives? [May 2009]
• An objective setting is a difficult task which requires intelligent coaching by the superior and
extensive practice by the subordinates.
• The list of objectives should not be too long, but it should cover the main features of the job.
• The various criteria for good objectives are summarized as follows.
✓ Objective should cover the main feature of the job.
✓ Objectives must be clearly specified in writing.
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 ✓ The list of objectives should not be too long, wherever it is possible, some objectives should be
combined to make the list reasonable.
✓ Objectives must set by considering the various factors affecting their achievement.
✓ Objectives should be verifiable.
✓ Objectives should clearly indict the organizational mission.
✓ Objectives should be challenging and reasonable.
✓ Objectives should yield specific results when achieved.
✓ Objectives should be coordinated with these of other managers and organizational units.
✓ Objectives should provide timely feedback so that the necessary corrective action can be taken.
✓ Short-term objectives should be consistent when long-term objectives.
✓ Objectives should start with the word ‘to’ and be followed by an action.
✓ Objectives should be periodically reviewed.
✓ Objectives should clearly indicate the resources and authority required for achieving it.
✓ All assumptions underlying the objectives are clearly identified.

2.6 MANAGEMENT BY OBJECTIVES (MBO)

Q8. What is MBO? Discuss the benefits and weakness of MBO. [May2011] (Or)
Define MBO. Describe the benefits & weakness of MBO and ways to overcome them. [May 2009]
(Or) Define MBO and explain the various steps involved in it. [Nov/Dec 2017] (or) What do you
understand by Managing by Objectives (MBO)? What are its advantages and limitations? [April
2010,2012,Nov 2009,2010] (or) Explain in detail about MBO. [Dec 2014] (or) Define MBO and
explain the process of MBO. [May 2018]

2.6.1 Definition
✓ MBO is a process whereby superiors and subordinates sit together to identify the common objectives
and set the results which are to be achieved by subordinates.
✓ MBO is a management system is which each member of the organization effectively participates and
involves himself

2.6.2 Features of MBO

✓ It is a goal oriented rather than work-oriented approach.
✓ It will lead to effective management.
✓ MBO tries to combine the long range goals of organization with short range of organization.
✓ MBO involves the participation of subordinate managers in the goal setting process.
✓ A high degree of motivation and satisfaction is available to employees through MBO.
✓ Periodic review of performance is an important feature of MBO.
✓ MBO increases the organizational capability of achieving goals at all levels.
✓ MBO’s emphasis is not only on goals but also on effective performance.
✓ MBO is not a set of rules, procedures of techniques; it is a particular way of thinking about
management.

2.6.3 The Process of MBO

✓ Management by objectives has been recognized as a system for achieving the organizational
objectives.
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 ✓ The MBO process consists of the following steps:
i. Setting Preliminary Objectives:
✓ Normally, setting of objectives starts from the top-level management. Then, it moves downwards.
✓ The definition of organizational objectives states why the business is started and existed.
✓ The long-term objectives are laid down in the key result areas.
✓ Then short-term objectives are framed taking into account the feasibility of achieving the long-term
objectives.
ii. Fixing key result areas:
✓ These are the areas reference to which organizational health can be measured.
✓ Some examples of KRAs are: (i) Profitability, (ii) Market standing, (iii) Innovation, (iv) Productivity,
(v) Market Performance, (vi) Public responsibility, etc.
iii. Setting subordinate’s objectives:
✓ The organizational objectives are achieved through individuals.
✓ Therefore each individual must know what he is expected to achieve.
iv. Recycling objectives:
✓ It is a two-way process in which superior suggests a goal that is acceptable to the subordinates.
v. Matching resources with objectives:
✓ It certain resources re not adequately available, the objectives of an organization are changed
accordingly.
✓ The allocation and movement of resources should be done in consultation with subordinates.
vi. Periodic Performance Reviews:
✓ At specified intervals, the superior and subordinates should held meetings in which they discuss the
progress in the accomplishment of objectives.
vii. Appraisal:
✓ Appraisal aspect of MBO tries to measure whether the subordinates is achieving his objectives or
not.
✓ The main purpose of the appraisal is to find out the shortcomings in achieving objectives and also to
remove them promptly.
✓ It ensures that everything is going on according to the plan.

2.6.4 Benefits of MBO

MBO offers the following benefits:
➢ Improvement of managing:
✓ MBO forces managers to think about planning for end results rather than merely planning
activities or works.
✓ MBO produces clear and measurable performance goals.
✓ Goal is created and appropriate action plans are formulated for goal achievement.
➢ Clarification of organization:
✓ Forces managers to clarify organizational roles, authorities and responsibilities.
➢ Personnel satisfaction:
✓ When the individuals are involved in setting goals, they feel satisfaction that they are important
for the organization.
✓ This is possible for two reasons:

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 1. Participation in objective settings
2. Rational (balanced) performance appraisal.
➢ Team work:
✓ MBO results a better communication between superiors and subordinates which reduces
conflicts.
✓ There is an integration of lower level goals with organizational goals.
➢ Development of effective control:
✓ MBO not only provides a better planning but also aides in developing effective control.
✓ Control involves the measuring of results and taking corrective action, if any derivations arise
from plans.
➢ Fast decision-making:
✓ Decision is taken by the management very quickly.
✓ The reason is that each worker knows the purpose of taking the decision and does not oppose the
decision.

2.6.5 Weakness of MBO

The main problems and weakness of MBO are as follows:
➢ Failure to teach the philosophy of MBO:
✓ MBO fails to explain the philosophy.
✓ Most of the executives do not know what is MBO, how MBO works and why is MBO necessary and
how participants can benefit by MBO
➢ Failure to give guidelines to goals setters:
✓ MBO does not provide any guidelines for setting goals.
✓ Therefore, often managers are neither taught how to set the objectives nor familiarized with the
various plans and policies of the organization.
✓ In such cases, each department ends up going its own way.
➢ Difficulty of setting goals:
✓ MBO requires verifiable objectives against which performance can be measured.
✓ Setting of objectives is more difficult is some areas especially where they are cannot be presented
in quantitative form.
✓ Objectives are more in the form of statement rather than in quantitative form.
✓ Some objectives can be quantified and can be broken in terms of time period but others lack this
characteristic for further course of action.
➢ Emphasis on short-terms goals:
✓ MBO emphasis only on short-term objectives.
✓ It does not consider the long-term objectives.
✓ By emphasizing short range objectives, performance appraisal becomes easier, but there is always
a danger in emphasizing short-term objectives at the cost of long-term objectives.
➢ Danger of inflexibility:
✓ MBO is rigid one.
✓ Objectives should not be changed under MBO.
✓ It introduces inflexibility in the organization.

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 ✓ In present situations, an objective cannot be valid forever. It needs a change with the change in
environment.
➢ Time consuming:
✓ MBO is a time-consuming process.
✓ Much time is needed by senior people for framing the MBO.
✓ Particularly, at the initial stage, several meetings may have to be held to create confidence in
subordinates.
✓ The formal periodic reviews, and final appraisal sessions also consume a lot of time.
➢ Increased paper work:
✓ MBO contains many newsletter, instructions, booklets, training manuals, performance appraisal
reports etc.
✓ This increased paper work reduces the effectiveness of MBO is in many organizations.

2.7 POLICIES
Q9. Define policy. Explain the types of policy.
✓ A policy is a general statement formulated to provide guidance in decision-making.
✓ Policies are general statements of understanding which guide in decision making of subordinates.
✓ Policy is a continuing decision as it provides answers to problems of recurring (repetitive nature).
✓ For eg: If a management has adopted the policy of seniority based promotion, the department
managements need not seek guidance from top management again with respect to promotional
decisions.

2.7.1 Definition:
✓ According to Koontz and Weihrich, “Policies are general statements of understandings which
guide or channel thinking in decision-making of subordinates”.

