Professional Documents
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PLANNING
TABLE OF CONTENTS
1. PLANNING- NATURE OF PLANNING- TYPES OF
PLANS.
2. STEPS IN PLANNING- THE PLANNING
PROCESS.
3. 0BJECTIVES- MBO- THE PROCESS OF MBO.
4. STRATEGIES-POLICIES- PLANNING
PREMISES.
5. DECISION MAKING- SEARCH FOR
ALTERNATIVES.
6. EVALUATION OF ALTERNATIVES- SELECTION
OF AN ALTERNATIVE.
7. PROGRAMMED & NON-PROGRAMMED
DECISIONS.
8. MODERN APPROACHES TO DECISION MAKING.
9. DECISION TREE.
MODULE-02
PLANNING
INTRODUCTION:
Planning is the process of determining in advance what should be accomplished
and how it should be realized.
According to KOONTZ O DONNELL, Planning is essentially decision
making since it involves choosing from alternatives.
According to GEORGE TERRY, Planning is selecting and relating of facts
and making use of assumptions regarding the future in the visualization and formulation
of proposed activities believed necessary to achieve the desired results.
NATURE OF PLANNING:
1. IT IS GOAL ORIENTED The planning process is focused on those efforts
necessary to achieve Future objective.
2. IT IS DECISION ORIENTED The planning process involves decision making that
specifies action necessary to achieve future goals.
3. ITS FUTURE ORIENTED The successful manager must plan for future to
determine what needs to be done and how it must be done before the situation
actually Occurs
4. ITS INTELLECTUAL PROCESS Involves rational, fact based procedure.
5. ITS A SELECTIVE PROCESS Goals & standard become standard against which
performance is measured. Rational approach to selected goals.
6. IS AN INTEGRATED PROCESS Involves selecting missions n objective n action
to achieve them.
7. IS FLEXIBLE Changes according to the demand of the situation.
8.
TYPES OF PLANS:
SINGLE USE PLAN Plan developed to achieve a specific goal. E.g. Programs,
budgets.
STANDING PLAN Plans designed foe recurring situation. E.g. Policies, procedure.
STRATEGIC PLAN Statement of how the org will be going to utilize its resources
and conduct its Activities in order to achieve strategic goals.
Strategies
(For non-repetitive
activities)
Single use plans
Programs and budgets
Deciding
Evaluating the alternatives and
choosing the best alternative
Step 7
Step 8
Step 9
Controlling and evaluating the
results
The first step in planning is to determine the enterprise objectives. These are mostly set
by upper levels or top managers usually after a number of possible objectives have been
carefully considered.
The second step is to establish the planning premises i.e., certain assumptions about the
future on the basis of which the plan will be ultimately formulated. Planning premise are
vital to the success of planning as the y supply facts and information relating to the future
such as population trends, the general economic conditions, production costs and prices,
probable competitive behavior, capital and material availability, government control etc.
these premise can be, tangible or intangible premises, controllable or non-controllable
premise etc.
In some instances plans are made for a year while others plan for a decade. Companies
are generally selecting a period, which they can reasonably be anticipated.
The factors, which influence the choice off the period, are:
Lead time in development and commercialization of a new product, (gestation period),
Time required to recover capital investments or the pay back period, length of
commitments already made, etc.
Finding alternative course of action and evaluating and selecting a course of
action:
Next is to search for alternative courses of action, which are feasible solutions to reach
the desired objective and evaluating them in the light of the premises and goals and to
select the best course or courses of action.
Developing derivative plans:
Once the plan has been formulated, its broad goals must be translated into day-today
plans, programs and budgets for their sub- units these are describes as derivative plans.
Measuring and controlling the progress:
The process of control is critical since it is necessary to take whatever remedial action
and the change the original plan if it is unrealistic.
OBJECTIVES:
Objectives are defined earlier as the important end points towards which
organizational and individual activities are directed.
CHARACTERISTICS OF OBJECTIVES:
1. MULTIPLE IN NATURE: Objectives are needed in all areas and functional activities
of business.
2. OBJECTIVES HAVE HIERARCHY: The objectives which are based on a mission or
purpose of the company form a hierarchy from top to the lowest position in the
organization structure.
3. OBJECTIVES MAY BE LONG RANGE OR SHORT RANGE: The objectives may
be of two types : LONG Range objectives such as SURVIVAL & GROWTH and SHORT
Range objectives like Market Standing, Maximization of sales, Product Development,
Productivity, Effective Utilization of Resources etc..
4. OBJECTIVES ARE INTERDEPENDENT: Objectives are interdependent and must
support another so that the may be realized simultaneously.
