AMERICAN COLLEGE OF TECHNOLOGY

Department of Business Administration

Title: Planning

Module Title: Management Theories and Practices (MBA611)

Individual Assignment 2

Submitted to: Dr. Temesgen Dagne

Student Name:Temegnu gizaw
Student ID: - OMBA-168-21A

Jan. 2022
Addis Ababa, Ethiopia
Abstract
Planning is the function of management that involves setting objectives and
determining a course of action for achieving these objectives. Planning requires that
managers be aware of environmental conditions facing their organization and
forecast future conditions. It also requires that managers be good decision-makers.
Planning is a process consisting of several steps. The process begins with
environmental scanning, which simply means that planners must be aware of the
critical contingencies facing their organization in terms of economic conditions,
their competitors, and their customers. Planners must then attempt to forecast future
conditions. These forecasts form the basis for planning. Planners must establish
objectives, which are statements of what needs to be achieved and when. Planners
must then identify alternative courses of action for achieving objectives. After
evaluating the various alternatives, planners must make decisions about the best
courses of action for achieving objectives. They must then formulate necessary steps
and ensure effective implementation
Table of Contents
Abstract........................................................................................................................................................
1. INTRODUCTION.............................................................................................................................
2. CHARACTERISTICS OF PLANNING..............................................................................................
3. PLANNING PROCESS.........................................................................................................................
4. TYPES OF PLANNING........................................................................................................................
5. ADVANTAGES OF PLANNING.........................................................................................................
6. DISADVANTAGES OF PLANNING................................................................................................
CONCLUSION........................................................................................................................................
REFERENCES........................................................................................................................................
1. INTRODUCTION
Planning means looking ahead and chalking out future course of action to be
followed. It is a preparatory step. It is a systematic activity which determines when,
how and who is going to perform a specific job. Planning is a detailed programme
regarding future courses of action. It is rightly said ―Well plan is half done‖.
Therefore planning takes into consideration available & prospective human and
physical resources of the organization so as to get effective coordination, contribution
& perfect adjustment. It is the basic management function which includes formulation
of one or more detailed plans to achieve optimum balance of needs or demands with
the available resources. According to Urwick, Planning is a mental predisposition to
do things in orderly way, to think before acting and to act in the light of facts rather
than guesses‖. Planning is deciding best alternative among others to perform different
managerial functions in order to achieve predetermined goals.
According to Koontz & O‘Donell, ―Planning is deciding in advance what to do, how
to do and who is to do it. Planning bridges the gap between where we are to, where
we want to go. It makes possible things to occur which would not otherwise occur.
2. CHARACTERISTICS OF PLANNING
1) Planning is goal-oriented.

a. Planning is made to achieve desired objective of business.

b. The goals established should general acceptance otherwise individual efforts & energies
will go misguided and misdirected.

c. Planning identifies the action that would lead to desired goals quickly & economically.

d. It provides sense of direction to various activities. E.g. Maruti Udhyog is trying to capture
once again Indian Car Market by launching diesel models.

2) Planning is looking ahead.

a. Planning is done for future.

b. It requires peeping in future, analyzing it and predicting it.

c. Thus planning is based on forecasting.

d. A plan is a synthesis of forecast.

e. It is a mental predisposition for things to happen in future.

3) Planning is an intellectual process.

a. Planning is a mental exercise involving creative thinking, sound judgement and

imagination.

b. It is not a mere guesswork but a rotational thinking.

c. A manager can prepare sound plans only if he has sound judgment, foresight and
imagination. d. Planning is always based on goals, facts and considered estimates.

4) Planning involves choice & decision making.

a. Planning essentially involves choice among various alternatives.

b. Therefore, if there is only one possible course of action, there is no need planning because
there is no choice.

c. Thus, decision making is an integral part of planning.

d. A manager is surrounded by no. of alternatives. He has to pick the best depending upon
requirements & resources of the enterprises.

5) Planning is the primary function of management / Primacy of Planning.

a. Planning lays foundation for other functions of management.

b. It serves as a guide for organizing, staffing, directing and controlling.

c. All the functions of management are performed within the framework of plans laid out. d.
Therefore planning is the basic or fundamental function of management.