2.7.2 Importance of policy:

• They facilitate quick and correct decisions (guides to thinking and action)
• Save time and effort.
• Permit delegation of authority to managers at lower level.
• Promote co-operation and consistency of action.
• Help to reduce deviations from planned course of action

2.7.3 Types of policies

a. Organizational policies:
✓ Overall policies of an organization and formulated by top management
✓ It is used uniformly throughout the organization.
b. Functional policies:
✓ Functional policies are meant for specific functions or department.
✓ It is derived from organization policies to guide the effort of people in particular department and
applied in particular department
✓ (eg:) Production policy, Financial policy

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c. Originated policies:
✓ Formulated by top managers on their own to guide the action of their subordinates
✓ Generally put in writing in a policy manual
d. Formulated Policies:
✓ Formulated on the appeal (or) request of subordinates (lower level management).
✓ Regenerated by top level managers and flows down the level of management.
e. Written Policies:
✓ Clearly defined and explicit declaration in writing.
✓ They are definite and cannot be interpreted.
f. Implied Policies:
✓ Sometimes policies may not be clearly stated.
✓ The actions of manager at higher level provide guidelines for action at lower level.
✓ Oral understandings can be inferred from the decision of managers.
g. Imposed policies:
✓ Policies imposed by external forces like government, trade union etc.,

2.7.4 Nature of policy / Characteristics of Sound Policy

Q10. Discuss in Brief about the Nature of Policy. [April 2014] (or) Enumerate the
characteristics of sound policy and process of policy making.

✓ A policy is a broad statement formulated to provide guidance in decision-making. “Policies are

general statements of understandings which guide or channel thinking in decision-making or
subordinates”.
2.7.4.1 Nature of Policy:
✓ A sound policy should have the following characteristics:
➢ Relationship to organizational objectivities:
❖ Policies should be based on objectivities and should contribute towards the attainment of
objectivities.
➢ Clarity of policy:
❖ It should be easily understandable.
❖ If there is a problem of misinterpretation, the organization should provide the method for
overcoming the ambiguity.
➢ A policy is a guide to thinking in decision-making:
❖ A policy must prescribe the criteria for current and future action.
➢ Policies should be written:
❖ It creates an atmosphere in which individuals can take actions with confidence knowing fully the
impact of a particular action.
❖ A written policy is easier to communicate through an organizational manual.
➢ Communication of Policies:
❖ A system should be developed to communicate the policies.
❖ A written policy can be communicated easily.
➢ Consistency of Policies:
❖ A policy should provide consistency in the operation of organizational functions.
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 ❖ The formulation of policies should be taken in an integrated way so that policies in each area
contribute to other areas also.
➢ Balance of Policy:
❖ It should be stable enough to assume people that there will be no drastic overnight change.
➢ Planned formulation:
❖ All policies should confirm to the norms of ethical behavior and standards.

2.7.4.2 Essentials of Policy Formulation:

The essentials of policy formation may be listed as below:
✓ A policy should be definite, positive and clear. It should be understood by everyone in the
organization.
✓ A policy should be translatable into the practices.
✓ A policy should be flexible and at the same time have a high degree of permanency.
✓ A policy should be formulated to cover all reasonable anticipatable conditions.
✓ A policy should be founded upon facts and sound judgment.
✓ A policy should conform to economic principles, statutes and regulations.
✓ A policy should be a general statement of the established rule.

Limitations:
✓ Policies are formulated under particular set of conditions.
✓ Do not remain the same at all times.
✓ Polices require constant review and revision.
✓ No formula for all problems.
✓ It serves as guidelines to thinking and action.
✓ It does not provide instant solution to problems.
✓ Not a substitute for human judgment.
✓ It only points the limit within which the judgment is to be exercised.

2.8 PLANNING PREMISES

Q11. What are planning premises? Explain the classifications of planning premises.

Definition:
✓ The planning premise is a set of assumptions made about the environment during a planning
process.
✓ There are mainly three category of planning premises
a. Internal and external premises
b. Tangible and intangible premises
c. Controllable and non-controllable premises

2.8.1 Internal and external premises:

✓ Internal premises include assumptions made on factors that are related to internal of the company
such as policy, capital investment, competence of managers etc.
✓ External premises include assumptions about market, competition, technological changes
government policy etc.

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2.8.2 Tangible and intangible premises:
✓ Premises that can be verifiable are called tangible premises such as market demand,
demographics.
✓ On the other hand factors such as political stability, economic environment are intangible premises

2.8.3 Controllable and non-controllable premises:

✓ Controllable premises- Factors that can be controlled by a company such as production capacity.
✓ Non-controllable premises- Factors such as tax policy or import policy.

Planning premises may be external or internal.

External Planning premises relate to conditions outside the business.

➢ It includes assumptions about the market demand and nature of competition, laws affecting the
business, availability of resources, and changes in the methods and techniques of production.
❖ External environment may create problems for an organization.
❖ It may also provide opportunities for making profits.
❖ If managers have advance knowledge of the likely changes in the external conditions, they can take
steps to solve future problems and take maximum advantage of business opportunities.
❖ Government policies and legal factors, for example, affect the decisions of managers to a great
extent.
❖ Government today control and regulate the activities of business units in a number of ways.
❖ It may encourage some business activities and discourage others.
❖ It may regulate business activities by laying down rules for prices, wages, imports, exports,
working hours, safety conditions etc.
❖ Advance knowledge of the likely change in government policy during the plan period enables
managers to take correct business decisions.

Internal planning premises relate to conditions existing within an organization.

➢ These conditions include cost, methods and techniques of production, employee’s requirements of
machinery and equipment, etc.
❖ All these things depend upon sales.
❖ Estimating future sales is the key to determine all other requirements.
❖ Managers should make area-wise estimates of sales for the plan period.
❖ Once they have an idea of the likely sales, they can easily determine the requirements of materials,
machines, employees and capital.
❖ The study of external conditions enables a business unit to know the opportunities available in the
market.
❖ Hundreds of opportunities are available to a business unit.
❖ It has to decide what it will produce and distribute in the basis of internal premises.

2.9 STRATEGIES
Q12. Write short notes on strategy. [Nov/Dec 2012, April/May 2010, 2013] (or) What are the
nature, need and importance in strategy?

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 ✓ Strategy is the determination of basic long-term objectives and adoption of course of action and
allocation of resources to achieve these goals.
✓ A Strategy may also be defined as a special type of plan prepared for meeting the challenge posted by
the activities of competitors and other environment forces.
✓ To formulate an effective strategy, management must anticipate accurately the plans of competitors
and look them from view point of rival firms.
✓ Strategy – basic plan to choose objective.
✓ Tactics – are the means of implementing the plan.

2.9.1 Nature of Strategy:

The definitions of Strategy provide the following features:
✓ Strategy relates an organization its environment particularly the external environment.
✓ Strategy is the right combination of both internal and external factors. Such as strength and
weakness to take various course of action.
✓ Strategy is a contingent plan, as it is designed to meet the demands of a particular situation.
✓ Strategy may involve the contradictory action.
✓ Strategy provides a guideline for future course of action
✓ Strategy is forward looking.
✓ Strategy is flexible and dynamic.
✓ Strategy is generally formulated by top level management.

2.9.2 Need and Importance of Strategies:

✓ Strategy of an organization is more helpful for achieving environmental challenges.
✓ A long-term guide towards the achievement of objectives.
✓ More efficient and effective utilization of organizational resources.
✓ It integrates the different departments and groups of the organization.
✓ It helps in maintaining or increasing the firm’s market share in the face of competition.

2.9.3 Strategic Planning Process / Strategic Formulation Process (six step process)
Q13. Explain the Strategic management process.

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 ➢ Mission and objectives:
✓ Strategic planning process starts with the determination of organizational mission and
objectives.
✓ The basic purpose which the organization has been started should be clearly indicated.
✓ This process is known as mission.
✓ Objectives are the end result which an organization tries to achieve.
✓ Mission – Statement of its purpose.
✓ Managers must identify the current goals, and strategies.
➢ Environmental analysis
✓ Ay organization must know the kind of environment in which it has to work.
✓ The basic objective of strategies is to integrate the organization with its environment.
➢ Corporate analysis:
✓ The strength and weakness of the organization are analyzed in corporate analysis, such as a
source analysis.
✓ It will enable the organization to improve on its strength and to minimize its weakness.
➢ Identification of alternatives:
✓ Strategic alternatives are developed on the basis of an analysis of both external and internal
environment.
➢ Strategic decision-making
✓ The stage has to decide the acceptable alternative among several alternatives which fits with the
organizational objectives.
➢ Implementation, Review and Control:
✓ Once, the strategy has been chosen, it is put into action by translating it into tactical and
operational plans.

