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ISC Class XII Notes 2024 : Commerce (Smt. Lilavatibai Podar High School (LPHS), Mumbai)

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Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Grade: 12 Topic: Chp 8. Planning Topics to Cover Planning: Meaning, Steps, Importance, Limitation Types of plans: Objectives, Policy, Procedures, Method, Rule, Bud Program, Strategy (Meaning, features & differences). Q.1 What is planning? Answer: 1)A plan is a course of action to be taken in future. 2) It is a predefined course of action. Planning is the process of deciding in advance the objectives to be achieved during a given period, formulating alternative courses of action to achieve them and selecting the best course of action. 3) For example, a trader decides to increase his sales. In order to achieve this objective, he should examine various alternatives, e.g., advertising, price cut, better service to customers, etc. and choose the most appropriate course of action. 4) Planning is a mental exercise that requires imagination, foresight and sound Judgment. It is thinking before doing. Planning is looking ahead, anticipating the future and deciding the course of action to be taken. Planning involves choice among alternative course of action. Q.2 Explain briefly the importance of planning. OR Planning is beneficial to all . In the light of this statement, discuss the importance of planning. OR Planning is of vital importance in the managerial process . Do you agree? Explain any five points in support of your answer. Answer: Planning is of vital importance because it is pervasive and precedes all other functions of management. Sound planning is an essential condition for effective management. Poor planning has often been a cause of failure in business. Sound planning offers the following advantages: 1. Focuses Attention on Objectives: Planning makes the goals clear and specific because the objectives or goals to be achieved are decided before plans are drawn. Planning focuses managerial attention on the purposes for which various activities 1 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Grade: 12 Topic: Chp 8. Planning are to be undertaken. The objectives so decided serve as a guide for deciding what actions should be taken. Thus, planning helps in achieving the objectives of the organization by directing resources and efforts towards the common objectives. 2. Makes Activities Meaningful: When goals are clearly defined actions become meaningful. Managers and employees know how their activities relate to the goals of the organization. Everyone becomes conscious of his own contribution towards achievement of organizational goals. This acts as a motivating force and employees are encouraged to work harder. 3. Brings Order in Place of Chaos: Planning helps the organization to keep on the right path. Planning ensures clarity in thought and action. By stating in advance how work is to be done planning provides directions for actions. It avoids aimless and ad hoc actions. Planning provides systematic and orderly efforts towards the goals. Planning enables orderly functioning of the organization. 4. Reduces Risks of Uncertainty: Business enterprises operate in an uncertain environment and face several types of risks. Planning enables these enterprises to predict future events and prepare to face the unexpected events. In the process of planning managers look ahead, anticipate change, consider the impact of change and develop appropriate responses. With the help of planning, managers can identify potential dangers and take steps to overcome them. For example, forecasting of population growth gives an idea of future demand. 5. Improves Economy of Operations: Planning involves selection of the best possible course of action. Plans indicate how various tasks are to be completed and how resources are to be utilized. It helps to eliminate all types of waste and to achieve optimum utilization of available resources. Planning helps to minimize the cost of operations and improves the competitive strength of an enterprise. 6. Provides Basis for Control: Planning provides the standards against which the actual performance can be measured and evaluated. A comparison of performance with the planned results helps to identify the deviations and to take corrective steps to make the events conform to plans. Planning makes control meaningful and effective. In fact, control is blind without planning. Thus, planning provides the basis for control. 2 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Grade: 12 Topic: Chp 8. Planning 7. Promotes Innovation and Creativity: Sound planning encourages creative thinking. Managers get the opportunity to develop new and apply these ideas in creating new products and services. This leads to growth and expansion of business. Thus, planning promotes creativity and innovation. 8. Facilitates Decision making: Decision making involves searching for various alternative courses of action, evaluating them and selecting the best course of action. Under planning, targets are laid down. With the help of these targets managers can better evaluate alternative courses of action and select the best alternative. As a result, hasty decisions and random actions can be avoided. Thus, decision-making is inherent (essential) in planning. 