Management Principle and Application Unit 2 : Planning Notes For 3rd Semester As per CBSE New syllabus - Guwahati University | The Treasure Notes

Management Principle and Application Unit 2 : Planning Notes For 3rd Semester
Management Principle and Application

Management Principle and Application (Hons) 3rd Semester

Unit 2: Planning


  • (a) Types of Plan - An overview to highlight the differences
  • (b) Strategic planning - Concept, process. Importance and limitations
  • (c) Environmental Analysis and diagnosis (Internal and external environment) Definition, Importance and Techniques (SWOT/TOWS/WOTS-UP),Business environment; Concept and Components  
  • (d) Decision-making concept, importance; Committee and Group Decision making, Process, Perfect rationality and bounded rationality, Techniques.


1. What is planning?

Ans: Planning is the process of defining organization's objectives and selecting best possible future courses of action for achieving these objectives efficiently and effectively. It may even attempt deliberately to create change. It is a carefully controlled and coordinated activity.

2. What is a premise?

Ans: Management has to take policy decisions based on certain assumptions about the future happenings. Such assumptions are known as planning premises.Planning premises provide a framework for planning and a basis for action in the midst of uncertainties in the environment.

3. What is forecasting?

Ans: Forecasting is a scientific, systematic and logical technique of foreseeing the future eventualities with the help of available information and facts. Forecasting is an intellectual process requiring the exercise ofhuman skill, knowledge and experience. Thus, forecasting is the inference of the future with the help of the data collected regarding past and present. 

4.What is M.B.O?

Ans: According to Peter Drucker "Management by objective is regarded as a system for improving performance, both the individuals managers and the enterprise as a whole by setting of objectives at the corporate, departmental and individual manager's level."The process of MBO begins with the setting of subordinates' objectives jointly by the immediate superior and subordinates and ends with the performance appraisal of the subordinates. Managers and their subordinates plan together to set common goals.

5.What is policy?

Ans: Policies are divided from objectives. They are designed to operationalise objectives and hence policies are also known as operational objectives. A policy may be defined as "a guideline that helps in attaining the objectives of the organization." Policies are the guiding principles to think and act for them who have to make decision.

6.What is strategy?

Ans: A strategy involves preparing oneself for unforeseen and unpredictable events. In other words, a strategy means placing oneself in the position of competitions and seeing one's own reaction in a similar situation.Strategy means the long-range approach for dealing with organizations competitive environment with a view to win over competitors in business.,

7. What is procedure?

Ans: A procedure is a systematic way of handling regular events. It lays down a series of steps to be taken to do a particular job. According to G.R. Terry, "A procedure is a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished."

8. What is Method?

Ans: Methods are sub-units of a procedure; they show clearly as to how a step of procedure should be performed. They indicate the techniques to be employed to make the procedure effective. The primary focus is on finding out the best way of doing a piece of work.

9.What is rule?

Ans: A rule is a very specific and detailed guide to action. It is established to direct or restrict action in a fairly narrow manner. There is no scope for discretion or judgement. Rules must be followed precisely and observed strictly.

10. What is decision making?

Ans: Decision making is a process involving information, choice of alternative actions, implementations and evaluation that is directed to the achievement of certain stated goals. According to George R. Terry "Decision making is the selection based on some criteria from two or more possible alternatives."

11. What is a strategic plan?

Ans: It is prepared to achieve the overall organizational goals. These plans aim at achieving the strategic goals through effective allocation of resources over different functional areas, in the light of its internal environment. These plans are prepared by the top manager in consultation with board members and middle level managers and generally relate to a period of 3 to 5 years.

12. What is Tactical plans?

Ans: These are the means to support and implement the strategic plans. These are intended to achieve the tactical goals of an organization. These are related to departmental goals. These plans are made by middle level management, in consultation with lower level managers and normally for a period of one to three years.

13. What is an operational plan?

Ans: These are the means to support tactical plans. These are intended to achieve the operational goals of an enterprise. These plans are highly specific and lay down exactly what is expected of different sections of the organization.

14. What is an objective?

Ans: Objectives are the goals or the end results towards which all management activities are directed. Koontz and O'Donnell state that "Objective is a term commonly used to indicate the end point of a management programme" Objectives should be specific and set for different periods.

15.What is action plan?

Ans: The action plan gives directions and ensures unity of purpose of organizational activities. It explains in detail exactly what is to be done, how the subordinate will proceed, what steps will be taken and what activities will be engaged in as the subordinate progresses. It provides a specific answer to the questions: "What is to be done?

16. What is pervasiveness of planning? 

Ans. Pervasiveness of planning indicates that planning extends throughout the organisation. 

17. What are the types of planning?

Ans. In the basis of coverage of activities, planning is corporate and functional planning, on the basis of importance of contents,- strategic and tactical planning, on the basis of time-period long term and short-term planning, on the basis of approach adopted - proactive and reactive planning and on the basis of degree of formulation formal and informal planning.

18. What kind of approach is planning?

Ans. Planning adopts an open system approach. That means planning takes inputs from the environment, processes these and exports outputs to environmental. While adopting open system, managers have to take into account the dynamic features of the environment.

19. What is the basic nature of planning?

Ans. The basic nature of planning may be understood in terms of it being a rational approach, open-system approach and its pervasiveness. 

20. What are the types of decisions involved in every organisation? 

Ans. Decisions are classified as programmed or non-programmed. These are further classified as strategic and tactical decisions.

21. What are the conditions of decision-making? 

Ans:- Decision-making involves three conditions ranging from conditions of perfect certainty, conditions of risk and conditions of complete uncertainty.

22. What do you mean by Business Environment?

Ans: Business Environment means the surrounding factors which influences the operation of a business. The businessmen consider these factors for their survival and for making reasonable profit out of his business venture.