2.9.4 TYPES OF STRATEGIES

Q14. Explain the types of Strategies. [Dec 2012 , Dec 2017]
a. Master Strategy (Corporate strategy) –
✓ Specifies the business company is in (or) wants to be in.
✓ Sets the task of organization and serves as the basis for all other plans.
✓ Determines nature and scope of the enterprise.
✓ Specifies what business a company wants to do continuing to serve the same clients with same
strategy products.

b. Stability strategy:
✓ Organization following this is satisfied with its performance and wants the same rate of growth.
✓ It doesn’t grow but doesn’t fall.
✓ The strategy can be followed when environmental is stable, limited customers.
✓ Continues to provide the same product or services.

c. Growth strategy:
✓ Organization wants to raise its level of its performance or rate of growth.
✓ Following ways adopted for this purpose.

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 ✓ Sales of existing products in existing markets. (Market penetration)
✓ Increasing the products or number of markets served by current businesses or in new businesses.
✓ Increasing the revenue, Increasing the number of employees.

d. Integration Strategy:
Organizations grow by (i) concentration (ii) vertical integration (iii) horizontal integration.
Taking over (or) combining with other firm.
❖ Concentration: Focuses on its primary line of business and increase the number of products.
Eg: CRI pumps 250 crores, 75000 pumps over 70 countries
❖ Vertical integration: Either back ward (or) forward or both – original business
❖ Backward integration: Organization becomes own suppliers and can control its inputs.
(e.g) eBay, Amazon, Flipkart i.e., online payment business
❖ Forward integration: Organization becomes its own distributor. (e.g) Apple company more than
80 retail stores.
❖ Horizontal integration: organization grows by combining with competitors. (e.g) Hero Honda,
Maruthi Suzuki.

e. Renewal strategies: declining performance

i. Turn around - organization problem was more serious
ii. Retrenchment -short time renewal for minor performance problems shown performance problem
– revitalize to compete once again, stabilise an organization. Advertisement, reduce cost (free)

f. Functional Strategy (or) sub strategy –

✓ They are used for development of resources to achieve specific objective.
✓ Such strategies are developed in different functional areas of business, (e.g.) production, marketing
✓ For e.g. an intensive advertising campaign may be a sub strategy to master strategy for capturing
25% of market demand.

2.9.5 Major Kinds of strategies and Policies:

➢ Finance:
• Financial strategy is important for every organisation.
• Every business organization must have a clear strategy for financing and its operation.
➢ Organization:
• Organizational strategy may vary with the type of organizational structure which its uses.
➢ Personnel:
• It deals with topics, such as union relations, compensation, selection, hiring training an appraisal
and also the special areas, such as job enrichment.
➢ Produces or Services:
• Products or services determine what an enterprise is or will be.
• A product or service strategy should give answer to the following questions:
❖ What is our business?
❖ Who are the customers?
❖ What are the expectations of our customers?

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➢ Market:
• Marketing strategies are designed in such a way that it should guide the managers getting products
or services to customers and also encouraging the customers to buy.
❖ Who are the customers and why do they buy?
❖ How do our customers buy?
❖ How is it best for us to sell?

2.9.6 Effective Implementation of Strategies

Eight important recommendations should be considered for the success of implementing strategies
✓ Communications of strategies.
✓ Developing and communicating planning premises.
✓ Developing appropriate operational plans.
✓ Periodic review of strategy.
✓ Developing contingency strategies and programmes.
✓ Developing appropriate organization structure.
✓ Continuing to emphasize planning and implementing strategy.
✓ Setting proper organizational climate.

2.9.7 Tools for Developing Organizational Strategies

Q15. Discuss some of the tools for developing organizational strategies. [May 2015]
a. SWOT Analysis :( Identifying Organizational Opportunities)
✓ SWOT means Strength, Weakness Threats and Opportunities.
✓ The SWOT matrix is a framework for systematic analysis that facilitates matching of the external
threats and opportunities with internal Strength and weakness.
✓ SWOT analysis can be carried as
❖ External Analysis - Identifying strategic opportunities and threats in the operating environment.
❖ Internal Analysis – Identifying internal strength and Weakness
✓ Based on SWOT matrix the strategies are classified as

➢ The SO strategy(“ Maximize – Maximize”):

✓ It uses company’s strengths to take advantage of opportunities.
✓ If they have weakness, they will try to overcome by making them strengths.
✓ If they face threats, they will manage with them to focus on opportunities.

➢ The WO strategy(“ Minimize – Maximize”):

✓ It attempts to minimize the weakness and maximize the opportunities.
✓ Thus a firm with weakness in some areas either develop them within the enterprise or from
outside to take advantage of opportunities in the external environment.

➢ The ST strategy (“ Maximize – Minimize”):

✓ It is based on using organization’s strengths to deal with threats in the environment.
✓ Thus a firm uses its technological, financial or marketing strength to cope with threats of a new
product introduced by its competitor.

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 ➢ The WT strategy(“ Minimize – Minimize”):
✓ It aims to minimize both weakness and threats.
✓ It may requires to undergo a joint venture, retrench or even liquidate.

SWOT Matrix
Internal Factors
Internal Strengths (S)
Internal Weaknesses(W)
Eg. Strength in mgt,
Eg. Weaknesses in areas
operation, Finance,
shown in the box of strength.
Marketing, R&D Engineering
External Factors
External Opportunities (O) SO strategy Maxi–Maxi. WO Strategy Mini–Maxi
Consider risk also. Potentially the most successful Eg. Developmental strategy to
Eg. Current and future Economic strategy, utilizing the overcome weakness in order to
condition, political and social Organisation strength to take take advantage of opportunities
changes, New product services advantage of opportunities
and Technology
External Threats (T) ST Strategy Maxi –Mini WT Strategy Mini Mini
Eg. Lack of energy, competition Eg. Use of strengths to cope Eg. Retranchement, Liquidation,
and areas similar to those shown with threats to avoid threats Joint-venture to minimise both
in Opportunity box weakness and threads.

b. Blue ocean strategy:

✓ The blue ocean strategy focuses on the uncontested market by offering a product or service that is
unique in a market place where there is no competitor.
✓ Blue ocean strategy attempts to develop and create market for new products or services.
✓ It is a strategy that requires that the company is commitment of creation of for the customer by
offering something special with low cost and price.

c. BCG Portfolio analysis

✓ BCG Portfolio analysis is mainly used for Multi Category / Multi Product companies.
✓ All categories and products together are said to be Business portfolio.
✓ Thus, the various products of business portfolio may move forward by a different pace and with a
different strategy.
✓ The BCG analysis actually helps you in deciding which products in the business portfolio are
actually profitable
✓ Once you know which businesses stand where in your business portfolio, you also come to know
which businesses need investments, which needs harvesting (making money), which needs
divesting (reducing investment) and which needs to be completely taken out of the business
portfolio.

d. BCG matrix
✓ Developed by the Boston Consulting Group
✓ Considers market share and industry growth rate

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 ✓ Once the business has been classified, they are placed into four quadrant of the matrix. The
quadrants of the matrix are divided in to
➢ STARS – High market share and high growth rate (high competition)
➢ Cash Cows - High market share and low growth rate (Most Profitable)
➢ Question marks – Low market share and high growth rate (uncertainty)
➢ Dogs - Low market share and Low growth rate (Less profitable)
✓ At a certain level, the company get to make a decision on which product to continue and which
product to be divested.
✓ Which product can give new returns with good investment, and which products are reaching the
apex of market share

2.10 PLANNING TOOLS AND TECHNIQUES:

Q16. Explain in detail about planning tools and techniques. (or) Discuss on Planning Tools and
Techniques.

i. Environmental Scanning
✓ The screening of large amounts of information to anticipate and interpret change in the
environment.
ii. Competitor Intelligence
✓ The process of gathering information about competitors— who they are; what they are doing.
✓ Is not spying but rather careful attention to readily accessible information from employees,
customers, suppliers, the Internet, and competitors themselves.
✓ May involve reverse engineering of competing products to discover technical innovations
iii. Global Scanning
✓ Screening a broad scope of information on global forces that might affect the organization.
✓ Has value to firms with significant global interests.
✓ Draws information from sources that provide global perspectives on world-wide issues and
opportunities.
iv. Forecasting
Q17. Write short notes on Forecasting.