9. Helps in Coordination: Planned targets and programmers serve as the basis of harmonizing the efforts of different departments, sections and individuals. Establishment of common goals helps to secure unity of purpose. Cooperation and coordination between departments become easy because people at all levels are involved in planning. For example, when the production budget is prepared on the basis of sales budget manufacturing and marketing activities can be easily synchronized. Without planning different department may be working at cross purposes. Q.3 Planning is not a guarantee of success . Explain the limitations of planning. OR What are the limitations of planning? OR Though planning is an important tool of management, yet it is not a remedy for all types of problems . Do you agree with this statement? Give any five reasons in support of your answer. Answer: There are several limitations of planning. Some of them are inherent in the process of planning while others arise due to shortcomings in the techniques of planning and in the planners themselves. These limitations of planning are given below: 1. Costly Process: Planning is an expensive process. Money, time and effort have to be spent in forecasting, collection of information, evaluation of alternatives, etc. Services of experts may be necessary to select the best 3 and economical course of Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Grade: 12 Topic: Chp 8. Planning action for the enterprise. Planning should be economical, i.e., the cost of planning should not exceed the gains expected from it. 2. Time consuming: Considerable time is required for collection, analysis and interpretation of information for planning. Therefore, planning is not practicable during emergencies and crises when on-the-spot decisions are necessary. Planning may cause delay in decisions and actions. Any delay caused by planning may deprive the business of a profitable opportunity. 3. Rigidity: Once plans are formulated; people tend to strictly adhere[follow] to them irrespective of changes in the environment. Employees become more concerned with observing the programmes and procedures rather than achieving the goals. They are reluctant to deviate from plans due to fear of criticism. Thus, detailed planning may create a rigid framework in the organization. It may discourage individual initiative and creativity. 4. Lack of Accuracy: Planning is based on forecasts which are estimates about the future. When the forecasts are inaccurate, plans become misleading. The degree of inaccuracy increases as the plan period increases. Bias of planners, lack of reliable data and errors of judgment also reduce the accuracy of planning. Therefore, blind reliance on plans may be dangerous. 5. False Sense of Security: Detailed planning may create a feeling among employees that everything has been taken care of. They may consider work as per plans as full satisfactory. They may fail to improve performance and may confine[restrict/limit] themselves to fulfilling the requirements of plans. Following a predetermined course of action in a dynamic environment might be risky and unprofitable. 6. Psychological Barrier: People get accustomed to attitudes, beliefs and traditions and they resist change in established practices and behavior. 7. External Limitations: Changes in business environment restrict freedom of planning for the management. Changes in technology, changes in government policies, industrial unrest in the country etc. are important external limitations on planning. Management has 4 little or no control over these Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce external events which Topic: Chp 8. Planning greatly hamper Grade: 12 managerial planning in an enterprise. In a fast-changing environment, planning may have little practical value. 8. Human Elements: Particular individuals and groups serve their own influence formulation of plans to suit interests the organization. Some of interests. They try their to human people interests may may use planning goal setting ignoring prepare the too to and larger elaborate reports to be of little use. There may be endless follow up of results. Q.4 Discuss the steps involved in the process of planning. OR What are the steps taken by management in the planning process? OR Defining organizational objectives is the step in the process of planning . Explain the other steps of the planning process. Answer: Systematic approach to planning is necessary for preparing sound plans. The steps usually evolved in systematic planning are given below: Serving Objectives Follow up of Plans Establishing planning Premises Securing Cooperatio Identifying Alternatives Evaluation and Choice Formulating derivative plans 1) SETTING OBJECTIVES: The first step in the planning process is the setting of objectives or goals which will serve as the basis of all plans. The basic objective of the enterprise should be defined in terms of the philosophy or master strategy, e.g., in what business we are in and for what reasons. Major objectives should be clear and specific and they should be broken down into departmental, sectional, and individual objectives. For example, a company s main objective may be to increase profits by 25 per cent during the next year. From this goal the production and sales targets should be decided. Objectives provide guidelines for relating to many decisions allocation of resources, scheduling of work, nature of actions etc. 5 Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Grade: 12 Topic: Chp 8. Planning Therefore, planned objectives must be clear and specific. For this purpose, planners must anticipate the problems that are likely to arise in future opportunities that may be available. Relevant information and the must be collected and analysed to identify the problems and opportunities.. 2. DEVELOPING THE PLANNING PREMISES: Once the objectives to be achieved are set, the next step involves establishing the premises or assumptions about the future.Planning premises provide the environment or boundaries within which plans will be executed. These are established with the help of forecasting future conditions and events which are likely to influence the pursuit of objectives. These assumptions serve as the base of plans. For example, several business houses in India prepared plans for expansion of their business when the government announced its policy of opening up the telecommunications and insurance to private sector. Their plans were drawn up on the assumptions or premises that demand for these services will increase. Planning premises may be of the following kinds: (a) Tangible and Intangible Premises: Assumptions which can be expressed in quantitative terms are called tangible premises, e.g., units of production, capital investment, time available, etc. On the other hand, intangible premises like employee morale, goodwill of the enterprise, motivation, etc. cannot be expressed in quantitative terms. (b) Internal and External Premises: Assumptions about the internal working of the enterprise are known as internal premises, e.g., capital, machines, personnel, etc. On the other hand, factors outside the enterprise are called external premises, e.g. changes in technology, population growth, changes in competition, government policies, etc. (c) Controllable and Uncontrollable Premises: Policies and programmes of the organization which can be fully regulated by the management are controllable premises. Uncontrollable premises are the external factors like trade cycles, political changes, etc. which are beyond the control of the management. 