BBA 1st Semester Notes Fundamentals of Management 2024 PDF

BBA 1st semester, SJCA, Jakhama. Notes on UNIT-2 Fundamentals of Management 2024  PLANNING Planning is the process of deciding in advance what is to be done, when and where it is to be done,how it is to be don...

BBA 1st semester, SJCA, Jakhama. Notes on UNIT-2 Fundamentals of Management 2024  PLANNING Planning is the process of deciding in advance what is to be done, when and where it is to be done,how it is to be done and by whom. Planning is the process of making decisions about future. A plan is a forecast for accomplishment. It is a predetermined course of action. It is today‟s projection for tomorrow‟s activity. It is deciding in the present, what is to be done in future. It is the process of thinking before doing. The necessity of planning arises because of the fact that business enterprises/organizations have to operate,survive and progress in a highly dynamic economy where change is the rule,not the exception. Some of the important forces of change are: a) Changes in technology b) Changes in population and income distribution c) Changes in the tastes of consumers. d) Changes in competition e) Changes in government policies. These changes often give rise to innumerable problems and throw countless challenges. Most of these changes are thrust on managers,thus, managers are forced to adjust their activities in order to take full advantage of favorable developments or to minimize the adverse effects of unfavorable ones. Features / characteristics of planning: Planning has a number of characteristics A) Planning is goal oriented/ Contributing to objectives: Planning is goal oriented. An enterprise works for achieving predetermined objectives. In the words of Koontz and Q‟Donnell, “the purpose of every plan and all derivative plans is to facilitate the accomplishment of enterprise objectives.” The function of planning of planning itself begins with the establishment of objectives of objectives and sub-objectives. All plans arise from objectives. Objectives provide the basic guidelines for planning activities. Planning is goal oriented as it aspires to achieve the predetermined goals. B) Planning is primary function : Planning is the foundation of management. It is a parent exercise in management process. Planning provides the basic foundation from which all future management functions arise. The idea of primacy of planning emphasizes the fact that planning takes precedence over other managerial functions like, organizing,directing and controlling because none of these functions can come into being until there is a plan. C) Pervasive in nature: Planning bears the quality of pervasiveness. It means every manager performs the planning function. It is needed and practiced at all managerial levels. Planning is inherent in everything a manager does.Managers have to plan before launching a new business. They have to plan whenever things change. Even when they decide to close down a plant, they have to plan meticulously to avoid problems from employees. The scope of planning, however, differs at different levels and among different departments. D) Planning is mental exercise: Planning is a mental exercise involving imagination, foresight and sound judgment. Planning compels managers to abandon guesswork and wishful thinking. It makes them think in a logical and systematic manner. Plans are based on a careful study of internal and external factors influencing business activities. E) Planning is a continuous process: Planning is not a one time task. As it is related to future which is full of uncertainties, it is needed every time so that effective action can be contemplated to reduce the risks. Planning is continuous. It is never ending activity. Once plans for a specific period are prepared,they are translated into action. At the end of that period,there is a need for a new plan to be drawn on new situations and conditions. Planning is thus, an ongoing process of adjustment to change. There is always a need for a new plan to be drawn on the basis of new demands and changes in the circumstances. F)Futuristice in nature/ forward looking: One of the unique features of planning is that it is forward looking and futuristic in nature. In planning, decisions are taken in advance what is to be done in future. Planning means looking ahead and preparing for the future. It is today‟s projection for tomorrow‟s activities. Managers plan today with a view to flourish tomorrow. Planning is trap laid to capture the future. G)Planning involves choice/ a selective process : Planning essentially involves choice among various alternative course of actions. The need for planning arises only when alternatives are available. From out of various alternatives, a manager would select the best alternative, after careful analysis and evaluation. H) Planning is flexible :Planning is based on a forecast of future events. Since future is uncertain,plans should be reasonably flexible. For instance, the onset of color television sets forced many manufacturers in the west to abandon production of black and white television sets long back. When market conditions change, planners have to make necessary changes in the existing plans. I) Efficiency of planning: Plans aim at deploying resources economically and efficiently. They also try to accomplish what has been actually targeted. The success of planning hinges on the efficiency of planning. Efficiency of planning is measured in terms of its contribution to the attainment of objectives. It is expressed in terms of the ratio of input to output. It is measured both in quantitative and qualitative terms. Quantitatively, the lower the cost, the higher the efficiency. Qualitatively, the greater the level of cooperation, satisfaction and morale, the greater the efficiency of planning. TYPES OF PLANS Plans may be classified into two categories, i. e., standing plans and single use plans. 