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 ✓ Forecasting is the process of predicting future conditions that will influence and guide the activities,
behaviour and performance of the Organization.
✓ Definition – “Forecasting is the formal process of predicting future events that will significantly
affect the functioning of the enterprises”.
Forecasting Techniques
✓ Qualitative forecasting uses expert opinions and judgments.
✓ Quantitative forecasting uses mathematical and statistical analysis.
✓ All forecasts rely on human judgment.
✓ Planning involves deciding on how to deal with the implications of a forecast.
v. Statistical data:
✓ Statistical analyses of innumerable aspects of a business operation and the clear presentation of
statistical data, whether of a historical or forecast nature are, of course, important to control.
✓ Some managers can readily interpret tabular statistical data, but most managers prefer presentation
of the data on charts.
vi. Benchmarking
✓ Use of external comparisons to better evaluate current performance and identify possible actions for
the future.
✓ Adopting best practices of other organizations that achieve superior performance.
vi. Types of Resources
The assets of the organization
✓ Financial: debt, equity, and retained earnings
✓ Physical: buildings, equipment, and raw materials
✓ Human: experiences, skills, knowledge, and competencies
✓ Intangible: brand names, patents, reputation, trademarks, copyrights, and databases
vii. Allocation of Resources
Budgets
✓ Numerical plans for allocating resources (e.g., revenues, expenses, and capital expenditures).
✓ To improve time, space and use of material resources.
✓ The most commonly used and most widely applicable planning technique for organizations.
Schedule
✓ Plans that allocate resources by detailing what activities have to be done, the order which they are to
be completed, who is to do each, and when they are to be completed
✓ Represent the coordination of various activities.
Gantt chart
✓ A bar graph with time on the horizontal axis and activities to be accomplished on the vertical axis.
✓ Shows the expected and actual progress of various tasks.
Load Chart
✓ A modified Gantt chart that lists entire departments or specific resources on the vertical axis.
✓ Allows managers to plan and control capacity utilization.

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vii. Allocating Resources: Analysis
Program Evaluation and Review Technique (PERT)
✓ A flow chart diagram that depicts the sequence of activities needed to complete a project and the
time or costs associated with each activity.
✓ Events: endpoints for completion.
✓ Activities: time required for each activity.
✓ Slack time: the time that a completed activity waits for another activity to finish so that the next
activity, which depends on the completion of both activities, can start.
✓ Critical path: the path (ordering) of activities that allows all tasks to be completed with the least
slack time.
Steps in developing PERT network
✓ Identify every significant activity that must be achieved for a project to be completed.
✓ Determine the order in which these events must be completed.
✓ Diagram the flow of activities from start to finish, identifying each activity and its relationship to all
other activities.
✓ Compute a time estimate for completing each activity.
✓ Using the network diagram that contains time estimates for each activity, determine a schedule for
the start and finish dates of each activity and for the entire project.

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A Visual PERT Network for Constructing an Office Building

Critical Path: A - B - C - D - G - H - J - K
viii. Breakeven Analysis
✓ Is used to determine the point at which all fixed costs have been recovered and profitability begins.
✓ Fixed cost (FC)
✓ Variable costs (VC)
✓ Total Fixed Costs (TFC)
✓ Price (P)
✓ The Break-even Formula:
Total Fixed Costs
Breakeven :
Unit Price - Unit Variable Costs
Break even Analysis

ix. Linear Programming

✓ A technique that seeks to solve resource allocation problems using the proportional relationships
between two variables.

2.11 DECISION MAKING

Q18. Discuss on types of decision.
✓ Decision –making is defined as the process of choosing a course of action among alternatives to
achieve a desired goal.
✓ It is one of the functions of management and also a core process of planning.

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2.11.1 Characteristics of Decision Making:
Q19. Discuss in detail about the characteristics and types of decision making. [Dec 2011,2008]
(or) Is Decision making a rational process? Discuss. [Dec 2017]
✓ Decision making implies that there are various alternatives and the most desirable alternative is
chosen to solve the problem or to arrive at expected results.
✓ The decision-maker has freedom to choose an alternative.
✓ Decision-making may not be completely rational but may be judgmental and emotional.
✓ Decision-making is goal-oriented.
✓ Decision-making is a mental or intellectual process because the final decision is made by the
decision-maker.
✓ A decision may be expressed in words or may be implied from behaviour.
✓ Choosing from among the alternative courses of operation implies uncertainty about the final result
of each possible course of operation.
✓ Decision making is rational. It is taken only after a thorough analysis and reasoning and weighing the
consequences of the various alternatives.

2.11.2 Types of decision making

a. Organization– Such decisions can be delegated to others
b. Personal – Such decisions cannot be delegated to others
c. Routine
✓ Repetitive in nature.
✓ It covers short term period.
✓ Well established procedures used for taking such decisions and therefore little thought and
deliberation is needed.
d. Strategic
✓ A mistake in such derision will affect the entire organization.
✓ Much thinking and deliberation is required in such decisions.
✓ For eg: development of new product is a strategic decision, setting up of new plant (change the
question)
e. Programmed decision:
✓ Established procedures to take decision
✓ Repetitive in nature for which systematic procedures already exist in the organization
✓ Therefore need not be treated as an unique case each time.
✓ It requires little judgment
✓ For eg:
➢ If an employer is absent without leave.
➢ The supervisor need not refer it to higher authorities.
➢ These decisions are made at lower levels of management.
f. Non programmed decision – novel and unstructured in nature
✓ Deal with non-routine problems, unexpected situations.
✓ Taken by top level.
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 ✓ Opening of new branch number of set of procedures can be designed for them.
✓ It requires much thought and judgement.
✓ Policies are of fundamental nature as they affect the whole organization.
g. Operating decisions:
✓ Made for executing policy decision.
✓ Concerned with day to day operations of business.
h. Group decision making is better because knowledge and imagination of group is better than that of
individuals, because it improves co-operation and coordination in the organization
2.11.3 Disadvantages:
• Disagreement among group members may lead to conflict and ill feelings between them.
• Group decisions are more time consuming.

Q20. Comparison of Programmed decisions and Non programmed decisions

Characteristics Programmed decisions Non programmed decisions

Type of problem Structured Unstructured
Managerial level Lower level Upper level
Frequency Repetitive, routine New, unusual
Information Readily available Incomplete
Goals Clear, specific Vague
Time frame for solution Short Relatively long
Solution relies on Procedures, rules, policy Judgment and creativity

2.11.4 Decision making process or steps.

Q21. Explain in detail the decision making process with examples. Also explain any two decision
making tools. [May 2008, May 2016, Dec 2016] (Or) State and explain the decision making
process or steps. [May 2014, May 2015, Dec 2018] (or) Discuss the 8 steps of decision making
process. [May 2017][May 2019]

✓ Identifying a problem
✓ Identifying decision criteria
✓ Allocating weights to criteria
✓ Developing alternatives
✓ Analyzing alternatives
✓ Selecting an alternative
✓ Implementing the alternative
✓ Evaluation (of decision effectiveness)
i) Identifying a problem
✓ Problem is a discrepancy (difference) between an existing and a desired state.
✓ Example: “The manager has resigned, and we need another manager”
✓ Here the phrase “manager has resigned” reflects the current state while “need another manager”
represents a desired state.