3. IDENTIFYING ALTERNATIVE COURSE OF ACTION: Once the objectives and planning premises are established, it becomes necessary to discover the various courses of action which may be used to achieve the 6 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Topic: Chp 8. Planning Grade: 12 established objectives. In order to identify all possible alternatives, it is necessary to collect and analyse all relevant information. Information may be collected from primary and secondary sources.The data so called will serve as the basis for development of an alternative course of action. The information used in discovering alternatives must be up-to-date and reliable. Instead of trying to discover and analyse each and every alternative, it is desirable to confine[limit] to those alternatives which are strategic, promising or directly related to the situation or objectives in hand.This is known as the principle of limiting factor. 4. EVALUATING ALTERNATIVE AND CHOOSING THE BEST ALTERNATIVE: The various alternatives are evaluated and compared in terms of their expected costs and benefits.The alternative courses of action should be judged in terms of common factors, such as the risk involved, expected return, planning premises goals to be achieved, etc. After objective and scientific evaluation of different alternatives, the best alternative is selected. 5. FORMULATING DERIVATIVE PLANS: After the basic plan is decided, the next logical step is to develop detailed plans for its implementation. These detailed or derivative plans refer to the policies, procedures, rules, programmes, schedules, budgets, etc. For instance, when a company decides to develop a new product, plans concerning the product design, procurement of funds, purchase of materials, training of personnel, advertising for the product, etc. have to be prepared. 6. SECURING COOPERATION: Successful implementation of plans requires the understanding and whole- hearted cooperation of all the members of the organization. Therefore, plans must be communicated and explained in detail to the employees so that they have an understanding of what is proposed to be done and why? When plans are communicated to workers some useful suggestions and ideas may be received. Employees should be motivated to execute the plans to the best of their abilities. 7. FOLLOW- UP ACTIONS: Existing plans are reviewed at periodic intervals to ensure their relevance and effectiveness. Whenever necessary, the plans must be revised in the light of these facts and changing environment.Continuous revision of plans enables the management to draw up subsequent plans on the basis of experience gained in the process of implementing the previous plans. [ Steps should be written in sequential order only] 7 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Topic: Chp 8. Planning Grade: 12 Q.5 Planning bridges the gap between where we are and where we want to go . Explain. Answer: Planning means systematized pre-thinking for determining a course of action to achieve some desired result. It is concerned with future to minimize risks. Instead of leaving future events to change, planning is undertaken to allow them to happen in a definite manner. Planning is deciding in advance what to do, how to do it, when to do it and who shall do it. In other words, planning bridges the gap between where we are (present position) and where we want to go. (Future position) Types of Plans 8 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Grade: 12 Topic: Chp 8. Planning Plans are classified into two categories: 1) Standing plan or repeat-use plans: Standing Plans are plans which are used repeatedly or in similar situations. Objectives, policies, procedures and rules are the examples of standing plans. 2) Single-Use Plans: Single- use plans are plans which have to be reformulated after every use. Budgets, Programmes are examples of single -use plans. Q.6 Write the meaning and features of the following types of plans. Answer: 1) Objectives: Meaning: Every organization is established to achieve some purposes which are called its objectives. Objectives are the ends or results to be achieved. All the activities of an organization and all functions of management are directed towards the objectives. Objectives indicate the destination of the organization. The process of planning begins with the setting of objectives. Objectives may be defined as the purposes or aims which an organisation wants to achieve over different time periods. Objectives may be short term or long term. For example, in the beginning of an enterprise survival is a more important objective than growth. A business enterprise has multiple or several objectives such as survival, profits, growth, service to society, etc. Objectives at different levels of an organisation form a hierarchy or ends means chain. Objectives at each lower level serve as the means for achieving the objectives at the next higher level. For example, sales targets at branch level help to achieve the sales target of the marketing department as a whole. Features: i) Objectives provide a sense of direction to the organisation. ii) They are ends towards which all objectives are directed. iii) They are the integral part of the planning process. iv) They help in measuring the overall effectiveness of the organisation. v) They lay down targets of performance and thus serve as a basis of control. 