1.STANDING PLANS: Standing plans are developed for activities that recur regularly over a period of time. They are out to use again and again, over a long period of time. Once established, they continue to apply until they are modified or abandoned. Standing plans help managers in dealing routine matters in a pre-determined and consistent manner. Further, there are many types classified under the standing plans. They are: A. OBJECTIVES: Objective indicates an end result to be sought and accomplished. Objectives are the end results toward which all managerial activities are directed. The objectives and goals are established to guide the efforts of the company and each of its components. Without objectives no intelligent planning cab ne formulated. Objectives give meaning and purpose to the organization. Without objectives, without something to achieve, organization would be purposeless and chaotic. They serve as reference points to concentrate resources and efforts. They determine what action to take today to obtain results tomorrow. B. POLICIES: A policy is a basic statement that guides decision making. It tells people what they may or may not do. It directs the way in which activities are to be achieved. It is concerned with “how” of administrative actions. Policies set behavioral limits. They channel behavior towards organizational Objectives by limiting what managers can and cannot do. They are restrictive in the sense that they define the boundaries within which decisions ought to be made. For instance, a policy like “Promotions based on merit” does not only dictate promotional choices, it simply eliminates one factor, say experience, as an element in the choice. Policies are broad guides to thinking and action. As pointed out by Koontz, „policy is a means of encouraging discretion and initiative but within limits‟. Policies are useful instructional devices. A policy may be specific in its instruction. For example a company‟s advertisement for recruiting executive trainees may state „preference will be given to those having MBA degree'. This does not provide explicit guidance to recruiting officer but indicates intent and leaves the recruiting officer to exercise discretion. Policies provide standing answers to recurring questions and specify the steps to be taken in making decision. Policies reduce chances of misinterpretation, misrepresentation and friction. Managers and subordinates can act with confidence. By adopting policies, a manager can provide guidance to his subordinates. The routine, standard problems can be disposed of by lower level people quickly. Thus, policies permit managers to transfer some of the recurring problems to subordinates. In a way, policies are important management tools that facilitate some transfer of decision making to lower levels of the organization. C. PROCEDURES: A procedure is a well thought out course of action. It prescribes the specific way in which a piece of work is to be done. Procedures are called „action guidelines'. Where policies define a broad field, procedures show a sequence of activities within that area. Procedures describe what action-steps need to be taken in a chronological sequence, in a specific situation. For most policies, there is an accompanying procedure to show how that policy should be carried out. For example, the policy „customer is right' may demand a procedure like: where the customer is expected to complain, in case of trouble, whether the complaint should be made orally or in writing, who would process the complaints -the departmental heads or divisional heads, when is it necessary for the General Manager to look into complaints and take appropriate action and so on. Procedures play a vital role in an organization‟s daily operations, they relieve the manager of much of the detail in directing subordinates. They indicate the steps to be accomplished as well as the required time and order of preference. Members need not invent original solutions in order to solve repetitive problems, a standard procedure can be pressed into service readily and time and energy can be saved. Procedures provide a basis for uniform performance as well as a standard against which we can measure such performance. Procedures are basically formulated by management to ensure consistent action for routine work.  D. RULES: Rules describe exactly how specific activities are to be carried out, leaving no scope for individual discretion and judgment. A rule is a very specific and detailed guide to action. It is established to direct or restrict action in a fairly narrow manner. Rules must be followed precisely and observes strictly. Some rules are couched in positive terminology like: “hard hats must be worn in the plant all the times”, “welding machines should be operated by wearing safety glasses only”. Others may be expressed in a negative way: “employees are not permitted to leave before five o'clock”, etc. Rules permit managers to simplify the decision-making process. For instance, rules about absenteeism, late reporting, etc., permit managers to resort to disciplinary measures quickly. Rules help in regulating behavior in a fairly consistent manner. Rules are products of managerial thinking regarding what is good and what is bad for an employee and organization. Violation of rules is viewed seriously and penalties are imposed for deviations. 2. SINGLE USE PLANS: Single use plans are non-recurring in nature and deal with problems that probably will not be repeated in the same form in future. A) BUDGET: Budget is designed primarily to allocate the resources (personnel, materials, tools, and facilities) of an organization. It is the blueprint of a future course of action, an estimate that indicates the future, usually in monetary terms sometimes expressed in time, man- hours, etc., a projection that defines the anticipated cost of attaining an objective. In the words of George R. Terry, “A budget is an estimate of future needs, arranged according to orderly bases, covering some or all of the activities of an enterprise for a definite period of time.” The basic features of a budget may be stated thus:  It is a statement in terms of money or quantity or both,  It is prepared for a definite future period,  It is prepared in advance,  It aims at achieving a given objective. Budgets describe the desired results in numerical terms. A budget is that planning which provides details about estimated money, material, time and other resources for the achievement of pre-determined objectives of various departments. For example, the sales department‟s budget gives estimated figures about the type of material that will be purchased, its quantity, the time of purchase and the amount to be spent on it. Similarly, budget of other departments are also prepared. B) SCHEDULES: Schedules implies fixing of time to commence the work, reaching through the different processes and finishing the task. Schedules translate programmes into action in an orderly fashion. In all types of organizations, scheduling is necessary to provide for a systematic and even flow of operations. For instance, in an organization, recruitment, selection, training and placement activities are sequenced. Schedule is a kind of time table of work, specifying the date when a task is to begin and the