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ii) Identifying decision criteria
✓ The word criteria, is defined as “a standard by which something can be judged”.
✓ A decision criteria therefore, is the basis of a decision, which outlines the relevant and important
factors for a decision.
✓ And implicitly, it also defines what is not important.
✓ In the above-cited scenario, the decision criteria may include the following factors:
• Relevant qualifications
• Leadership skills
• Communication skills
• Planning and analytical skills
• Professional experience

iii) Allocating weights to criteria

✓ The next step in the decision making process is prioritization.
✓ Prioritization is achieved by assigning quantitative weights to each criteria element.
✓ The weight age defines the relative significance of each element.
Criterion Weight
Relevant qualifications 3
Leadership skills 5
Communication skills 3
Analytical skills 4
Professional experience 1

iv) Developing Alternatives

✓ Involves defining the possible alternatives (or choices) that would resolve the problem.
✓ In our case, the alternatives would be a list of candidates or job applicants.

v) Analyzing alternative
✓ Alternatives are rated and analyzed on the basis of the criteria.
✓ The rating can be based on a specified scale, say 1 – 5 etc.
✓ Rating may be subjective in nature and thus, may depend on the judgment of the individual(s).
Criteria Rating: Example
CANDIDATES RATING AND ASSESSMENT

Candidate Qualification Leader-ship Communication Analysis Experience

Surya 3 3 3 1 1
Roger 2 1 4 2 2
Sathish 4 2 3 2 3
Surender 2 5 2 4 1
Karthik ram 4 5 4 3 2

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Analyzing & Assessment: Example
EVALUATION OF CANDIDATES
Candidate Qualification Leadership Communication Analysis Experience Total
Surya 9 15 9 4 1 38
Roger 6 5 12 8 2 33
Sathish 12 10 9 8 3 42
Surender 6 25 6 16 1 54
Karthik ram 12 25 12 12 2 63

vi) Selecting an alternative

✓ Involves choosing the best alternative, based on the above rating and analysis.
✓ Generally implies selecting the alternative with the highest score.

vii) Implementing the alternative

✓ Putting the decision into action.
✓ Involves clear communication of the decision to all concerned and obtaining their commitment.

viii) Evaluation
✓ Evaluation forms an integral part of any process.
✓ Involves evaluation of the outcome based on the desired goal and criteria.
✓ Involves assessing the effectiveness and efficiency of the outcome (or the entire process).
✓ In case of any undesired results, each step of the process is carefully reviewed to trace the root
causes.

2.11.5 Decision making under different conditions

Q22. State and explain the decision making under different conditions or environments. (or)
Explain how decision making under different conditions are made. [May 2014]
The conditions for making decisions can be divided into three types.
a. Certainty
b. Uncertainty
c. Risk
There are certain risks involved in making decisions.

Conditions of Decision Making

✓ To make correct decision, the decision maker must know the conditions under which decision are to
be made and implemented.
✓ Decision should be made based on the situation prevailing in the environment.
✓ On the basis of amount of information available and degree of confidence in such in information for
predicting the future the types of decision situation can be identified.

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a. Certainty:
✓ Manager has a complete knowledge of the decision making environment.
✓ Sufficient information to predict 100% accuracy
✓ Exact result is known is advance.
✓ Decision maker has just to choose the alternative with maximum benefit.
✓ Certainty exists in routine and repetitive decision.
✓ (e.g) allocation of resources to various product lines because the resources and the amount of
finished product can be produced from them is known.
b. Risk:
✓ Most of the organization decisions are made under the condition of risk.
✓ Information available is in complete.
✓ The probability of each possible outcome is known.
✓ Result is not totally known but fall within a certain range of outcome.
✓ Decision maker has to choose the alternative which gives the largest expected value.
c. Uncertainty:
✓ Probability of occurrence of various outcomes are not known.
✓ Too many unknown factors and managers cannot predict the outcome.
✓ Very difficult to make decision under uncertainty.

2.12 RATIONAL DECISION MAKING MODEL

Q23. Discuss in detail about rational decision making model.
❖ The Rational Decision Making Model is a model which emerges from Organizational Behavior. The
process is one that is logical and follows the orderly path from problem identification through
solution.
❖ It provides a structured and sequenced approach to decision making. Using such an approach can
help to ensure discipline and consistency is built into your decision making process.
❖ The Six-Step Rational Decision-Making Model
✓ Define the problem.
✓ Identify decision criteria
✓ Weight the criteria
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 ✓ Generate alternatives
✓ Rate each alternative on each criterion
✓ Compute the optimal decision
a) Defining the problem
✓ This is the initial step of the rational decision making process. First the problem is identified and
then defined to get a clear view of the situation.
b) Identify decision criteria
✓ Once a decision maker has defined the problem, he or she needs to identify the decision criteria
that will be important in solving the problem.
✓ This step brings the decision maker’s interests, values, and personal preferences into the process.
✓ Identifying criteria is important because what one person thinks is relevant, another may not.
✓ Also keep in mind that any factors not identified in this step are considered as irrelevant to the
decision maker.
c) Weight the criteria
✓ The decision-maker weights the previously identified criteria in order to give them correct priority
in the decision.
d) Generate alternatives
✓ The decision maker generates possible alternatives that could succeed in resolving the problem.
✓ No attempt is made in this step to appraise these alternatives, only to list them.
e) Rate each alternative on each criterion
✓ The decision maker must critically analyze and evaluate each one.
✓ The strengths and weakness of each alternative become evident as they compared with the criteria
and weights established in second and third steps.
f) Compute the optimal decision
✓ Evaluating each alternative against the weighted criteria and selecting the alternative with the
highest total score.

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 UNIT II – PLANNING
Two Marks
1. What is planning?
✓ Deciding in advance a future course of actions to achieve a common objective.
✓ “Planning is the process of selecting the objectives and determining the course of action required
to achieve these objectives”
2. Define planning. [Nov 2010, April 2004, Nov 2008, May 2019]
✓ According to Koontz and O’ Donnell,” Planning is deciding in advance what, how, when and
who is to do it”.
✓ Planning involves selecting missions, objectives and the actions to achieve them.
✓ It requires decision making that is, choosing among alternative future course of action.
3. What are the main objectives of planning? [May 2016, Dec2005, May 2013, Dec2013, Dec 2017]
(or) What is the main purpose of planning? [Dec2011, May2015, May 2017]
Planning is a primary function of organization
✓ Planning is a primary function of organization.
✓ Planning guides in decision-making.
✓ It helps in achieving objectives.
✓ It is done to cope with uncertainty and change.
✓ It helps in facilitating control.
✓ It also helps in coordination planning increases organization effectiveness.
4. What are the features of planning? [Nov2011](or) List out the characteristics of planning.
Planning
✓ A primary function.
✓ A dynamic process.
✓ An intellectual process.
✓ Based on objectives and policies.
✓ Selective process.
✓ Pervasiveness of planning.
✓ An intellectual process.
✓ Directed towards efficiency.
✓ Focus with future activities.
✓ Activities based on facts.
✓ Flexibility of planning.
5. What are the advantages and limitations of planning? [Dec 2008] (or) Mention any four
advantages and limitations of planning. [May 2011] (or) What are the pitfalls in planning?
Advantages of Planning
✓ Helps in achieving objectives
✓ Better utilization of resources
✓ Economy in operation
✓ Reduces uncertainty and risk
✓ Improves competitive strength
✓ Effective control
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 ✓ Coordination
✓ Encourages Motivation
✓ Guides in decision-making
✓ Provides decentralization
✓ Anticipation of crisis
Limitations of planning:
✓ Lack of accurate information
✓ Time and Cost
✓ inflexibility
✓ Delay during emergency period
✓ False sense of security
6. Mention the features of a good plan.
✓ Based on clearly defined objectives.
✓ Simple, easily understandable.
✓ Flexible or adaptable to changing conditions.
✓ Must provide standards for the evaluation of performance and actions.
✓ It should be economical.
✓ It should be practicable.
✓ Prepared with the consultation of concerned persons.
✓ Should be clear, specific and logical.
7. “Planning is looking ahead”. Comment.
✓ Planning is deciding in advance what is to be done and how.
✓ It involves the determination of a future course of action.
✓ It bridges the gap from where we to where we want to go.
✓ Therefore, planning is basically concerned with looking into the future.
8. Why planning is regarded as a pervasive function of management?
✓ Planning is regarded as a pervasive function of management because it is a function of all managers.
✓ Every organization irrespective of its nature and size prepares plans.
✓ Planning function is performed at all levels of management though the nature and scope of plans may
vary from one level to another.
9.”Planning bridges the gap between where we are and where we want to go”. Explain.
✓ Planning means systematized pre-thinking for determining a course of action to achieve some desired
result.
✓ It is concerned with future so as to minimize the risks.
✓ Instead of leaving the future events to change, planning is undertaken to allow them to happen in a
definite manner.
10. ”Planning may create a false sense of security”. Comment.
✓ The condition under which plans are executed may differ from assumed conditions or planning
premises.
✓ Moreover, planning is based on forecasts which may not be fully accurate.