6) Planning is a Continuous Process.

a. Planning is a never ending function due to the dynamic business environment.

b. Plans are also prepared for specific period f time and at the end of that period, plans are
subjected to revaluation and review in the light of new requirements and changing conditions.

c. Planning never comes into end till the enterprise exists issues, problems may keep cropping
up and they have to be tackled by planning effectively.

3. PLANNING PROCESS
Planning function of management involves following steps:-

1) Establishment of objectives

a. Planning requires a systematic approach.

b. Planning starts with the setting of goals and objectives to be achieved.

c. Objectives provide a rationale for undertaking various activities as well as indicate

direction of efforts.

d. Moreover objectives focus the attention of managers on the end results to be achieved.

e. As a matter of fact, objectives provide nucleus to the planning process. Therefore,

objectives should be stated in a clear, precise and unambiguous language. Otherwise the
activities undertaken are bound to be ineffective.

f. As far as possible, objectives should be stated in quantitative terms. For example, Number
of men working, wages given, units produced, etc. But such an objective cannot be stated in
quantitative terms like performance of quality control manager, effectiveness of personnel
manager.

g. Such goals should be specified in qualitative terms.

h. Hence objectives should be practical, acceptable, workable and achievable.

2) Establishment of Planning Premises

a. Planning premises are the assumptions about the lively shape of events in future.

b. They serve as a basis of planning.

c. Establishment of planning premises is concerned with determining where one tends to
deviate from the actual plans and causes of such deviations.

d. It is to find out what obstacles are there in the way of business during the course of
operations.

e. Establishment of planning premises is concerned to take such step that avoids these
obstacles to a great extent. f. Planning premises may be internal or external. Internal includes
capital investment policy, management labour relations, philosophy of management, etc.
Whereas external includes socio- economic, political and economic changes. g. Internal
premises are controllable whereas external are non- controllable.

3) Choice of alternative course of action

a. When forecast are available and premises are established, a number of alternative course of
actions have to be considered.

b. The merits, demerits as well as the consequences of each alternative must be examined
before the choice is being made.

c. For this purpose, each and every alternative will be evaluated by weighing its pros and
cons in the light of resources available and requirements of the organization.

d. After objective and scientific evaluation, the best alternative is chosen.

e. The planners should take help of various quantitative techniques to judge the stability of an
alternative.

4) Formulation of derivative plans

a. Derivative plans are the sub plans or secondary plans which help in the achievement of
main plan.

b. Secondary plans will flow from the basic plan. These are meant to support and expedite
the achievement of basic plans.

c. These detail plans include policies, procedures, rules, programmes, budgets, schedules, etc.
For example, if profit maximization is the main aim of the enterprise, derivative plans will
include sales maximization, production maximization, and cost minimization.

d. Derivative plans indicate time schedule and sequence of accomplishing various tasks.

5) Securing Co-operation

a. After the plans have been determined, it is necessary rather advisable to take subordinates
or those who have to implement these plans into confidence.

b. The purposes behind taking them into confidence are:-

  Subordinates may feel motivated since they are involved in decision making
process.
 The organization may be able to get valuable suggestions and improvement in
formulation as well as implementation of plans.
 Also the employees will be more interested in the execution of these plans.
6) Follow up / Appraisal of plans

a. After choosing a particular course of action, it is put into action.

b. After the selected plan is implemented, it is important to appraise its effectiveness.

c. This is done on the basis of feedback or information received from departments or persons
concerned.

d. This enables the management to correct deviations or modify the plan. e. This step
establishes a link between planning and controlling function.

f. The follow up must go side by side the implementation of plans so that in the light of
observations made, future plans can be made more realistic.

4. TYPES OF PLANNING
Managerial planning comprises various types of plans, which are also known as elements of
good planning. Some of the important types of plans may be discussed as follows, which
must be included in a sound planning system.