9 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 2) POLICIES Grade: 12 Topic: Chp 8. Planning Meaning: A policy is a general statement that guides decision- making. Policies define the boundaries within which decisions can be made and they direct decisions towards the accomplishment of objectives. For example, the policy of offering equal job opportunity to minorities and women contributes to the objective of meeting social obligations. Mc Donald s policy is not to grant a franchise to an individual who already owns another fast food restaurant. For example, the company may have a recruitment policy, pricing policy within which objectives are set and decisions are made. Policies channel decisions but at the same time allow discretion. [ option/choice] Thus, policies are general statements of understandings which guide or channel thinking in decision making of subordinates. Features: i) A policy is a standing plan. It is a standing answer to recurring problems of a similar nature. ii) Policies provide broad guidelines as to how objectives of a business are to be achieved. It provides the routes. iii) Policies are broad guides and provide scope for executive judgement or discretion. iv) Policies exists at all levels of the organizations- company policies, departmental policies and minor policies. v) Policies are models of thought and principles underlying the activities of an organisation. They guide the decisions and behavior of executives. 10 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Grade: 12 Topic: Chp 8. Planning Distinction between Objectives and Policies Basis of Objectives distinction Meaning Nature Scope Formulation Source Means Policies Objectives refers to purpose to be achieved. Objectives determine what is to be done Objectives are endpoints of planning. Policies are guidelines which facilitate the accomplishment of predetermined objectives. Policies determine how the work is to be done Policies are the Means by which objectives are to be achieved top Formulated at top, middle and and lower levels Determined by management owners Derived from Derived from objectives. philosophy of business Provide meaning and content to objectives Objectives indicate the Policies provide the route destination. 3) Procedures Meaning: A Procedure describes the exact manner in which a certain activity is to be performed. It is a chronological sequence of steps to be taken. It spells out a series of steps arranged in some predetermined best order. Procedures are designed to executive policies and achieve objectives. For example, an airline adopts passenger safety as one of its objectives. In order to achieve this objective, the policy of preventive maintenance is developed. This is because traffic safety requires proper functioning of all the equipment of an aeroplane. A procedure for carrying out preventive maintenance is required. Such a procedure would spell out a step-by-step ordering of actions to be taken for conducting preventive maintenance checks. A procedure spells out the exact 11 manner in Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Grade: 12 Topic: Chp 8. Planning which certain activities must be carried out. Thus, procedures are guides to action. Procedures are used in all major functional areas. Purchase procedure, selection procedure, grievance procedure, procedure for processing orders are examples of procedure. [ Example: Procedure for purchase of goods: identify various suppliers, invite quotation, compare the quotation, place order who offers the best quotation, receipt & inspections of goods, make payments to the suppliers.] Features: i) It facilitates decision making. ii) It helps in implementation of policies. iii) It specifies chronological sequence of steps. iv) Procedures are pervasive in nature. v) It essentially involves methods or steps of doing different jobs. vi) A Procedure is a standing plan. Difference between Policies and Procedures:Basis distinction Meaning Nature Scope Connectivity Of Policies Procedures A policy is a statement that decision- making. general A Procedure describes guides the exact manner in which a certain activity is to be performed. Expressions of Systematic ways of management s attitude handling routine events. towards certain issues. A policy provides a A procedure provides guidance for managerial guidelines to the action, thinking as well as action. prescribing the steps to be taken, and also the time limit. Provide bridge between Provide bridge between purpose and performance. activities and outcomes. 12 Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Benefits Formulation Source Expressed Grade: 12 Topic: Chp 8. Planning Provide norms for thinking and discretion. Broad, general and flexible. Formulated mainly by top management. Derived from objectives of the organization. Detailed and rigid. More specific. Provide manner of doing something. Laid down at middle and lower levels. Specify chronological sequence of steps. Derived from policies. Expressed in the form of Expressed in more general statement. specific terms. 4) Methods: Meaning: Methods accomplishing are repetitive formalized and routine and standardized ways of jobs. For example, there are various methods of charging depreciation on fixed assets such as straight-line method, diminishing balance method, etc. A business firm can select any of these methods. They are designed to keep operations running on planned and desired lines, to prevent confusion and ad- hocism and to ensure economy and efficiency. [ example: the job training methods at the supervisory level etc] Methods provide detailed and specific guidance for day-to-day action. Methods are helpful in the simplification, standardization, and systemization of work. They serve as uniform norms to guide and control operations and performance. Standard methods represent the best way of performing jobs. A method prescribes the manner of performing a task. Therefore, it is helpful in the use of a procedure with minimum expenditure of time, money and efforts. Features: i) There can be uniformity in actions of the employees. ii) It acts as guide for employees. iii) These help in applying the techniques of standardization and simplication. iv) It provides detailed and specific guidance for day-to-day actions. 