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11. ”Planning is a time consuming process”. Explain.
✓ In order to prepare sound plans, managers require considerable information.
✓ Forecasting and research may be needed to gather the necessary information.
✓ Plans become obsolete very soon due to rapid changes in environment.
12. Enumerate the steps involved in planning process. [Nov / Dec 2018]
Identification of Establishing Developing Identification
opportunities objectives planning of alternatives
premises

Quantifying Formulating Selecting an Evaluation of

in terms of derivative alternative alternatives
budget
13. What are the types of plans? (Apr plan
2004, Apr 2012 & Nov 2012)
The types of Plans are
✓ Operational plan.
-Single use plan. (Program. budget
-Standing plan. (Policy, Procedure, Rules)
✓ Strategic plan (Mission, Objectives, Strategies)
✓ Contingency plan.
✓ Tactical plan.
14. Define Operational Planning. [Nov/Dec 2007]
✓ Operational planning is one that a manager uses to accomplish his job responsibilities.
✓ Operational planning it can be a single-use plan or an on-going plan.
15. What is a Standing Plan or Multi use plan?
✓ This plan provides guidelines for further course of action and used over a period of time.
✓ Examples: Mission, Objectives, Policies, Rules.
16. What is a single use plan?
✓ Single use plan is relevant for a specified time.
✓ Once lapse of time, this plan is formulated again for the next period.
Examples: (programs, Budgets, Schedules, Methods, Project.)
17. What is Strategic planning? Give an example. [Dec 2011, May 2014, May 2015]
✓ A strategic plan is an outline of steps designed with the goals of the entire organization as whole in
mind rather than with the goals of specific divisions or departments.
✓ Strategic planning begins with organization’s mission.
18. What is a Tactical plan? May 2015
✓ A tactical plan is concerned with the lower level units within each division.
✓ Tactics are the means needed to activate a strategy and make it work.
✓ These plans usually span one year or less because they are short-term goals.

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19. What are derivative plans?
✓ Directive plans are the supportive plans (minor plans) formulated for executing the primary plan.
✓ After the primary plan is decided, the next step is to formulate the derivative plan
20. Define purpose or mission. [Nov 2007]
✓ Mission may be defined as “a statement which defines the role that an organization plays in the
society”
21. What is a Budget?
✓ A budget is a statement of expected results expressed in numerical terms.
22. What is a procedure?
✓ A procedure is a set of step-by-step directions that explains how activities or tasks are to be
carried out
23. What are programmes?
✓ Programmes are an ordered list of events to be followed to execute a project.
✓ Example is installation of Wi Fi.
24. Define project.
✓ Project is a group of inter related activities- a separate unit. Eg construction of a flyover.
25. Differentiate rules and policies. [Dec 2017]
✓ Policies provide scope for managerial decision, whereas rules do not.
✓ Rules are to be implemented strictly.
✓ Rules are guidelines for action.
26. What is contingency plan?
✓ A contingency plan is a plan for a specific situation when things could go wrong.
✓ It is devised by governments or businesses.
✓ During time of crisis, contingency plans are often developed.
27. Define corporate planning. [Dec 2014]
✓ Corporate planning is a systematic approach to clarify corporate objectives, strategic decision
making and checking progress towards objectives. A corporate plan is a set of instructions to
managers of an organization describing what role each department is expected to fulfill in the
achievement of organization’s objective.
28. What is meant by long term, intermediate term and short term planning?
➢ Long term planning
– Time frame is beyond five years.
– It specifies what the organization wants to become in long run.
➢ Intermediate term planning
– Time frame is between two and five years.
– It is designed to implement long term plans.
➢ Short term planning
– Time frame is of one year or less.
– It provide basis for day to day operations.

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29. What are the different types of planning? (Or) Classify various plans. [April’04]

Plans

Standing Single use

Plans Plans
Mission or purpose Programmes

Objectives Budgets

Strategies Schedules

Policies Methods

Procedures Projects

Rules

30. Define “objectives” [May 2010]

According to Koontz and O'Donnell, "An objective is a term commonly used to indicate the
endpoint of a management programme."
31. What are objectives? How will you set objectives for a manufacturing organization? [Nov/Dec
2006, May 2016]
✓ Objective is the aim or goal or purpose which an organisation tries to achieve over a varying
periods.
✓ Objectives are described as the end- points of planning.
32. Specify the features of Objectives.
✓ The objectives must be predetermined.
✓ A clearly defined objective provides the clear direction for managerial effort.
✓ Objectives must be realistic.
✓ Objectives must be measurable.
✓ Objectives must have social sanction.
✓ All objectives are interconnected and mutually supportive.
✓ Objectives may be short-range, medium-range and long-range.
✓ Objectives may be constructed into a hierarchy.
33. What are the advantages of objectives?
The advantages of objectives are
✓ Unified planning
✓ Defining an organization
✓ Direction
✓ Individual motivation
✓ Basis for decentralization
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 ✓ Basis for control
✓ Co-ordination
34. Illustrate how you will set objectives for a manufacturing organization. [May 2016]
✓ Objectives must be clearly specified in writing.
✓ The list of objectives should not be too long
✓ Objectives should be verifiable.
✓ Objectives should clearly indict the organizational mission.
✓ Objectives should be challenging and reasonable.
✓ Short-term objectives should be consistent when long-term objectives.
35. Mention the different areas of an organization towards objective setting.
The different areas of an organization towards objective setting are
✓ Market standing
✓ Innovation
✓ Productivity
✓ Resources-Physical and financial
✓ Profitability
✓ Manager performance and development
✓ Worker performance attitude and development
✓ Public responsibility
36. State the two approaches of objectives.
The two approaches of objectives are
✓ Top down approach
✓ Bottom up approach
37. Define MBO (Managing by objective)? [May 2016, 2012, 2011, 08, 09, 07] (or) What is MBO?
[May 2007, May 2008, May 2009, May 2011, May 2012] (or) Define MBO. [Dec 2016] (or) What is
meant by Management by Objective? [Dec 2017]
✓ MBO is a process whereby superiors and subordinates sit together to identify the common objectives
and set the results which are to be achieved by subordinates.
✓ MBO is a management system is which each member of the organization effectively participates and
involves himself
38. Mention any four features of MBO.
✓ MBO focuses more attention on what must be accomplished.
✓ It is goal oriented rather than work oriented approach.
✓ MBO tries to combine the long range goals of organisation.
✓ MBO involves the participation of subordinate managers in the goal setting process.
✓ It will lead to effective management.
✓ MBO increases the organizational capability of achieving goals at all levels.
39. What are the steps involved in MBO process?
✓ Setting preliminary objectives
✓ Fixing key result areas
✓ Setting subordinate’s objectives