23. Give six P's of planning as fundamental requirements.

Ans: The six P's of planning as fundamental requirements are - (a) Purpose b) Philosophy, c) Promise, d) Policies, e) Plans, f) Priorities

Management Principle and Application Unit 2 : Planning Notes For 3rd Semester   

24. Why planning is called a continuous process?

Ans: Planning is a never ending activity of a manager. Planning is always tentative and subject to revision and amendment, as new facts become known Even in execution of planning there may be a change in settings and conditions necessitating modification on a somewhat continual basis. Generally, managers follow the practice of re-examining plans regularly and modify them, if necessary, in view of the new situations. In this way, it will be possible to heed to new situations and overcome problems. Planning is necessary for situations when things are going well, as well as when troubles are faced. All types of situations require continuous planning.

25. "Planning is an intellectual process"- Comment. 

Ans: Planning is intellectual in nature, it is mental work. The facts relevant to the situation are related to the manager's experience and knowledge. A planner should develop a future course of action to be taken for implementation of plans.

Planning may be an easy task for some while difficult for others, depending upon their capabilities. A planner has to think about the following aspects:

(a) What is to be done?

(b) How is it being done?

(c) When is it to be done?

(d) By whom is it to be done?

A decision on these aspects will depend upon the capability of decision maker. Proper thinking about the practical aspects of various decisions will enable a right choice at the right moment.

Also Read

Unit - 1 Introduction 

Unit - 2 Planing 

Unit - 3 Organising 

Unit - 4 Staffing and Leading 

Unit - 5 Controlling


1. Explain the different characteristics of planning. 

Ans: The following characteristics of planning clearly explains its nature: 

(a) Primary or basic function: Planning is the primary or basic management function. It is primary because it is the foundation on which all other managerial function rest. In other words, planning precedes all the other managerial functions. It sets the stage for execution of all other managerial functions. Terry has very highly stated that "without planning, there would be nothing to organize, no one to motivate, and no need to control."

(b)Pervasive function: Another important feature of planning is that it is an all-pervasive function. Each and every manager has to perform this function regardless of his (i) level and (ii) area of operation. Koontz and O'donnell have here rightly remarked that "all managers - from presidents to foremen - plan. And planning must filter through the entire scope of management, from top to bottom."

(c) Purposeful: Planning is purposeful or goal-oriented. Planning begins with some goal or objective that an organization wishes to achieve. Every manager plans to achieve the goal. And all the managers plan to contribute to the achievement of organization's goal.

(d)Interdependent activity: It is true that planning is a primary and basic function of management. Planning is done while taking into consideration all other functions of managers. However, it is an interdependent activity. Moreover planning in one department is dependent on the planning of other department.

(e)A process: Planning is a process. In this process, managers anticipate future by analyzing environmental factors set goals or objectives, formulate plans to achieve the objectives.

(f)Planning is a path finding process: Planning is a path finding process. It is the process by which answers to following questions are discovered -

(i)Where are we now?

(ii)Where we want to go? 

(iii) How to reach to the destination?

Planning bridges the gap between the places who we are and where we want to go. Planning is concerned with finding out the means/paths to reach from one place to another.

(g) A continuous process: Planning is a continuous and never-ending process. It does not end with the accomplishment of a particular objective. After achieving one objective, manager is to achieve the others. Therefore, the planning process goes on forever during the life of an organization.

(h) Dynamic process: Planning is a dynamic process. It is the process of adjustments and readjustments in accordance with the current and anticipated future situations. A manager constantly monitors the conditions, both within and outside the organization to determine the changes required in his plans. (Weihrich and Koontz)

(i) Intellectual process: Planning is regarded as an intellectual process. It requires managers to think intelligently and rationally before doing. It demands managers to act in the light of facts and to do the things in orderly manner.

(j) Futuristic: Planning is future oriented. Every plan is prepared by anticipating and considering future events, opportunities, challenges, threats etc. Moreover, every plan is prepared to face and win over the future challenges and threats.

(k) Time bound: Planning is always time bound. Planning may be short-range or medium-range or long-range. However, the long-range planning is the basis of short-range and medium range planning.

(l) Planning involves decision-making: Planning involves decision making. It is a process of one best course of action out of the available alternatives. Moreover, planning is the process of evaluating effects of today's decision on future.

(m) Planning and controlling are inseparable: Planning and controlling are inseparable functions. They are two sides of the same coins. Any attempt to control without plans is meaningless. Plans furnish, the standards against which actual performance is measured and controlled. (Weihrich and Koontz)

(n) Forecasting is the basis of planning: Planning is more essential than forecasting. Forecasting is the process of predicting future environment. Planning is essentially based on forecasts. It is an activity prior to planning.

2. Discuss the importance of planning.

Ans: Planning is the most important and fundamental function of management. It precedes the execution of all other managerial functions. Moreover, planning is essential for effective performance of all the other functions of management. No organization can effectively utilize its resources without effectively planning. The importance or benefits of planning is briefly stated in the ensuring points -

(a)Helps define objectives: Establishing objectives is the first step in planning. Therefore, planning helps establish clear-cut and tangible objectives of the organization as well as of the each of its individual and department. Thus, every one in the organization becomes aware of his objectives. Every one may know where he is and where he is to go.

(b) Helps achieve objectives: Planning is the process of deciding courses of action to achieve the objectives. Thus, planning shows the rational path or way to attain the objectives. It prevents organization members drifting and working at cross-purposes.

(c) Reduces uncertainty: Planning involves the systematic forecasting of future events, trends and risks. The managers can, therefore, foresee the amount of uncertainty and risk involved in any business activity. Hence, they can better manage the uncertainty and reduce its impact on their organization.

