Planning Class 12 NCERT Guide for CBSE Business Studies Chapter 4

Key Terms You Must Know

Planning

Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap between where the organisation is and where it wants to reach.

Objective

An objective is the end result which an organisation or department wants to achieve, such as increasing sales by 15 percent in one year.

Strategy

A strategy is a comprehensive plan for achieving major organisational objectives in the light of the business environment, competitors and available resources.

Policy

A policy is a general guideline for decision-making. It does not give exact steps, but sets boundaries within which managers act.

Budget

A budget is a plan expressed in numerical terms, usually money, quantity or time, such as an advertising budget of ₹10 lakh.

Meaning and Nature of Planning

Planning is both a mental exercise and a managerial function. It is intellectual because managers must analyse facts, forecast future conditions, compare alternatives and choose the most suitable course. It is also goal-oriented because planning has no meaning unless it is linked with objectives. For example, a school can plan extra classes only after deciding whether the objective is better board results, completion of syllabus or remedial support. Planning is continuous: once one target is reached, new plans are prepared. It is also pervasive, meaning top managers, middle managers and supervisors all plan, though at different levels of detail.

Features and Importance of Planning

• Planning focuses on achieving objectives: every plan must connect resources and actions to a clear target, otherwise it becomes only routine activity.
• Planning reduces uncertainty but does not remove it completely. Forecasting helps managers prepare, but sudden changes in technology, law or consumer taste can still affect results.
• Planning facilitates decision-making because managers compare alternatives before selecting one. This reduces guesswork and impulsive action.
• Planning promotes coordination because departments can align their work. If sales, production and finance follow one plan, duplication and conflict are reduced.
• Planning establishes standards for controlling. Actual performance can be compared with planned targets, and corrective action becomes possible.
• Planning improves efficiency by avoiding wasteful activities, but excessive planning can become costly and time-consuming if managers keep preparing files and never act.

Process of Planning: Step-by-Step

1. Step 1: Set objectives — The manager first defines specific, measurable and time-bound objectives. For example, increase online sales by 20 percent in six months is clearer than sell more products.
2. Step 2: Develop premises — Premises are assumptions about the future, such as expected demand, inflation, government rules and competitor action. A plan is only as strong as the realism of these assumptions.
3. Step 3: Identify alternative courses — Managers list possible ways to reach the objective. For sales growth, alternatives may include discounts, influencer promotion, dealer expansion or product improvement.
4. Step 4: Evaluate alternatives — Each alternative is judged for cost, risk, expected return and feasibility. The cheapest alternative is not always best if it damages quality or brand image.
5. Step 5: Select the best alternative — The most suitable course is chosen. Sometimes a combination is selected, such as moderate discount plus social media advertising.
6. Step 6: Implement and follow up — The plan is converted into action through budgets, schedules and responsibility assignment. Results are monitored so that deviations can be corrected.

Worked Case Examples

• Example 1: A company wants to launch a healthy snack for teenagers. Step 1: Its objective is to sell 50,000 packs in three months. Step 2: Planning premises include rising demand for healthy food, strong competition and a fixed promotion budget. Step 3: Alternatives are school campaigns, online ads and supermarket displays. Step 4: School campaigns are targeted but slow; online ads are faster; displays increase impulse buying. Step 5: The company chooses online ads plus supermarket displays. Step 6: A weekly sales review is planned. This case shows that planning involves objectives, alternatives, evaluation and follow-up.
• Example 2: A garments firm prepares a rule that employees must wear safety gloves while operating cutting machines. Step 1: Identify the type of plan. A rule is a specific statement that must be followed without discretion. Step 2: Check whether it is a policy or procedure. It is not a policy because it does not provide broad guidance; it gives a compulsory direction. It is not a procedure because it does not list a sequence of steps. Final conclusion: The plan is a rule, and violation may attract penalty.
• Example 3: A café estimates monthly sales of ₹8,00,000 and allocates ₹1,20,000 for ingredients, ₹80,000 for salaries and ₹40,000 for promotion. Step 1: The plan is expressed in numerical financial terms. Step 2: It sets limits for spending and creates a standard for control. Step 3: If actual promotion spending becomes ₹65,000, management can investigate the deviation. Final conclusion: This is a budget and it helps both planning and controlling.

Board Exam Tips and Common Traps

In CBSE case studies, do not identify planning only from the word plan. Look for clues such as deciding in advance, setting objectives, choosing among alternatives, forecasting, preparing budgets or laying down policies. A common trap is confusing policy, rule and procedure. Policy gives broad guidance, rule is rigid, and procedure gives a fixed sequence of steps. For 3 or 4 mark questions, write the point, explain it, and connect it with the given case line. Avoid writing only headings without application.

Practice Questions with Solutions

• Q: Define planning and explain how it bridges the gap between present and future.
  A: Step 1: Planning means deciding in advance what to do, how to do it, when to do it and who will do it.
  Step 2: The present position shows current resources and performance, while the future position shows desired objectives.
  Step 3: Planning selects actions, resources and time schedules to move from the present state to the desired state.
  Final answer: Planning bridges the gap by converting future objectives into present decisions and actions.

• Q: A company wants to increase market share by 10 percent. Managers discuss advertising, price reduction and product improvement before choosing product improvement. Identify the planning step highlighted.
  A: Step 1: The objective is already clear: increase market share by 10 percent.
  Step 2: Managers are considering different possible courses of action.
  Step 3: They compare alternatives and finally choose product improvement.
  Final answer: The highlighted steps are identifying alternative courses, evaluating them and selecting the best alternative.

• Q: Distinguish between policy and rule with one example each.
  A: Step 1: A policy is a general guideline for decision-making and allows some managerial discretion.
  Step 2: Example: A company may have a policy to give preference to internal candidates during promotion.
  Step 3: A rule is a specific statement of what must or must not be done and normally allows no discretion.
  Final answer: Policy guides decisions broadly, while rule gives a strict instruction, such as no smoking inside factory premises.

• Q: Explain any two limitations of planning.
  A: Step 1: Planning may not work in a dynamic environment because business conditions like technology, competition and government policy can change suddenly.
  Step 2: Planning can be time-consuming and costly because managers need research, forecasting, meetings and expert advice.
  Step 3: These limitations do not make planning useless; they show that plans must be flexible and reviewed regularly.
  Final answer: Two limitations are difficulty in a changing environment and high cost or time involved in planning.

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