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 ✓ Recycling objectives
✓ Matching resources with objectives
✓ Periodic performance reviews
✓ Appraisal
40. What are the benefits of MBO?
✓ Improvement of managing.
✓ Clarification of organisation.
✓ Personnel satisfaction
✓ Team work
✓ Development of effective control
✓ Fast decision-making
41. Mention the weakness of MBO.
The main problems and weakness of MBO are as follows:
➢ Failure to teach the philosophy of MBO
➢ Failure to give guidelines to goals setters
➢ Difficulty of setting goals
➢ Emphasis on short-terms goals
➢ Danger of inflexibility
➢ Time consuming
➢ Increased paper work
42. What are the demands that should be met by the selective objectives?
✓ Objectives should be consistent with the values of the management in the organization.
✓ Objectives should pin-point the organizational strength and weakness.
✓ Objectives must satisfy the external environmental forces.
43. What are KRA’s?
✓ Key Result Areas are the areas to which organizational health can be measured. Some examples of
KRAs are: Profitability, Market standing, Innovation, Productivity, Market Performance, Public
responsibility, etc.
44. Define Policy. (or) What do you mean by policy? Give an example. [Dec 2016, May 2014]
✓ A policy is a general statement formulated to provide guidance in decision-making.
✓ Policies are general statements (or) understandings that guide managers think in decision making.
✓ According to Koontz and O’Donnell, “Policies are general statements of understandings which
guide or channel thinking in decision-making of subordinates”.
✓ Example: Hiring only university trained Engineers, seniority based promotion.
45. What is known as Policy making?
✓ A policy is a deliberate system of principles to guide decisions and achieve rational outcomes.
✓ A policy is a statement of intent, and is implemented as a procedure or protocol.
✓ Policies are generally adopted by a governance body within an organization.
✓ Policies can assist in both subjective and objective decision making.
46. Give the importance of policy.
• They facilitate quick and correct decisions (guides to thinking and action)
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 • Save time and effort.
• Permit delegation of authority to managers at lower level.
• Promote co-operation and consistency of action.
• Help to reduce deviations from planned course of action
47. What are the steps involved in policy making? (or) Write short notes on policy making. [Dec
2014] (or) What are the processes involved in policy formulating process?
The following steps involved in policy making
• Definition of policy area.
• Creation of policy alternatives.
• Evaluation of policy alternatives.
• Choice of policy.
• Communication of policy.
• Implementation of policy.
• Review of policy.
48. What are the types of policies?
✓ Organizational policies
✓ Functional policies
✓ Originated policies
✓ Formulated Policies
✓ Written Policies
✓ Implied Policies
✓ Imposed policies
49. What are the various characteristics of sound policy?
The characteristics of sound policy
• It should be based on the objectives of the organization.
• It should be expressed in writing.
• Written policies are clearer, precise, communicated and understood better.
• It should be based on condition of resources, environment of an organization.
• It should be reviewed, revised regularly to keep them up to date.
50. What are the essentials for policy formulation?
The essentials of policy formation may be listed as below:
✓ A policy should be definite, positive and clear. It should be understood by everyone in the
organization.
✓ A policy should be translatable into the practices.
✓ A policy should be flexible and at the same time have a high degree of permanency.
✓ A policy should be formulated to cover all reasonable anticipatable conditions.
✓ A policy should be a general statement of the established rule.
51. What are the limitations of policy?
✓ Policies are formulated under particular set of conditions.
✓ Do not remain the same at all times.
✓ Polices require constant review and revision.
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 ✓ No formula for all problems.
✓ It serves as guidelines to thinking and action.
✓ It does not provide instant solution to problems.
✓ Not a substitute for human judgment.
52. Define Planning Premises. [May 2009, May 2018]
✓ Planning premises are defined as the anticipated environment in which plans are expected to
operate.
✓ The planning premise is a set of assumptions made about the environment during a planning
process.
53. Give the classification of planning premises.
The classification of planning premises is
• Internal and external
• Tangible and intangible
• Controllable and uncontrollable
54. What are the practices made in making effective premising? (or) What are the requirements for
effective premising?
• Selection of premises that bear materially on the programs
• Development of alternative premises for contingency planning
• Verification of the consistency of premises
• Communication of the premises
55. What is meant by Internal and external premises?
✓ Internal premises include assumptions made on factors that are pertinent to internal of the
company such as policy, capital investment, competence of managers etc.
✓ External premises include assumptions about market, competition, technological changes
government policy etc.
56. What is meant by tangible and intangible premises?
✓ Premises that can be verifiable are called tangible premises such as market demand,
demographics.
✓ On the other hand factors such as political stability, economic environment are intangible premises
57. What is meant by Controllable and non-controllable premises?
✓ Controllable premises- Factors that can be controlled by a company such as production capacity.
✓ Non-controllable premises- Factors such as tax policy or import policy.
58. What is meant by “strategy”? [Nov 2012, Dec 2006, May 2009] (or) Write short notes on
strategy. [Nov/Dec 2012, April/May 2010, 2013]
✓ Strategy is the determination of basic long-term objectives and adoption of course of action and
allocation of resources to achieve these goals.
✓ A strategy is defined as a special type of plan prepared for meeting the challenge posted by the
activities of competitors and other environmental forces.
59. What are the nature, need and importance in strategy?
✓ Strategy is the right combination of both internal and external factors.

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 ✓ Such as strength and weakness to take various course of action.
✓ Strategy may involve the contradictory action.
✓ Strategy provides a guideline for future course of action
✓ Strategy is forward looking.
✓ Strategy is flexible and dynamic.
✓ Strategy is generally formulated by top level management.
60. List out the needs / Importance of Strategies?
✓ Strategy of an organization is more helpful for acing environmental challenges.
✓ A long-term guide towards the achievement of objectives.
✓ More efficient and effective utilization of organizational resources.
✓ It integrates the different departments and groups of the organization.
✓ It helps in maintaining or increasing the firms market share in the face of competition.
61. What are the steps to be followed while implementing a strategy?
✓ Developing an organization having potential of carrying out strategy successfully.
✓ Disbursement of abundant resources to strategy-essential activities.
✓ Creating strategy-encouraging policies.
✓ Employing best policies and programs for constant improvement.
✓ Linking reward structure to accomplishment of results.
✓ Making use of strategic leadership
62. Write down any four factors which lead to fail of strategic planning.
✓ Managers are inadequately prepared for strategic planning.
✓ The information for preparing the plans is insufficient for planning for action.
✓ The goals of the organization are too vague.
✓ The business units are not clearly identified.
63. What are the factors to be considered while formulating strategies?
✓ Mission and objectives of an organization.
✓ Values and aspiration of top level management.
✓ Opportunities and threads of the external environment.
✓ Strength and weakness of the firm in various aspects such as funds organization structure, human
talent, technology etc.
64. What do you understand by strategic management process? [Dec 2017][May 2019]
✓ The strategic management process means defining the organization’s strategy.
✓ It is also defined as the process by which managers make a choice of set of strategies.
✓ It will enable to achieve better performance.
65. Mention the steps involved in Strategic management process.
✓ Mission and objectives
✓ Environmental analysis
✓ Corporate analysis
✓ Identification of alternatives
✓ Strategic decision-making
✓ Implementation, Review and Control

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66. Give the types of Strategies.
✓ Master Strategy (Corporate strategy)
✓ Stability strategy
✓ Growth strategy
✓ Integration Strategy
✓ Renewal strategies
✓ Functional Strategy (or) sub strategy
67. What are the major kinds of strategies and policies?
✓ Growth
✓ Finance
✓ Organization
✓ Personnel
✓ Products or service
✓ Market.
68. State the eight important recommendations should be considered for the success of
implementing strategies.
✓ Communications of strategies.
✓ Developing and communicating planning premises.
✓ Developing appropriate operational plans.
✓ Periodic review of strategy.
✓ Developing contingency strategies and programmes.
✓ Developing appropriate organization structure.
✓ Continuing to emphasize planning and implementing strategy.
✓ Setting proper organizational climate.
69. Define SWOT analysis.
✓ SWOT means Strength, Weakness, Opportunities and Threats.
✓ The combined internal and external analysis of the organization is called SWOT analysis.
✓ Strength , Weakness – Internal analysis
✓ Opportunities and Threats- External analysis
70. Define TOWS Matrix.
✓ The TOWS Matrix is a modern tool for analysing the threats and opportunities (external)
environment and their relationship to the organization’s (internal) weaknesses and strengths.
71. List the planning tools and techniques available in business management. [May 2017]
The planning tools and techniques available in business management are
• Environmental scanning
• Competitor intelligence
• Global scanning
• Benchmarking
• Forecasting
• Allocation of resources
• PERT/CPM

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72. What is a BCG matrix?
✓ Developed by the Boston Consulting Group.
✓ It considers market share and industry growth rate.