5) Rules Meaning: Rules are specific statements of what should or should not be done in specific situations. 13 Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Grade: 12 Topic: Chp 8. Planning The only discretion left to employees is whether or not to apply the rule. No smoking in the factory is an example of a rule. Rules deal with specific situations whereas procedures cope with situations involving a sequence of related actions. Rules are standing plans. They are meant to be enforced rigidly with few exceptions. Rules indicate limits of acceptable behavior to the members of an organization. They help to improve efficiency and enable managers to predict what subordinates will do in the given situation. Rules channel the behaviour of workers in the desired directions, i.e. towards the accomplishment of objectives. The essence of a rule is that it reflects what action must or must not be taken. For example, the rule No smoking in the factory is not part of any procedure. But the rule that All orders must be acknowledged within 48 hours of their receipt is a part of procedure for processing orders . Rules should be so planned that they do not stifle[stop/suppress] initiative and creativity and at the same time help in smooth flow of work. Features: i) Rules are very specific and rigid. ii) Rules create an environment of discipline in the organization. iii) They guide the actions and the behaviour of all the employees of the organization. iv) If a rule is not followed, there may be some penalty. v) Rules are norms for action and non-action by the employees. Distinction between Rules and Methods. Basis distinction Meaning Adherence Results of Rules Methods A specific guideline to Behaviour Requires strict adherence and self-control Designed to One best way of doing things Standardized and simplified way of doing things. achieve Designed to achieve 14 Lilavatibai Podar High School, ISC Academic Year 2024 2025 Subject: Commerce Grade: 12 Topic: Chp 8. Planning discipline and order Source Penalty Part of procedure Considered as Related to efficiency and economy of operations. of objectives, Result of research and and common analysis Result values sense Penalty of violation laid down. Do not always form part of a procedure Regarded as official and authoritative Relate to Behaviour of people Penalty not laid down. Constitute part of a procedure Regarded as logical or rational Relate to work or tasks. 6) Budgets Meaning: A budget which states expected results of a given future period in numerical terms. It is a plan of action or blueprint designed to achieve a specific goal. It may be expressed in time, money or physical units. Budgets may be prepared for production, sales, materials, cash, capital expenditure, etc. Features of budget are as follows:i)A budget is an instrument of both planning and control. As goals are expressed in numerical terms the plan becomes clear. ii)Budgets serve as standards for evaluating performance. A budget is generally prepared for one year. iii)A budget may reflect capital outlay, cash flows, production and sales targets. iv)It expresses organizational objectives in financial and physical units. v)A budget is a single -use plan. 7) Programmes Meaning: A programmes is a comprehensive plan designed to implement the policies and accomplish the objectives. It is a combination of goals, policies, task assignments, resources etc. It is a concrete or well- defined scheme designed to 15 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Grade: 12 Topic: Chp 8. Planning accomplish a specific objective. It spells out clearly the steps to be taken, resources to be used, and the time period within which the task is to be completed. It also indicates who should do what and how. In business, programmes are used in various areas, e.g. Developing a new product, training programme, advertising programme, expansion programme, etc. It is action based and result oriented. Programmes may be of two types. 1)A major programme is the basic plan, e.g., programme to eradicate poverty, programme to reduce unemployment, programme for modernization of plant, etc. 2)A minor programme is a derivative programme designed to implement the major programme. One primary programme may require several supporting programmes. 3)Programmes may be developed for both repetitive as well as for novel situations. Features of Programmes: (a) A programme is a single-use but comprehensive plan. (b) It is based on the objectives and policies of the organization. (c) It is an action plan indicating the activities to be performed and time for each activity. (d) It is designed to ensure smooth and efficient functioning of the organization. 8) Strategy Meaning: It is defined as a comprehensive and integrated plan which indicates the desired future of the organisation. It is a blueprint of an organization s desired destination, direction and image. It provides answers to questions like Where is the organisation now ? Where does it want to be in future ? What it must do to reach the desired position ? Features: 1) It is flexible and dynamic 2) It is generally formulated at the top level of management. 3) It is action-oriented and is more specific than objectives. 4) It is generally meant to cope with competition and other environmental pressures. 5) It is an integrated and multipronged plan. 16 Subject: Commerce Lilavatibai Podar High School, ISC Academic Year 2024 2025 Topic: Chp 8. Planning Grade: 12 6) It is formulated after understanding environmental opportunities and threats as well as organization s strengths and weaknesses. 7) It is generally long-term in nature though it has short-term implications too. ************************************************************************************************ 17

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