(d) Prepares for change: No one can prevent change. But planning can prepare managers to face and cope with the change. It is because planning forces managers to foresee future, anticipate change and its impact and develop appropriate strategies to respond to the change suitably. Thus, planning enables managers to avoid tendency to let thing run down to waken to opportunities and to see things as they might be not as they are (Ferry and Franklen)

(e) Helps capitalize opportunities: In a dynamic environment opportunities and threats go hand in hand. Through sound planning managers try to search most suitable opportunities and capitalize on them.

(f)Help optimum utilization of resources: Planning helps in achieving optimum utilization of resources of an enterprise. Sound planning provides a logical basis of allocation of different resources among various plans and activities. Sound policies, procedures, methods, rules etc. ensure optimum utilization of resources..

(g)Provides competitive Strength: Planning enables a company to remain competitive. In fact, through planning a company may systematically add new lines of products, expand the plant capacity, change the method of work, and change the product quality and style. Such activities are the key to remain competitive in the industry.

(h) Facilities co-operation and co-ordination: Planning facilitates co-operation and co-ordination in an organization with the help of well defined objectives, policies, procedures, rules, methods etc. Every one knows where the organization is going and what they must contribute to reach the objective of the organization. Consequently managers can easily co-ordinate their activities and seek co-operation of each member (Robbins & coulter)

(i)Facilitates decentralization and delegation: Sound Planning ensures proper policies, procedures, methods, rules, programmes etc. in place. This facilitates decentralization and delegation of authority because managers are sure that the subordinates will exercise the authority according to the plans.

(G) Provides criteria for decision-making: The different elements of planning provide sound criteria for making decisions. These serve as a basis of uniform and unbiased decisions. These elements of planning guide all and sundry in making decisions in the organization. These elements provide a framework within which every one can make decisions with freedom and autonomy.

(k) Provides a basis of control: Planning is regarded as the twin of controlling. It ensures timely performance as per standards. Various types of plans or elements of planning serve as standards of performance as well as the deadlines for start and completion of activities. Thus, planning serve as a basis of control.

(l) Motivates employees: Plans spell out goals as well as reward. Employees, therefore, tend to accomplish the goals in order to get the reward. They are inspired to work more and better to get the reward. Thus, planning motivates employees.

(m) Encourages innovation and creativity: Sound planning encourages innovation and creativity in the organization. It is so because good planning has scope for growth and development of an organization and its employees. One expert has rightly stated, "good planning process will provide avenues for individual participation, and will throw up more ideas about the company and its environment." (D.E. Hursey)

3.what are the various limitation of planning?

(a) Ambiguous objectives and plans: Sometimes, established objectives and the plans to achieve them are ambiguous. Ambiguity may even arise when these are expressed in qualitative or intangible forms. In such cases, planning cannot succeed.

(b) Lack of reliable facts and information: Sometimes, planning is based on unreliable facts and information. If reasonably reliable facts and information are not available, planning is bound to fail. 

(c)Inaccurate premises: Every plan is based on certain premises or assumptions. They must be accurate today and must remain accurate during the plan period. But sometimes, the assumptions remain no more valid and accurate during the implementation phase due to the change in conditions. Consequently, the value of the plan is lost.

(d)Stifles initiative: Another limitation of planning is that it may stifle initiative of members of organization for at least two basic reasons: 

(i) The members are bound to work within the framework of policies, procedures, methods, rules etc. 

(ii)Absence of proper reward or motivation system in the plans. Consequently, organization members instead of helping may hinder in planning.

(e) Rigid philosophy or lack of pragmatism: Some managers are very rigid to their philosophy of management. They become accustomed to do a job in a particular way. Thus, they lack pragmatism. They do not want to change their planning patterns in light of the changing situations. Therefore, their planning and plans may be idealistic but not pragmatic and practicable. Consequently plans serve no purpose.

(f) Resistance to change: Planning involves change in goals expectations, working patterns etc. And managers as well as employees have a tendency to resist change. They usually feel discomfort in status quo. Thus, the planning tends to lose its significance.

(g) Inflexibility of existing objectives and plans: Sometimes, the existing objectives and plans are found inflexible. Therefore, it becomes very difficult to make necessary changes in them. Thus, they become obstacles in further planning. Therefore, managers are bound to develop stereotype plan and do not change the existing planning system.

(h) Lack of planning skills: Planning is an intellectual and creative process. It needs conceptual, technical, human, and forecasting skills. But all managers are not equally intelligent and able to think in advance and conceive a sound plan. Moreover, some managers by their nature and temperament are doers rather than thinkers. Therefore, they fail to plan effectively.

(i) Biased mangers/bosses: Every manager does not always behave rationally and objectively. Even planning is affected by the likes, dislikes, preferences, personal interests etc. of the managers or bosses. Hence, planning cannot serve the organizational purpose effectively and lose their utility.

(J) Failure to integrate with other functions: A sound planning system and plan fails because the manager fails to integrate planning function with other functions of management. If planning function is not effectively implemented, directed and controlled it is likely to fail miserably.

4. What are the essentials of an effective planning? 

Ans: Planning is essential and most important function of management. The need is to make it more effective. Planning or a plan can be more effective. Planning or a plan can be more effective if the following factors are taken into consideration:

(a) Well-defined objectives: Well-defined objectives are the foundations of effective planning. Therefore, every plan should be based on well-defined objectives. Moreover the objective should be clear, concise and accurate.

(b) Simple and easy to understand: Planning proves more effective when plans are simple and easy to understand.

(c) Comprehensive: A sound plan should always be comprehensive.It should cover each and every aspect and action necessary for.accomplishment of the objectives.

(d) Flexible: A plan should be flexible. It should be capable of being modified and adjusted to meet the changed conditions. However, the cost of flexibility should not exceed its benefits.

(e)Balanced: A sound plan is one that is well balanced. There should be a balance between objectives and resources in a plan. Moreover, balance should also be maintained between long-range and short-range plans.

(f) Economical: A good plan is one that achieves the objectives at a minimum possible cost. Therefore, cost involved in formulating and implementing a plan should be reasonably economical. It must justify in terms of its cost and benefits.