5. OBJECTIVES ARE EITHER TANGIBLE OR INTANGIBLE: For some of the
Objectives such as in the areas of Productivity, Market Standing, Physical & financial
Standing, there are Quantifiable values available.
6. OBJECTIVES HAVE A PRIORITY: This implies that at a given point of time, the
accomplishment of one Objective is relatively more important than that of others.
7. OBJECTIVES SOME TIMES MAY CLASH WITH EACHOTHER: In an enterprise,
each Department is given a responsibility for attaining a specified objective.
ADVANTAGES OF OBJECTIVES:
1.
2.
3.
4.
5.
6.
7.
8.
Unified Planning.
Individual Motivation.
Co-ordination
Standards for Control.
Basis for Planning.
Elimination Haphazard Action.
Better Management.
Reduce Misunderstanding and Conflict.
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STEPS IN MBO:
TOP MANAGEMENT
Subordinates
Appraise Results
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POLICY:
An operational definition of policy may be as follow a policy is the statement or general
understanding which provides guidelines in decision making to members of an
organization in respect to any course of action.
STRATEGY:
Strategy is the determination of organizational objectives in the
light of environmental variables & determination of course of action & commitment of
organizational resources to achieve these objectives.
Features of strategy:
1.
2.
3.
4.
5.
PLANNING PREMISES
Planning is undertaken under certain planning premises. Premises are the assumptions on
which plans are formulated. A major source of premises is forecasting which indicates
what is to be expected in the future & thus provides a frame work on which plans are
developed. But not all premises are forecasts.
Factors of planning premises:
1. External premises.
2. Internal premises.
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1. External premises:
Premises external to the organization relate to external constraints & facilitators.
These are events in the organizations environment such as changes in social values &
norms, changes in the economy, changes in resource availability, and changes in
market place so on.
External premises includes two types General business environment
Factor market
Product market.
Factor market:
Organization employs many factors of production-land, labour, capital, management.
Etc. forecasting is necessary in respect of the availability of these following factors
affect the operation of a business organization.
- natural resources
- infrastructure facilities
- raw materials & suppliers
- plant & equipment
- Financial facilities.
Production market:
The purpose of determining & developing premises in respect of product market in
the determination of the kind of market is available for organizations products &
services.
-industry demand
- Nature of competition
- Elasticity of demand
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2. Internal premises:
These relate to events occurring within the organization. The basic nature of
these factors is that they can be changed by managerial actions depending on the
time.
- basic policies & programmers
- organization structure
- Sales forecast.
Procedures
Procedures are general guidelines usually
for lower ends.
these show us the way to implement
policies.
Procedures are specific and lay down the sequence of
definite acts.
Are always established after through study and analysis of
work.
Decision - Making
Decision-making is an essential part of modern management. A plan cannot exist unless a
decision a commitment of resources, direction, - has been made. Mangers sometimes
see decision making as their central job because they constantly choose what is to be
done, which is to be done, when and where it is to be done. It is necessary and permeated
through all managerial functions such as planning, organization, and direction and
control. In planning it is through the process of decision-making that objectives and
policies are laid down and the manager decides many things such as what to produce,
what to sell where, when and how and so on.
In organizing the decision-making is related to the choice of structure, nature and the
form of organization. It also includes division of work, delegation of authority, fixing of
responsibility and the like. In directing, decision-making relates to determining the
course, deciding the orders and instructions to be given, providing leadership etc. In
controlling the decisions relate tom the laying down the performance standards, strategic
control etc.
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Meaning of decision
A decision is a choice between two or more alternatives. This implies three things.
When managers make decisions they are choosing. (Based on rationality)
Managers have alternatives available when they are making a decision. It does
require a wise manger to evaluate several alternatives and select the best one.
Managers have a purpose in mind when they make decision.
Types of decisions
Programmed decisions are those that are made in accordance with some policy, rule or
procedure so that they do not have to be handled new each time they occur. These
decisions are generally repetitive, routine and are obviously the easiest for mangers to
make. E.g. determining salary decisions, recording the performance appraisal etc.
Non-programmed decisions are novel and non-repetitive. If a problem has not arisen
before or if there is no previous experience how to handle it then, deserves a nonprogrammed decision. E.g. How to allocate an organizations resources, what to do about
a failing product line etc require non-programmed decisions.
In the case of programmed decisions service each manager is guided by the same set of
rules and policies, it is not possible for two managers to reach different solutions to the
same problem. But in the case of non-programmed decisions, since each manger may
bring his own personal beliefs, attitudes and value judgments to bear on the decision
process, it is possible for two mangers to arrive at two different solutions to the same
problem, each claiming that he is acting rationally.