1. Objectives

Objectives may be defined as the targets people seek to achieve over different time periods.
Objectives give direction to human behaviour and effort. Hence, an essential task of
management it to formulate, classify and communicate organizational objectives. Managers
are required to set both general and specific objectives. Survival, growth and development are
general objectives of a business enterprise. The specific objectives include the goals set for
various departments, divisions, groups and individuals. The general objectives are long term
in nature, whereas the specific objectives are short range, though the short range objectives
are and should be a part of long term objectives. Departmental objectives must be consistent
with the conductive to the overall, corporate objectives.

2. Policies

A policy is a general statement that guides thinking, action and decision making of managers
for the successful achievement of organizational objectives. Policies define the limits within
which decision are to be made. This ensures consistent and unified performance and exercise
of discretion by managers. Top management generally frames the policies. However, a
manager at any other level may lay down policies within the limits of his authority and also
within boundaries set by policies of his seniors. A policy is not static and may be modified or
reviewed in the light of changes the environment. A policy may be verbal, written or implied.
A well-defined policy helps the manager to delegate authority without undue fear, because
the policy lays down the limits for decisions by the subordinates.

3. Procedures

A procedure prescribes the sequence of steps that must be completed in order to achieve a
specific purpose. A procedure is a guide to action rather than to thinking. It details the exact
manner in which a certain activity must be accomplished. Its essence is chronological
sequence of required actions or steps. A procedure is generally established for repetitive
activity so that same steps are followed each time when that activity is performed. The
procedures do not allow much latitude in managerial decision making because they lay down
a definite way of doing certain things. Procedures are designed to execute policies and
achieve objectives. Procedures are used in all major functional areas.

Purchase procedure, materials issue procedure, costumer's order executing procedure,

accounting procedure, grievance handling procedure, etc, are some of the examples of usual
procedures.

4. Rules

Like a procedure, a rule is a guide to action. But it does not lay down any sequence of steps
as in the case of a procedure. A role tells us whether a definite action will be taken or will not
be taken in case of a given situation. Examples of rules are: (i) Customer's complaint must be
replied within one day (under customer satisfaction policy), (ii) No smoking in the factory
(under safety policy). Thus, a rule is prescribed course of action or conduct that must be
followed. As such, a rule does not leave any scope for discretion on the part of the
subordinates. Rules are definite and rigid because there must be no deviation from the stated
action, except in very exceptional cases.

5. Strategy

Strategy is a pattern or plan that involves matching organization competences (i.e. internal
resources and skills) with the opportunities and risks created by environmental change, in
ways that will be both effective and efficient over the time such resources will be deployed.
Effective formal strategies contain three elements: (i) the most important goals, (ii) the most
significant policies, (iii) the major programmes. Strategy deals with unpredictable and
unknowable. It is developed around a few key concepts and thrusts. A well-formulated
strategy helps to marshal and allocate and organisation's resources into a unique and viable
posture in relation to the strengths and weaknesses of the organisation, the anticipated
changes in the environment and the contingent moves of the opponents. Generally when we
walk of organizational strategy, it refers organization’s top level strategy. However, strategies
exist at other levels also.

6. Programmes
A programme lays down the principal steps for accomplishing a mission and sets an
approximate time for carrying out each step. George Terry says, A programme can be defined
as a comprehensive plan that includes future use of different resources in an integrated
pattern and establishes a sequence of required actions and time schedules for each in order to
achieve stated objectives. Programmes outline the actions to be taken by whom and where. A
programme is made up of objectives, policies, procedures, task assignment, budgets,
schedules etc. Examples of programmes are, building programme, expansion programme,
moral improvement programme, acquisition of the new line of business programme, training
programme, development of a new product programme, advertising programme and so on.
Programmes may be measure or minor, primary or derivative and long-term, medium term or
short term.

7. Projects

Often a single step in a programme is set up as a project. In fact a project is simply a cluster
of activities that is relatively separate and clear cut. Thus, projects have some features of a
programme but are usually parts of some programmes. Building a hospital, designing a new
package, building a new plant, are some examples of projects. The chief virtue of a project
lies in identifying a nice, neat work package within a bewildering array of objectives,
alternatives and activities.

