Meaning Forecasting : Future predicting. Dr. Terry : Planning is the selecting & relating of facts & using of assumptions regarding the future in the visualization of formulation of proposed activities believed necessary to achieve desired results. Haynes & Massie Planning is that function of manager in which he decides in advance what he will do. It is a decision-making process of a special kind, its essence is futurity.
STEPS IN PLANNING OR PROCESS OF PLANNING Establishing objectives Building the premises Collection, Classification & Analysis of data Determining Alternative courses Evaluating Alternatives Selection of Courses of action Preparing Derivative plans Providing follow up
Establishing Objectives : –Broad Objective must be laid down first –It may be subdivided into various objectives –If there are more than one objectives, they should be arranged in order of priority Building the premises: –Premises are assumptions about future –These premises can be sub divided into 3 types
Collecting, Classifying and Analyzing data : –Relevant data is to be collected –Heap of data must be classified –The classified data must then be interpreted Determining Alternative courses : –Various alternatives which can help organization achieve the objectives must be searched –All alternatives must be taken into account
Evaluating Alternatives : –Each alternative must be assessed in terms of its profitability –Various methods of operational research are widely used Selection of Course of action: –Assessment makes comparison possible –The best among them should be selected
Preparing derivative plans : –Main plan can be sub divided into various subsidiary plans eg. Department wise plans Providing follow - up: –A through examination is required –A plan can be first implemented on an experimental basis –Eye on the progress, checking of results on frequent intervals is must
Example base : career as a manager – colleges & courses...
Planning premises Planning premises : expected environment of Plans Dr. Terry Premises are assumptions providing background against which estimated events affecting the planning will take place. Management gives importance to the critical premises only
Types if planning premises Internal vs External Premises : - Inside organizational boundaries vs Outside organizational boundries. - Affecting individual firm vs universal effect. - are controllable vs are uncontrollable.
Controllable vs Non-controllable: - could have control vs no control. - Eg. Personnel vs Earthquake. Tangible vs Intangible : - Quantifiable vs not easy to quantify. - Eg. Assets vs morale of employee.
Internal premises (1) Sales Forecast : –Income vs expenses –small scale industries dont go for sales forecasting, which is not good practice –methods of sales forecasting viz. Statistical & other methods. (2) Capital investment : –long term investment –calculation on alternatives –various sources of investment,terms of payment to be considered.
(3) Basic policies : –cannot be changed if once set – profit sharing. (4) Supply of materials : –sources of various material or internal production – more than one supplier, to remove dependency. (5) Development of unit : –Expansion / upgradation.
(6) Ability of employees : –Employees contribution –Education – Experience - Expertise – attitude towards work.
External premises Relating to General Business Environment : includes political, economical, social & technological conditions. (1)Political Stability : –if political stability is maintained planning is considerably facilitated else not –planning become tough where the govt. changes twice or thrice a year.
(2) Govt. Controls : –The degree of govt. control depends on the nature of the business –more stringent/strict on eatables –health & safety. (3)Govt. fiscal policy : –policies of taxes –monetary policies – bank rate policy.
(4)Population Trends : –size of population –age groups. (5)Employment, productivity & National Income: –portion of disposable income.
(6)Price level : – price elasticity of demand –price & demand are inversely related –future price level & its influence on market. (7)Technological change : –Research staff. (8) International Political Situation : –integrated markets –war like situations – eg. Muslim caps & war with pakistan / war with iraq & iran crude oil price rise.
(9)Social revolution : –trade unions agitation, adult education programmes, students agitation etc. (10) Trade Cycles : – Regular ups & downs in business activity are known as trade cycles.
Relating to Product Market : conditions influencing firms demand & industries demand. (1)Industry demand : –factors that affect industry demand are production, national income, population etc. –lower income group : basic necessity –middle income group : comfort –High income group : luxury.
(2)Individual firm demand: –price elasticity of demand depends on its own policy –competitors policy –consumers preference etc.
Relating to Factor Market : concerned with land, labour, capital & raw-material. (1)Business Location : –availability of Raw materials –skilled labour –transportation –local environment –existence of auxiliary industries –availability of capital.
(2)Labour availability : –skill –stability –labour unrest –wage difference. (3)Sources of Material & parts: – suppliers distance.
(4)Availability of capital : –availability of capital – suppliers assuming controlling power in management of the unit, which is not acceptable by the owner.
Types of plans Single Use/ Multi Use Plans. (1) Objectives : –aims or purpose for which organization are set up. –goals a business unit want to achieve. –Mission:-Idealism; broad objective ; service to humanity. –Goal :- aim expressed in specific terms; time specific; measurable.
(2) Policies : –General statements which guides the subordinates in decision making in various departments of organization. –how to do. –eg. Higher positions must be filled with promotion only, raw materials must be purchased from local suppliers only etc. –policies must be communicated to the staff : willingness –uniformity – quick decision – delegation of authorities.
(3) Strategies : –type of plan which is prepared to meet the challenges posed by the activities of competitors & other environmental forces –keep in mind the plans of competitors –e.g. price cut by competitor / advertisement depicting superiority of our product –Bank Robbery –strategies are thus contingent plans, as it is prepared to meet the demand of a particular situation.
(4) Procedures: –They are the guides to action. –They lay down in detail the exact manner in which a certain activity must be done. –E.g. Purchase of R.M. – selection of employees. –Procedure lay down a standard way of doing a job. –Ensures smooth functioning. –Integrate efforts of different individuals. –Training of employees because they learn from procedures. –Should be standardized - reviewed periodically.
(5) Rules : –A rule is the simplest plan of action. –It dictates that a particular work is to be done in a particular manner. –It specifies what to be done or not to be done in a given situation. –It is a rigid & definite plan & leaves no scope for deviation. –Procedure lays steps : e.g. steps to deliver the goods. –Goals are not concerned with steps : e.g. smoking is prohibited in the factory.
(6) Budgets : –A budget is a plan giving the expected result expressed in numerical terms. –It may be entirely expressed in financial terms or it may be expressed in number of units, man hours or other any measurements that can be expressed in numbers. –It may be prepared for sales, production, material, labour, any cash or capital expenditure. –Budgets are controlled devices. –But making of budget is clear planning. –Actual operations can be measured & variations are found out. –Budgets should be flexible & not rigid.
(7) Programmes : –A programme is a sequence of activity taken to implement the policies & to achieve the objectives. –Lays down clear steps & time period. –Two types : Major programmes & Minor programmes. –Major Programme : expansion Programme. –Minor Programs : sub programmes to complete the major ones e.g. new machines, increase in advertisement exp. Etc. –Minor Programmes may be independent too e.g. train workers to implement new method of prod.