(g) Stable: A good plan should reasonably be stable in the usual business conditions. It should not require extensive changes and modifications merely because of changes in the long-term trend of the external environment of business. (W. Haynes)

(h) Continuity: Planning should have continuity. It means tl new plan should have link and continuity with the existing plan. Every plan should be made in continuity of the earlier plans.

(i)Unity: There should be a unity in planning. As far as possible, all managers should operate under one overall plan at one time. However, subsidiary and contingency plans may be prepared for the accomplishment of the overall plan.

(J) Consistency: Efficiency of a plan depends upon its consistency.

Therefore, every plan should be consistent with other departmental plans.

(k) Participation: A plan should be prepared with effective participation of all concerned. A manager should seek participation in the planning process of all those who are to implement the plan.

5. Describe the various principles of planning. 

Ans: Weihrich and Koontz have suggested the following principles of planning:

(a) Principle of contribution to objectives: The principles state that the purpose of every plan and supporting plan must contribute to the accomplishment of the organizational objectives.

(b) Principle of Objective: This principle states that objectives of planning should be clear, attainable and verifiable. Ambiguous objectives are meaningless and useless for effective planning.

(c) Principle of primary planning: Planning must logically proceed all other managerial functions i.e. organizing directing and controlling Execution of all other managerial functions must be dependent upon the planning function.

(d)Principle of efficiency of plans: This principle stresses that planning should be efficient. The cost of plans should not exceed ther contribution.

(e)Principle of planning premises: This principle emphasizes the need for consistent planning premises. Planners should, therefore thoroughly understand and utilize the planning premises. It will help planners in making more coordinated and effective planning.

(f)Principle of strategy and policy framework: This principle states that planner should clearly understand the strategies and policies of the enterprise. A clear understanding and implementation of these will help in creating an effective framework of plans. This will ultimately, help in effective implementation of the plans.

(g) Principle of limiting factor: A limiting factor is one, which creates problems in the way of achieving predetermined objectives. This principle states that planner must recognize and solve the limiting factors in order to formulate effective plans. If the planners can recognize and solve the limiting factors accurately, their chosen course of action will be the most effective. It may be noted that the principle of limiting factor is the essence of decision-making.

(h) Principle of commitment: The commitment principle states that planning should cover the period of time in future which is necessary to fulfill the commitment involved in the plan.

(i) Principle of flexibility: The principle of flexibility deals with the ability to change as and when needed. This principle states that plans should be flexible. Flexibility allows a manager to adjust the plans according to changing situations. This in turn, will reduce the danger of losses incurred through the unexpected events. However, cost of flexibility should not exceed its advantages.

(j) Principle of navigational change: This principle states that a manager is like a navigator of a ship in Ocean, must constantly check and monitor the conditions and change the plans as required by the changed.

Management Principle and Application Unit 2 : Planning Notes For 3rd Semester   

6. Discuss briefly the steps involved in planning process.

Ans: Planning is an intellectual process. This process consists of many steps. But it is very difficult to specify the exact number of steps in a planning process. Weihrich ad Koontz, and Richard T. Case have described six steps whereas Terry and Franklin have suggested eight steps in a planning process. However, an ideal planning may consist the following steps:

(a) Environment scanning: This is the step, which precedes planning. It is therefore, not strictly a part of the planning process. But this step is essential for sound planning. At this step, managers should scan the external as well as the internal environment of the organization. They look at the possible future opportunities and threats for them in the environment. Then they evaluate them in the light of their strengths and weaknesses. This process is known as SWOT analysis. This whole exercise will help them to understand what they can do. This will initiate the planning process.

(b) Setting objectives: The next step in the process is to set objectives. Initially, objectives are set for the entire organization. Then objectives are set for each and every department or key areas of the organization. The objectives should be set for the long-term as well as for the short-term. 

(c) Establishing planning premises: The next step in a planning process is to establish planning premises. Planning premises are the assumptions about the future environmental conditions of the organization.These are the assumed conditions in which plan is to be executed.

All the managers should develop the planning premises. However, the premises should be limited to critical or strategic factors to a plan. Moreover, all the managers must agree on the premises and understand them well. The more thoroughly they understand and agree the planning premises, the more coordinated planning would be (Weihrich and Koontz)

(d) Searching alternatives: An analysis of the environment and the firm's capabilities helps a firm determine the various strategic alternatives available to it. Some of these alternatives could be: to explore new markets; to redesign important products to improve their quality or reduce costs; or, to invest in promising sectors. A limited number of alternatives may be generated if only a minor change in the existing strategy is required. But if a totally different strategic approach is required, then more alternatives must be identified.

(e) Evaluating the alternatives: The next step is to evaluate the alternatives. The evaluation should be based on many factors such as the investment and risk involved, availability of resources, expected payback period, planning premises, the objectives of the organization etc. Planners may use scientific tools and techniques in evaluating the alternatives.

(f) Selecting the most appropriate alternative or plan: After evaluating different alternatives, planners select the most appropriate alternative course of action i.e. plan. Sometimes planners select two or more plans rather than one. The selection is made in the light of objectives and planning premises.

(g) Formulating derivative plans: Once a plan is selected, managers need to formulate derivative or supporting plans. These plans must be coordinated with the basic or overall plan. These plans are necessary to implement and support the basic plan.

(h) Budgeting i.e. committing resources: The next logical step is the budgeting or committing the resources necessary for plans. At this stage, basic and derivative plans are translated into budgets. In other words, the plans are reduced to quantitative terms or more specifically to monetary terms. The statements of income (output) and expenses (inputs) of all the plans are prepared. Thus, the management commits resources necessary for implementation of plans. This establishes a framework for implementation of plans.