73. Write short notes on Forecasting.

✓ Forecasting is the process of predicting future conditions that will influence and guide the activities,
behaviour and performance of the Organization.
74. Define forecasting.
✓ “Forecasting is the formal process of predicting future events that will significantly affect the
functioning of the enterprises”.
75. Distinguish between forecasting and planning.
FORECASTING PLANNING
(i)It is decided by lower or middle level management (i)It is decided by top level management
(ii)It is not necessary to implement the action (ii)It is necessary to implement the actions
(iii)It does not involve decision making (iii)It involves decision making
76. List the forecasting technique used for decision making. [Nov/Dec 2010]
The forecasting may be divided into two broad categories:
1. Qualitative method
✓ Jury of executive opinion
✓ Delphi method
✓ Consumer market survey
✓ Sales force opinion composite
✓ Scenario building
2. Quantitative method
✓ Time series methods/analysis
✓ Econometric forecasting
✓ Technological forecasting
77. List any four qualitative forecasting techniques. [April/May 2017]
✓ Jury of execution opinion
✓ Delphi method
✓ Simple moving average

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 ✓ Weighted moving average
78. Name any four quantitative forecasting techniques. [May 2013]
✓ Time series methods/ analysis
✓ Econometric forecasting.
✓ Technological forecasting.
79. Explain the Delphi Technique. [May 2009]
✓ The Delphi makes use of a panel of experts, selected based on the areas of expertise required.
✓ The techniques allow experts to deal systematically with a complex problem or task.
80. Define focus strategy.
A company adopting focused strategy concentrates on special groups of customers, a particular
product line, a specific geographic region or other aspects that become a focal point of the firm’s effort.
81. What is differentiation strategy?
A company following a differentiation strategy attempts to offer something unique with respect to
products or services. Porsche sports cars - Caterpillar Company - service and availability of spare parts.
82. Give the methods for allocation of resources.
The methods for allocation of resources are
• Budgets.
• Schedules.
• Gantt chart.
• Load chart.
• PERT(Program Evaluation Review Technique)
• Break even analysis.
• Linear programming.
83. Define decision making. [May 2004, Dec 2006, Dec 2007, Dec 2018]
✓ Decision –making is defined as the process of choosing a course of action among alternatives to
achieve a desired goal.
✓ It is one of the functions of management and also a core process of planning.
84. Comment the term decision and decision making. [May 2004, Dec 2006]
✓ The word decision is defined as: “A choice between two or more alternatives”.
✓ Thus decision-making can be defined as: “The selection of a course of action from among
alternatives”.
85. Explain the term decision and decision making?
✓ A decision may be a direction to another to do or not to do.
✓ Decision making is defined as the process of choosing a course of action from among alternatives to
achieve a desired goal.
✓ It is one of the functions of management and also a core process of planning.
✓ The management executive takes a number of decisions every day.
✓ Thus, decisions may be Rational or irrational.
✓ The best one is selected out of the available alternatives.

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86. Write the characteristics of decision making. [Dec 2011, 2008]
✓ The decision-maker has freedom to choose an alternative.
✓ Decision-making may not be completely rational but may be judgmental and emotional.
✓ Decision-making is goal-oriented.
✓ Decision-making is a mental or intellectual process because the final decision is made by the
decision-maker.
✓ A decision may be expressed in words or may be implied from behaviour.
87. List out the various decision types.
✓ Organisational and Personal decision
✓ Routine and Basic decision
✓ Programmed and Non-programmed decisions.
88. What are Programmed decisions? [Dec 2013]
✓ A Programmed decision is applied to structured or routine problems. It relies primarily on
previously established criteria.
89. What are Programmed decisions?
✓ Non programmed decisions are used for unstructured, novel and undefined situations of non-
recurring nature.
✓ Probabilities are assigned to the outcomes of decisions.
90. Mention the difference between Programmed decisions and Programmed decisions.
Characteristics Programmed decisions Non programmed decisions
Type of problem Structured Unstructured
Managerial level Lower level Upper level
Frequency Repetitive, routine New, unusual
Information Readily available Incomplete
Goals Clear, specific Vague
Time frame for solution Short Relatively long
Solution relies on Procedures, rules, policy Judgment and creativity

91. Mention the characteristics of ‘programmed’ and ‘non-programmed’ decisions. [Nov 2009]
Programmed decision
✓ Programmed decision is otherwise called routine decisions or structured decisions.
✓ Decision taken frequently and it is repetitive in nature.
✓ The decisions are taken by the middle or lower level managers.
Non-programmed decision
✓ Non- Programmed decision is otherwise called strategic decisions or basic decisions.
✓ Decision taken whenever the need arises.
✓ The decisions are taken by top management people.
92. What is expected value of perfect information? [May 2010]
✓ Expected value of perfect information is calculated by subtracting the expected value with existing
information from expected value with perfect information.

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93. How would you evaluate the importance of a decision? (Or) Mention any 2 features of decision
making. [May 2011]
1. Decision making is a selection process. The best alternative is selected out of many available alternatives.
2. Decision–making is a goal–oriented process. Decisions are made to achieve some goal or objective.
3. Decision making is the end process. It is preceded by detailed discussion and selection of alternatives.
94. Write down the process followed in decision- making process. (or) List the steps involved in
decision making process. [Dec 2013, May 2016]
✓ Identifying a problem
✓ Identifying decision criteria
✓ Allocating weights to criteria
✓ Developing alternatives
✓ Analyzing alternatives
✓ Selecting an alternative
✓ Implementing the alternative
✓ Evaluation (of decision effectiveness)
95. Mention the three approaches generally adapted by managers in selections an alternative.
[May 2005]
✓ Quantitative and Qualitative analysis.
✓ Marginal analysis.
✓ Cost effectiveness analysis.
96. What is meant by Marginal analysis?
✓ Marginal analysis is useful to evaluate the given alternatives. It can be used by comparing factors
other than costs and revenues.
97. What is cost effectiveness analysis?
✓ Cost effectiveness is a technique for choosing the best plan when the objectives are less specific than
sales, costs, or profits.
98. List down the conditions decision-making. (or) What are the different decision making
situations?
✓ Certainty
✓ Risk
✓ Uncertainty
99. Write down the different decision-making criteria proposed under uncertainty conditions.
✓ Maximizing the maximum possible payoff (optimistic)
✓ Maximizing the minimum possible payoff (Pessimistic)
✓ Minimizing the maximum possible regret to the decision maker (Regret)
✓ Assuming equally likely probabilities for the occurrence of each possible state of nature(Insufficient
reasoning)
100. What are different types of decision making process?
• Rationality
• Bounded rationality
• Intuition
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101. What is meant by Rational decision making?
✓ The Rational Decision making emerges from Organizational behaviour.
✓ The process is one that follows the orderly path from problem identification through solution.
✓ It provides a structured and sequenced approach to decision making.
102. Specify the six steps involved in rational decision making model.
✓ Define the problem.
✓ Identify decision criteria
✓ Weight the criteria
✓ Generate alternatives
✓ Rate each alternative on each criterion
✓ Compute the optimal decision
103. What is bounded rationality?
✓ Decision making under which the evaluation and selection of alternatives which satisfies rather than
maximizes is bounded rationality.
104. State the important assumption made on bounded rationalities. [April’05]
It is called normative approach which is based on the following assumptions.
✓ The decision maker has a clear and well defined goal that he is trying to maximize.
✓ He is fully objective and rational uninfluenced by emotions.
✓ The Decision maker can identify the problem clearly and precisely.
105. What is intuitive decision making? [Apr / May 2018]
✓ It is the ability to group on a situation (or) information’s without the need for reasoning and making
a decision.
106. What is strategic planning? Give an example. [May/June 2014, Nov/Dec 2017]
✓ Strategic planning is made up by top management which includes chief executive officer, president,
vice president, general managers and division heads.
✓ It is a long range plan and covers a time period of upto10 years.
Example: To achieve long term goals in a company in an effective way.
107. Name any two important procedures in organization.
✓ Procedures for placing orders for material and equipment.
✓ Procedures for sanctioning different types of employee’s leave.
108. How does planning help in achieving coordination?
✓ Planning creates unity of purpose and uniformity of operations.
✓ People cooperate better when they clearly understand what is to be done and how.
✓ Such cooperation in turn facilitates coordination.

UNIT –II PLANNING

Prepared By, S.BARATH, AP / MCA, 4213-KCET Page 48