The ability to make non-programmed decisions help differentiate between effective and
ineffective managers.
Major and minor decisions: some decisions are considerably more important
than others the relative importance of decisions are bases on degree of futurity of
decisions, impact of the decision o n other functional areas, qualitative factors that enter
the decision, and repetition of decision.
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Evaluation of alternatives
Selecting an alternative
There are almost always alternatives to any course of action. In fact if there seems to be
only one way of doing thing, that way is probably wrong. And may be on has not thought
hard.
The ability to develop alternatives is often as important as being able to select correctly
form among them.
Research and common sense will often reveal so many choices to a problem. Sometimes
a limiting factor, which strands in the way of accomplishing a desired objective need to
be recognized. The principle of the limiting factor is as follows: by recognizing and
overcoming those factors that stand critically in the way of a goal, the best alternative
course of action can be selected.
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Evaluation of alternatives:
This is the point of ultimate decision-making. There are three critical decisions to be
considered in this stage. They are, quantitative and qualitative factors; marginal analysis;
and cost effective analysis.
Quantitative and qualitative factors: Quantitative factors are those, which can be
measured, in numerical terms, such as time or various fixed or variable costs. Qualitative
or intangible factors are those that are difficult to measure numerically, such as quality of
labor relations, the risk of technological change etc.
The manger must recognize these factors in the problem and then determine whether
these can be measured quantitatively. Or he/she must find out as much as possible about
the factors, perhaps rate them in terms of importance, and compare their influence on the
goal and then take a decision.
Marginal analysis: the theory of marginal analysis can be used in evaluating
alternatives. This is to compare additional revenues arising from additional costs.
If the additional revenues of a larger quantity are greater than its additional costs, more
profits can be made by producing more. But if the additional revenues of the larger
quantity is less than its additional costs, a larger profit can be made by producing less.
For example, to find the best output of a machine, inputs can be varied until the
additional input equals additional output. Or the number of subordinates reporting to a
manager might be increased at which additional savings in costs, better communication
and morale and other positive results, equal additional losses in leadership, effectiveness
in control etc.
Cost effectiveness analyses:
This seeks the best ratio of benefits and costs. This means finding the least costly way of
reaching an objective or getting the greatest value for given expenditures.
It is a technique for choosing the best plan with the best cost.
Virtually all decisions are made in an environment of at least some uncertainty. However,
the degree will vary from less to most. And there are certain risks involved in making
decisions.
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Experience: experienced mangers usually believe, often without realizing it. That
things they have successfully accomplished and the mistakes they have made are valuable
guides in the future.
To some extent, experience is the best teacher. The very fact that managers have reached
their position appears to justify their past decisions. But relying on experience can be
dangerous also. Since, most people do not understand the reasons behind their mistakes
or failures and these lessons may be inapplicable to new problems. Good decisions must
be evaluated against future events, while experience belong to the past.
Experimentation: this is a scientific inquiry. This is to try all the alternatives and
sees what happens. It is likely to be expensive. Experimentation can be used in other
ways. A company may test a new product in a certain market before expanding nationally.
Research and analysis: this approach means solving a problem by first
comprehending it. It involves a reach for relationships among the more critical of the
variables, constraints, and premises that bear upon the goal sought. A major step in this
approach is to develop a modal simulating the problem. Using operations Research
techniques this can be done.
sure about what will happen when they make decisions. The information is available and
is considered to be reliable, and the cause and effect relationship is known.
Uncertainty: here mangers are very unsure and do not know whether data are reliable.
They cannot evaluate the different variables.
Risk: here the information may exist, but it may be incomplete. To improve decision
making one may estimate the probabilities of an outcome by using mathematical models.
Risk analysis: all managers who deals with uncertainty like to know the size and
nature of the risk they are taking in choosing a course of action. Every decision is based
on the interaction of a number of important variables, many of which have an element of
uncertainty, but also a high degree of probability. The manager needs to analyze the
probabilities of various factors and its effect on the final objective.
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Decision trees: this is one of the best ways of analyzing a decision. Decision tree
depict in the form of a tree, the decision points, chance events and probabilities involved
in various courses that might be undertaken.
Probability
High- (0.60)
Build large
plant
Large
expansion
Profit Rs.12
lakhs
Medium
expansion
2
Build small
plant
B
Small
expansion
Probability
Low- (0.40)
Profit Rs.5
lakhs
Outcome
nodes
Choice
nodes
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