8. Budgets

A budget is a statement or a plan of expected results expressed in numerical terms, such as

man hours, units of production, machine hours, and amount of expenditure or any other
quantitatively measurable term. Then it may be expressed in time, money, materials or other
quantitative units. Budget is prepared prior to a definite period of time of the policy to be
pursued during that period for a purpose of a given objective. It introduces the idea of
definiteness in planning. A budget is an important control device also because it provides
standards against which actual performance may be measured. Examples of budgets are,
production budget, sales budget, material budget, cash budget, capital expenditure budget,
expenses budget and so on.

9. Schedules

A schedule is an operational plan, timetable of work that specified time periods (with
beginning and completion time points) within which activity or activities are to be
accomplished. In order to keep the schedule realistic and flexible, minimum and maximum
time-periods may be specified. Three main elements are involved in planning a schedules, (i)
identification of activities or tasks, (ii) determination of their sequence, (iii) specification of
starting and finishing dates for each activity as well as for teh sequence as a whole.
Scheduling is the process of establishing a time sequence for the work to be done. Schedules
translate programmes into actions. Scheduling is necessary in all organizations with a view to
providing for an even flow of operations and to ensure completing of each task at the right
time. While planning schedule, the availability of resources, processing time and the delivery
commitments should be kept in view. Due allowance should be made for delays created by
factors beyond the control of management as well as for non-productive time.

10. Forecasts

Planning presupposes forecasting as the former is defined as deciding what is to be done in

future. Henri Fayol has described a plan as the synthesis of various forecasts - annual, long-
term, short-term, special etc. The targets cannot be fixed with any degree of precision unless
forecasts are made. Forecasts are estimates of future events, providing parameters to
planning. Forecasts do not involve any kind of commitment of organizational resources.
Planning without forecasts is not possible. In fact, forecasts are predictions or estimates of the
changes in the environment, which may affect the business plans. A manager has to make
forecasts keeping in view the planning premises. There are various types of forecasts, such as
economic, technological, political, and social and so on. However, sales forecast is the basis
of most planning.

5. ADVANTAGES OF PLANNING
1) Planning facilitates management by objectives.

a. Planning begins with determination of objectives.

b. It highlights the purposes for which various activities are to be undertaken.

c. In fact, it makes objectives more clear and specific.

d. Planning helps in focusing the attention of employees on the objectives or goals of

enterprise.

e. Without planning an organization has no guide.

f. Planning compels manager to prepare a Blue-print of the courses of action to be followed

for accomplishment of objectives.

g. Therefore, planning brings order and rationality into the organization.

2) Planning minimizes uncertainties.

a. Business is full of uncertainties.

b. There are risks of various types due to uncertainties.

c. Planning helps in reducing uncertainties of future as it involves anticipation of future

events.

d. Although future cannot be predicted with cent percent accuracy but planning helps
management to anticipate future and prepare for risks by necessary provisions to meet
unexpected turn of events.
e. Therefore with the help of planning, uncertainties can be forecasted which helps in
preparing standbys as a result, uncertainties are minimized to a great extent.

3) Planning facilitates co-ordination.

a. Planning revolves around organizational goals.

b. All activities are directed towards common goals.

c. There is an integrated effort throughout the enterprise in various departments and groups.

d. It avoids duplication of efforts. In other words, it leads to better coordination.

e. It helps in finding out problems of work performance and aims at rectifying the same.

4) Planning improves employee’s moral.

a. Planning creates an atmosphere of order and discipline in organization.

b. Employees know in advance what is expected of them and therefore conformity can be
achieved easily.

c. This encourages employees to show their best and also earn reward for the same.

d. Planning creates a healthy attitude towards work environment which helps in boosting
employees moral and efficiency.

5) Planning helps in achieving economies.

a. Effective planning secures economy since it leads to orderly allocation of resources to

various operations.

b. It also facilitates optimum utilization of resources which brings economy in operations.

c. It also avoids wastage of resources by selecting most appropriate use that will contribute to
the objective of enterprise. For example, raw materials can be purchased in bulk and
transportation cost can be minimized. At the same time it ensures regular supply for the
production department, that is, overall efficiency.