7. Discuss the different types of planning. 

Ans: Any organization can have different plans. We can classify the types of plans in the following ways: On the basis of Nature

(a) Operational Plan: Operational plans are the plans which are formulated by the lower level management for a short term period of up to one year. It is concerned with the day to day operations of the organization. It is detailed and specific. It is usually based on past experiences. It usually covers functional aspects such as production,, human resources, etc.

(b) Tactical Plan: The tactical plan is the plan which is concerned with the integration of various organizational units and ensures - implementation of strategic plans on day to day basis. It involves how the resources of an organization should be used in order to achieve strategic goals. The tactical plan is also known as a coordinative or functional plan.

(c) Strategic Plan: A strategic plan is a plan which is formulated by top-level management for a long period of time of years or more. They decide the major goals and policies to achieve their goals. It takes in a noe of all the external factors and risks involved and makes a long-term pcy of the organization. It involves the determination of strengths and ..knesses, external risks, missions, and control systems to implement FS.

On the basis of the Managerial Level

(a) Top-level Plans: Plans which are formulated by general managers and directors are called top-level plans. Under these plans, the objectives, budget, policies, etc. for the whole organization are laid down. These plans are mostly long term plans.

(b) Middle-level Plans: The managerial hierarchy at the middle level includes the departmental managers. A corporation has many departments like the purchasing department, sales department, nance department, personnel department, etc. The plans formulated by the departmental managers are called middle-level plans.

(c) Lower level Plans: These plans are prepared by the foreman or the supervisors. They take the existence of the actual work and the problems connected with it. They are formulated for a short period of time and called short term plans.

On the basis of Time

(a) Long Term Plan: The long-term plan is the long-term process that business owners use to reach their business mission and vision. It determines the path for business owners to reach their goals. It also reinforces and makes corrections to the goals as the plan progresses.

(b) Intermediate Plan: Intermediate planning covers 6 months to 2 years. It outlines how the strategic plan will be pursued. In business, intermediate plans are most often used for campaigns. On the basis of Use

(a) Single Plan: These plans are connected with some special problems. These plans end the moment of the problems to be solved. They are not used, once after their use. They are further re-created whenever required.

(b) Standing Plan: These plans are formulated once and they are repeatedly used. These plans continuously guide managers. That is why it is said that a standing plan is a standing guide to solving the problems. These plans include mission, policies, objectives, rules, and strategy.

8. write the key difference between tactics and strategy Planning.

Ans: The following are the major differences between tactics and strategy:

(i) Tactics are the properly organized actions that help to achieve a certain end. The strategy is the integrated plan that ensures the achievement of organization objectives. (ii) Tactics is a subset of strategy, i.e. without the strategy, tactics can do nothing. Tactics try to find out the methods through which strategy can be implemented. Conversely, Strategy is a unified set of activities that can help the organization to gain an advantageous position. (iv) Tactics are formulated by middle-level management, whereas top level management formulates a strategy. (v) Tactics involve lower risk as compared to strategy.(vi) Tactics are preventive in nature while Strategy is competitive in nature.(vii) Tactics are defined as a trip, i.e. typically for a short duration, but the strategy is a journey that lets the company travel from one position to another. Hence it is for a long duration.(viii) Tactics frequently change with the changes in the market conditions; however, the strategy remains same for a long period.(ix) Tactics have a reactive approach, unlike strategy. Tactics are made for coping with the present situation. In contrast to strategy, they are made for future.

9. Discuss the various components of planning.

Ans: The main components or elements of planning are as follows (a) Objectives, (b) Strategies, (c) Policies, (d) Procedures, (e) Methods, (f) Rules, (g) Standards, (h) Programmes, (i) Schedules, (j) Budgets, (k) Projects and (1) Tactics.

(a) Objectives: Objectives are the desired results that an organization wants to achieve within a specific period of time. They are the end points towards which activities and energies are directed. It is the destination where an organization wants to reach. It may be noted that the terms purpose, mission, goal and objectives are often used interchangeably.

(b) Strategies: The term strategy means the long-range approach for dealing with the organizations competitive environment with a view to win over competitors in business. The purpose of Strategy is to provide directional cues to the achieve its objectives. It furnishes a framework for thinking and action to achieve objectives.

(c) Policies Policies are guidelines in decision-making. In the words of Weihrich and Koontz, "policies also are plans". They further state that Policies are general statements or understandings that guide or channel thinking in decision-making."

Thus policies are the guidelines set to provide direction in decision-making. These set the boundaries around which decisions are made. 

(d) Procedures : A procedure is a chronological sequence of steps or actions to be taken to accomplish a specific task or job. It lays down a standard path to accomplish a job.

(e) Method: A method is a prescribed way of completing a step in a procedure. Thus, method relates to a step in the procedure. It is a component part or sub-unit of a procedure.

(f) Rules: Rules are definite recorded directions to do or not to do certain things in a given situation. It may be noted that rules are the ultimate directions allowing no room for discretion.

In the words of Robbins and Coulter, 'A rule is an explicit statement that tells a manager what he or she ought to or not ought to do."

(g) Standards: A standard is a measure against which the level of performance is measured or evaluated. A standard is a basis of control. It may be in quantitative and qualitative terms as well. However, a standard, as far as possible, should be in quantitative terms or verifiable.

(h) Programmes: Programme is a precise plan consisting of sequence of steps that are required to be taken in order to accomplish a given task.

10. What do you mean by Strategic planning? Write its features. 

Ans: Strategic planning means planning for strategies and implementing them to achieve organisational goals. Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation. Strategic planning is the process of determining a company's long-term goals and then identifying the best approach for achieving those goals.

The following are the salient features of strategic planning: 

(a) Process of Questioning: It answers questions like where we are and where we want to go, what we are and what we should be.

(b) Time Horizon: It aims at long-term planning, keeping in view the present and future environmental opportunities. It helps organisations analyse their strengths and weaknesses and adapt to the environment. Managers should be farsighted to make strategic planning meaningful.

