Commerce: Planning and Organising: Planning Process/Steps in Planning (For CBSE, ICSE, IAS, NET, NRA 2022)

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Planning Process/Steps in Planning

Image Shows the Steps in Planning

Step 1: Establishment of Objectives

  • Every organisation has some goals that it wants to achieve.
  • Planning actually starts with defining these goals.
  • Goal is in more concrete, clear and unambiguous terms.
  • This enables management in gaining clarity on what they have to achieve.
  • Hence, establishing organisational objective is a pre-requisite for good and meaningful planning.

Step 2: Making Assumptions (Establishing Premises) About the External and Internal Conditions

  • Second step of planning is making assumptions about the future environment of business.
  • These assumptions about future environment of the business are known as planning premises.
  • These premises may be external or internal.
  • External planning premises relate to conditions outside the business.
  • Internal planning premises relate to conditions prevailing within the organisation.
    • It includes cost, methods and techniques of production, employees, type of machinery and equipment, etc.
  • Study of external conditions enables a business unit to know the opportunities available in the market.

Step 3: Development of Alternative Courses of Action

  • Planning is to identify the alternative courses of action to achieve the goal set.
  • For example: to achieve the objective of increasing the profits of a business unit, any one or more of the following alternatives can be used:
    • Increase the sale of its existing products
    • Reduce costs
    • Add new products/product lines
    • Improve product quality
    • Increase the prices of products

Step 4: Evaluation of Alternatives

  • When alternative courses of action are there, before a manager has to examine feasibility and possible results of each course of action before selecting the best course.
  • Certain alternatives may not be practicable.
  • Management should ignore such alternatives.
  • Management should evaluate each of the remaining alternatives.
  • Also, work out how far they help in meeting the objectives and whether these are workable in the light of available resources.

Step 5: Selecting the Appropriate Course of Action

  • Selecting best course from among alternatives, managers should also keep in mind their own limitations of resources.
  • So, in making final selection from the alternative courses of action, the management will ultimately be guided by:
    • Opportunities provided by the external environment
    • Ability of the business unit to take advantage of these opportunities

Step 6: Arranging for Implementation

  • After management finalised their choice, it should build up the necessary strategies and action plan.
  • For its implementation in due consultation with all key personnel who are to implement it.

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