6) Planning facilitates controlling.

a. Planning facilitates existence of certain planned goals and standard of performance.

b. It provides basis of controlling.

c. We cannot think of an effective system of controlling without existence of well thought out
plans.

d. Planning provides pre-determined goals against which actual performance is compared.

e. In fact, planning and controlling are the two sides of a same coin. If planning is root,
controlling is the fruit.

7) Planning provides competitive edge.

a. Planning provides competitive edge to the enterprise over the others which do not have
effective planning. This is because of the fact that planning may involve changing in work
methods, quality, quantity designs, extension of work, redefining of goals, etc.

b. With the help of forecasting not only the enterprise secures its future but at the same time it
is able to estimate the future motives of its competitor which helps in facing future
challenges.

c. Therefore, planning leads to best utilization of possible resources, improves quality of

production and thus the competitive strength of the enterprise is improved.

8) Planning encourages innovations.

a. In the process of planning, managers have the opportunities of suggesting ways and means
of improving performance.

b. Planning is basically a decision making function which involves creative thinking and
imagination that ultimately leads to innovation of methods and operations for growth and
prosperity of the enterprise.

6. DISADVANTAGES OF PLANNING
Internal Limitations

There are several limitations of planning. Some of them are inherit in the process of planning
like rigidity and other arise due to shortcoming of the techniques of planning and in the
planners themselves.

1) Rigidity

a. Planning has tendency to make administration inflexible.

b. Planning implies prior determination of policies, procedures and programmes and a strict
adherence to them in all circumstances.

c. There is no scope for individual freedom.

d. The development of employees is highly doubted because of which management might

have faced lot of difficulties in future.

e. Planning therefore introduces inelasticity and discourages individual initiative and

experimentation.

2) Misdirected Planning
a. Planning may be used to serve individual interests rather than the interest of the enterprise.

b. Attempts can be made to influence setting of objectives, formulation of plans and

programmes to suit one’s own requirement rather than that of whole organization.

c. Machinery of planning can never be freed of bias. Every planner has his own likes,
dislikes, preferences, attitudes and interests which is reflected in planning.

3) Time consuming

a. Planning is a time consuming process because it involves collection of information, it‘s

analysis and interpretation thereof. This entire process takes a lot of time specially where
there are a number of alternatives available.

b. Therefore planning is not suitable during emergency or crisis when quick decisions are
required.

4) Probability in planning

a. Planning is based on forecasts which are mere estimates about future.

b. Any change in the anticipated situation may render plans ineffective.

c. These estimates may prove to be inexact due to the uncertainty of future.

d. Plans do not always reflect real situations in spite of the sophisticated techniques of
forecasting because future is unpredictable.

e. Thus, excessive reliance on plans may prove to be fatal.

5) False sense of security

a. elaborate planning may create a false sense of security to the effect that everything is taken
for granted.

b. Managers assume that as long as they work as per plans, it is satisfactory.

c. Therefore they fail to take up timely actions and an opportunity is lost.

d. Employees are more concerned about fulfillment of plan performance rather than any kind
of change.

6) Expensive

a. Collection, analysis and evaluation of different information, facts and alternatives involves
a lot of expense in terms of time, effort and money
b. According to Koontz and O‘Donell, ‘Expenses on planning should never exceed the
estimated benefits from planning.

CONCLUSION
The planning process is poor effective as of the proportion it occurs due to problems
such as time horizon lack of skilled manpower new identification of better
performance and lack of up to date data. The internal factors organizational structure
time horizon and type and quality of information are not considered enough in the
planning process. Employees had less involvement in the planning process problems
like misstatement of necessary data sources unavailability of data's the flow of
information in addition with other external influences retards the process. There is
also a dough on the adjust process as necessary as it is. Beyond the forecasting
technique the goal setting technique is also in use to plan the human resource
requirements with trend analysis. The benchmarking technique helps to plan the
overall human resource plan.
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