(c) Pervasive Process: It is done for all organisations, at all levels; nevertheless, it involves top executives more than middle or lower-level managers since top executives envision the future better than others.

(d) Focus of Attention: It focuses organisation's strengths and resources on important and high-priority activities rather than routine and day-to-day activities. It reallocates resources from non-priority to priority sectors.

(e) Continuous Process: Strategic planning is a continuous process that enables organisations to adapt to the ever-changing, dynamic environment.

(f) Co-Ordination: It coordinates organisations internal environment with the external environment, financial resources with non- financial resources and short-term plans with long-term plans.

11. Explain the Advantages and Disadvantages of Strategicplanning.

Ans: Strategic planning offers the following benefits:

(a) Financial Benefits: Firms that make strategic plans have better sales, lower costs, higher EPS (earnings per share) and higher profits. Firms have financial benefits if they make strategic plans.

(b) Guide to Organisational Activities: Strategic planning guides members towards organisational goals. It unifies organisational activities and efforts towards the long-terms goals. It guides members to become what they want to become and do what they want to do.

(c) Competitive Advantage: In the world of globalisation, firms which have competitive advantage (capacity to deal with competitive forces) capture the market and excel in financial performance. This is possible if they foresee the future; future be predicted through strategic planning. It enables managers to anticipate problems before they arise and solve them before they become worse.

(d) Minimises Risk: Strategic planning provides information to assess risk and frame strategies to minimise risk and invest in safe business opportunities. Chances of making mistakes and choosing wrong objectives and strategies, thus, get reduced.

(e) Beneficial for Companies with Long Gestation Gap: The time gap between investment decisions and income generation from those investments is called gestation period. During this period, changes in technological or political forces can disrupt implementation of decisions and plans may, therefore, fail. Strategic planning discounts future and enables managers to face threats and opportunities. 

(f) Promotes Motivation and Innovation:Strategic planning involves managers at top levels. They are not only committed to objectives and strategies but also think of new ideas for implementation of strategies. This promotes motivation and innovation. 

(g) Optimum Utilisation of Resources: Strategic planning makes best use of resources to achieve maximum output.

Following are the limitations:

(a) Problems of Change: The factor works more as limiting factor in the light of changes in future conditions. In a complex and rapidly changing environment, the succession of new problems is often magnified by implications that make planning most difficult. The problem of change is more complex in long-range planning. 

(b) The process is very complex: Strategic planning process consists of many steps that are connected to each other and must be constantly adjusted. Some unexpected factors also appear that may change the whole strategy and as a result, strategic planning process.

(c) Low rate of successful implementation : Due to its complexity and heavy commitment to strategic goals, strategic planning is rarely implemented successfully. Often, the poor implementation is the reason for failure, although it is more often the case of misaligned operational and strategic goals.

(d) Inflexibilities: Manager while going through the strategic planning process have to work in a set of given variables. These variables may be more in terms of organisations or external.

12. Explain the Process of Strategic Planning in details.

Ans: The process of strategic planning consists of the following


(a) Determination of Mission and Objectives: Strategic planning starts with the determination of the mission for the organisation. The principal objectives for which the organisation has been set up should be clearly defined. Strategic planning is concerned with an organisation's long-term relationship to its external environment. So, the business mission should be fixed in terms of social impact of the organisation.

(b) Environmental Analysis: In order to identify the opportunities and threats, the external environment of the organisation is analysed. A list of important factors likely to affect the organisation's activities is prepared.

(c) Self-appraisal: the next step, the strengths and weaknesses of the organisation are analysed. Such an analysis will enable the enterprise to capitalize on its strengths and to minimise its weaknesses. The enterprise can utilise the external opportunities by concentrating on its internal capacity. By matching its strengths with the environmental opportunities, an enterprise can face competition and achieve growth.

(d) Strategic Decision-making: Strategic alternatives are then generated and evaluated. After that, a strategic choice is made to reduce the performance gap. The organisation must select the alternative that is best suited to its capabilities. For instance, in order to grow, an enterprise may enter into new markets or develop new products or sell more in the present markets. Choice of strategy depends upon external environment, managerial perception, the managers' attitude towards risk, past strategies and managerial power and efficiency.

(e) Strategy Implementation and Control: Once the strategy is determined, it must be translated into tactical operational plans. Programmes and budgets are developed for each function. Short term operational plans are prepared to use the resources. Control should be developed to evaluate performance as the strategy is put into use. Wherever actual results are below the expectation, the strategy should be reviewed or reappraised. It must be modified and adapted to the changes in the external environment.

13. What is the difference between strategic and operational planning?

Ans: (a) Duration: Strategic planning is for a longer duration, it can be said that more the duration of a plan, more strategic it is. These plans are concerned with decisions that have enduring effects and are difficult to reverse. Strategic planning can also be called long range planning Operational planning is concerned with short-term plans or plans having short duration. Both the plans complement each other and cannot be separated.

(b) Scope: Strategic planning is broad in scope while operational planning is narrow. The more the functions of an organization's activities are affected by a plan, the more strategic it is. Strategic planning guides the choice among the broad directions in which the organization seeks to move and operational planning focuses individual functions may be programmed for attaining the organizational goals.

(c) Environment: Strategic planning takes into account external environment and tries to relate it to the organization. It encompasses ali the functional areas and is affected within the existing and long-term future characteristics of various environmental factors. Operational planning is monthly concerned with internal organizational environments so as to make effective use of resources.

(d) Primary: Strategic planning precedes operational planning, the former is concerned with setting the trends and direction of the organization while the later implements what has been decided by the former. Strategic planning is for fairly a long period while operational planning is for a short period. Strategic planning also limits the scope of operational planning because the later is to operate within the overall limits fixed by the former.

14. What is Environmental Analysis? Explain its characteristics. 

Ans: Environmental Analysis can be defined as the process which examines all the components whether internal or external that has an influence on the performance of the organization. Here, the internal components indicates the strength and weaknesses of the business entity whereas the external components indicates the opportunities and threats outside the organisation.

In other words, Environmental Analysis is the process through which an organisation monitors and comprehends various environmental forces so as to determine the opportunities and threats that lie ahead in the future. Further, Environmental Analysis is also known as Environmental Appraisal or Environmental Scanning.

Some of the features or characteristics of Environmental Analysis are:

(i) Holistic View: Environmental Analysis is a holistic exercise in the sense that it must comprise a total view of the environment rather than viewing a trend piecemeal. The corporate must scan the circumference of its environment in order to minimize the chances of surprises and to maximize its utility.

(ii) Continuous Process: The analysis of environment must be a continuous process rather than being an intermittent scanning system. It must operate continuously in order to keep track of the rapid pace of development. So, Environmental analysis becomes essential due to the dynamic nature of the environment.

(iii) Exploratory Process: While the Monitoring aspect of the environment is concerned with the present development, a large part of the process seeks to explore the unknown dimensions of possible future. The analysis emphasizes on "What could happen" and not necessarily "What will happen."

15. Explain the need and importance of environmental analysis. 

Ans: The following is the need and importance of environmental


(i) Identification of strength: Strength of the business firm means capacity of the firm to gain advantage over its competitors. Analysis of internal business environment helps to identify strength of the firm. After identifying the strength, the firm must try to consolidate or maximise its strength by further improvement in its existing plans, policies and resources.

(ii)Identification of weakness: Weakness of the firm means limitations of the firm. Monitoring internal environment helps to identify not only the strength but also the weakness of the firm. A firm may be strong in certain areas but may be weak in some other areas. For further growth and expansion, the weakness should be identified so as to correct them as soon as possible.

(iii) Identification of opportunities: Environmental analyses helps to identify the opportunities in the market. The firm should make every possible effort to grab the opportunities as and when they come.

(iv) Identification of threat: Business is subject to threat from competitors and various factors. Environmental analyses help them to identify threat from the external environment. Early identification of threat is always beneficial as it helps to diffuse off some threat.

(v) Optimum use of resources: Proper environmental assessment helps to make optimum utilisation of scare human, natural and capital resources. Systematic analyses of business environment helps the firm to reduce wastage and make optimum use of available resources, without understanding the internal and external environment resources cannot be used in an effective manner.

(vi) Survival and growth: Systematic analyses of business environment help the firm to maximise their strength, minimise the weakness, grab the opportunities and diffuse threats. This enables the firm to survive and grow in the competitive business world.

(vii) To plan long-term business strategy: A business organisation has short term and long-term objectives. Proper analyses of environmental factors help the business firm to frame plans and policies that could help in easy accomplishment of those organisational objectives. Without undertaking environmental scanning, the firm cannot develop a strategy for business success.

(viii) Environmental scanning aids decision-making: Decision making is a process of selecting the best alternative from among various available alternatives. An environmental analysis is an extremely important tool in understanding and decision-making in all situation of the business.

16. Explain the Steps Involved in Environmental Analysis.

Ans: The Steps Involved in Environmental Analysis are: Identifying: First of all, the factors which ence the business entity are to be identified, to improve its position in the market. The identification is performed at various levels, i.e. company level, market level, national level and global level.

Scanning: Scanning implies the process of critically examining the factors that highly influence the business, as all the factors identified in the previous step effects the entity with the same intensity. Once the important factors are identified, strategies can be made for its improvement. Analysing: In this step, a careful analysis of all the environmental factors is made to determine their effect on different business levels and on the business as a whole. Different tools available for the analysis include benchmarking, Delphi technique and scenario building.

Forecasting: After identification, examination and analysis, lastly the impact of the variables is to be forecasted. Environmental analysis is an ongoing process and follows a holistic approach, that continuously scans the forces effecting the business environment and covers 360 degrees of the horizon, rather than a specific segment.

17. What is Internal Environment? Explain the factors influencing internal environment. 

Ans: Internal Environment is that part of the business environment which is concerned with the different factors present within the organization. It comprises of conditions, forces, members and events which has the

capability to influence the company's decisions and operations. It determines the procedures and methods in which activities are carried out in the organization, as well as it includes all of the immediate and information resources, such as technical, financial and physical resources of the organization. These factors are:

(i) Value System: Value system consists of all those components that are a part of regulatory frameworks, such as culture, climate, work processes, management practices and norms of the organization. The employees should perform the activities within the purview of this framework.

(ii) Vision, Mission and Objectives: The company's vision describes its future position, mission defines the company's business and the reason for its existence and objectives implies the ultimate aim of the company and the ways to reach those ends.

(iii) Organizational Structure: The structure of the organization determines the way in which activities are directed in the organization so as to reach the ultimate goal. These activities include the delegation of the task, coordination, the composition of the board of directors, level of professionalization, and supervision. It can be matrix structure, functional structure, divisional structure, bureaucratic structure, etc.

(iv) Corporate Culture: Corporate culture or otherwise called an organizational culture refers to the values, beliefs and behaviour of the organization that ascertains the way in which employees and management communicate and manage the external affairs.

(v) Human Resources: Human resource is the most valuable asset of the organization, as the success or failure of an organization highly depends on the human resources of the organization.

(vi) Physical Resources and Technological Capabilities: Physical resources refers to the tangible assets of the organization that play an important role in ascertaining the competitive capability of the company. Further, technological capabilities imply the technical know-how of the organization.

Internal environmental factors have a direct impact on a firm. Further, these factors can be altered as per the needs and situation, so as to adapt accordingly in the dynamic business environment.

18. What is External Environment? Explain the factorsinfluencing external environment. 

Ans: External Business environment comprises of all the extrinsic factors, influences, events, entities and conditions, often existing outside the company's boundaries but they have a significant influence on the operation, performance, profitability and survival of the business enterprise.

For the purpose of continuous and uninterrupted functioning of the business, the enterprise has to act, react or adjust according to these factors. These factors are not under the control of the enterprise. The elements of the external environment are divided into two categories:

A. Micro Environment: Otherwise called as task environment, these factors directly influence the company's operations, as it covers the immediate environment that surrounds the company. The factors are somewhat controllable in nature. It includes:is required which is provided by the suppliers. The behaviour of the supplier (i)Competitors: Competitors are the business rivals, which operate in the same industry, offering the same product and services, and cater to the same audience. 

(ii) Suppliers: To carry out the production process, the raw material has a direct impact on a company's business operations. 

(iii) Customers: Customers are the target audience, i.e. the one who purchases and consumes the product. The customers are given the most important place in every business, because, the products are created and promoted for customers only.

(iv) Intermediaries: There are a number of individuals or firms that help the business enterprise in the promotion, selling, distribution and delivery of the product to the end buyer, which are called as marketing intermediaries. It includes agents, distributors, dealers, wholesalers, retailers, delivery boys, etc.

(v) Shareholders: Shareholders are the actual owners of the company, as they invest their money in the company. They get their share in the profits also, in the form of a dividend. In fact, they have the right to vote at the company's general meeting.

(vi) Employees: Employees refers to the company's staff, who are hired to work for the company to help the company reach its mission. Therefore, it is very important for the firm, to employ the right people, retain and keep them motivated so as to get the best out of them.

(vii) Media: Media plays an important role in the life of every company because it has the capability to make the company's product popular overnight or it can also defame them, in just one go. This is due to the fact that the reach of media is very large and so every content which is going to air on any form of media can affect the company positively or adversely depending on what kind of information it contains.

B. Macro Environment: Otherwise called as general environment, macro environment affects the entire industry and not the firm specifically. That is why these factors are completely uncontrollable in nature. The firm needs to adapt itself according to the changes in the macro environment, so as to survive and grow. It includes:

(1)Economic Environment: The economic conditions of the region and the country as a whole has a significant bearing on the company's profitability. This is because the purchasing power, saving habits, per capita income, credit facilities etc. depends greatly on the country's economic conditions, which regulates the demand for the company's products.

(ii) Political and Legal Environment: The political and legal environment consists of the laws, rules, regulations and policies which the company needs to adhere. The changes in these laws and government may affect the company's decisions, open doors of new opportunities for the business or pose a threat to the business.

(iii) Technological Environment: Technology is ever-changing, as everyday a new and improved version of something is launched which is created with the state-of-the-art technology. This can be a plus point if the company is the first mover in the race, subject to the success of the product. However, if it turns out as a failure, it will prove as a wastage of time, money and efforts. Further, every company has to keep itself updated with the changing technology.

(iv) Socio-Cultural Environment: Socio-cultural environment consist of those factors which are concerned with human relationships such as customs, traditions, beliefs, values, morals, tastes and preferences of the society at large. The company must consider these factors on various matters such as the hiring of employees, advertising the product and service, decision making etc.

(v) Demographic Environment: As the name suggests, the demographic environment covers the size, type, structure, education level, and distribution of population in a geographical area. The knowledge of this environment will help the firm in deciding the optimal marketing mix for the target population.

(vi) Global Environment: Due to liberalization domestic company's can offer their products and services for sale to other countries. In fact, there are many companies which are operating in a number of nations worldwide. Hence, such companies have to follow the laws prevalent in these countries as well as they have to adhere to international laws and guidelines. Further, the responses and the company's norms must be in alignment with the global environment.

19. What are the Key Differences Environment?Between Internal and External 

Ans: The difference between the internal and external environment can be drawn clearly on the following grounds:

(i)internal environment is composed of all those factors, events, conditions, etc. which exist inside the company and has the capability to The influence the company's strategic decisions and functions, as well as they can be influenced by company's decisions. On the contrary, the external environment is that part of the business environment consisting of all those factors which do not exist within the company but can affect the company's operations, decisions, survival, growth and profitability.

(ii)Internal environmental factors are controllable in nature, in the sense that the company has supremacy over these factors. Conversely, external environmental factors are largely uncontrollable in nature.

(iii) Internal environmental factors, either impart strength or cause weakness to the firm. As against, external environmental factors either give opportunities or poses threats.

(iv) Changes in internal environmental factors affect the company only, as the factors belong specifically to the company. In contrast, changes in external environmental factors have an impact on the industry as a whole and so all the companies operating in the industry gets affected by it.

(v) The internal environment consists of those factors which have the potential to influence the company's decisions, working and strategies. On the flip side, the external environment comprises of those factors which can affect the survival, growth, reputation and expansion of the company positively or negatively.

20. Explain the techniques of Environmental Anaysis in details.

Ans: The following techniques are generally pressed into service while carrying out environmental scanning:

(i) SWOT Analysis: SWOT is an acronym for the internal strengths and weaknesses of a firm and the external opportunities and threats facing that firm. SWOT analysis helps managers to have a quick overview of the firm's strategic situation and assess whether there is a sound fit between internal resources, values and external environment.

A good fit maximizes a firm's strengths and opportunities and minimizes its weaknesses and threats. The primary purpose of SWOT analysis is to identify the key internal and external factors that are important to achieving the goals. One useful way of putting SWOT analysis to good effect is to exploit market opportunities by leveraging on the strengths of a firm. At the same time a firm can also convert its weaknesses or threats into strengths or opportunities by proactively taking appropriate steps. An example of such a conversion strategy is to find new markets. If the threats or weaknesses cannot be converted a firm should try to minimize or avoid them.


Also Read

Unit - 1 Introduction 

Unit - 2 Planing 

Unit - 3 Organising 

Unit - 4 Staffing and Leading 

Unit - 5 Controlling

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