time needed to complete each task. STEPS IN PLANNING PROCESS: Planning is a vital managerial function. It is intellectually demanding. It requires a lot of time and effort on the part of the planners. They must adopt a systematic approach so asto avoid pitfalls, errors and costly mistakes which may upset the whole business later on. Such a systematic approach may consist of the following steps. A) AWARENESS OF OPPORTUNITY: Business exists for exploiting existing and potential opportunities. Hence the process of planning begins with awareness and diagnosis of opportunities. The task of manager is to generate, evaluate and select attractive business opportunities. The diagnosis of opportunities is done in the light of the strength of market, competitive conditions, customers needs and wants- particularly unfulfilled wants, expectations and desires, the resources of the enterprise, etc. All managers should know where they stand in the light of their strengths and weaknesses, understand what problems they wish to solve and why, and know what they expect to gain. The awareness of opportunity helps in setting realistic objectives. B) DETERMINING OBJECTIVES: Determination of objectives is the second important step involved in planning process. Objective indicates an end result to be sought and accomplished. Objectives are the end results toward which all managerial activities are directed. The objectives and goals are established to guide the efforts of the company and each of its components. Without objectives no intelligent planning cab be formulated. Objectives give meaning and purpose to the organization. Without objectives, without something to achieve, organization would be purposeless and chaotic. They serve as  reference points to concentrate resources and efforts. They determine what action to take today to obtain results tomorrow. Thus objectives are expressed in terms of result expected. Examples of Objectives:  To add two products in the existing product line within 5 years time starting from the next financial year.  Increase profit margin by 10 percent for the next 3 years.  Reduce costs by 8 percent for the next 4 years.  Increase sales/revenue by 20 percent every year for the next 4 years.  Recover 80 percent of the total outstanding debt starting from Q4 and continue till the next 4 years.  To increase the company‟s market share in the premium smartphone segment from 15 % to 20 % within the next 2 years by expanding distribiution channels. C) DEVELOPING PLANNING PREMISES: After setting objectives, it is necessary to outline planning premises. Planning premises are planning assumptions. They are referred to as the anticipated environment. Premises are assumptions about the environment in which plans are made and implemented. They include assumptions or forecasts of the future and known conditions that will affect the operation of the plans. Thus, assumptions about the likely impact of important environmental factors such as market demand for goods, cost of raw materials, technology to be used, population growth, government policies,etc. on the future plans are made. For instance, the demand for fuel efficient vehicles in the late 1980s has compelled virtually all automobile manufacturers in India to go in search of collaborative agreements with foreign manufacturers in Japan, Germany, USA, etc. Plans should be formulated by the management, keeping the constraints imposed by internal as well as external conditions in mind. D) DEVELOPING ALTERNATIVE COURSES: The fourth step in the planning process is to develop and examine alternative courses of action. Normally, stress should be placed on those alternatives only which are not immediately apparent or known. At times, the alaternatives which is not apparent may prove much more effective and beneficial or may be the best. There is hardly a plan for which several alternatives do not exist. Alternative courses should be searched and examined keeping in view the time and resource constraints. A suitable set of alternatives should be searched out by applying ingenuity and creativity.  Example : ref. objective bullet point 4- Increase sales/revenue by 20 percent every year for the next 4 years.  By setting up new sales territory /office  Reducing costs  Intense advertisement and promotional campaing   Sales promotion- offering discounts, providing a money back guarantee  Creating referral programmes  Improving pricing / Competitive pricing  Training sales personnel E) EVALUATING ALTERNATIVE COURSES: After establishing the objectives and planning premises, the alternative courses of action have to be considered. Having developed and examined the alternatives, evaluation of every alternative is essential. Initially, alternatives are evaluated on the basis of their advantages and disadvantages. Therefafter, it is assessed on the basis of relevant criteria- such as costs involved and quality expected, timing and speed, resources required and risk involved, possibility of application, and other tangible and intangible factors suitable for the enterprise. Change in government policy, technology, competition,etc. pose several alternatives before manufacturers, from time to time, regarding the product they should manufacture. Such alternatives have to be carefully evaluated against factors like costs, associated risks involved, benefits likely to arise, availability of spare capacity, etc.The pros and cons as well as the consequences of each alternative course of action must be examined thoroughly before a choice is made. F) SELECTING SUITABLE ALTERNATIVE COURSE: Selecting a suitable alternative courseis the sixth step in the process of planning. This is the point at which the plan is adopted. This is the real point of decision making. Considerations contributing to the proper selection include:  Does the plan possess flexibility to adjust to varying conditions?  Is the plan acceptable to the operating personnel?  What new equipment, space, personnel, training and supervision will be needed? G) FORMULATING DERIVATIVE PLANS: After selecting the best course of action, the management has to formulate the secondary plans to support the basic plan. Derivative plans are developed on the basis of basic plan. Basic plan is the overall organisational plan whereas derivative plans are departmental plans, sectional plans and individual plans. The plans derived for various departments, units, activities,etc., in a detailed manner are known as derivative plans. Thus, financial plan, production plan, marketing plan, etc. are departmental plans while product plan, price plan, promotion plan, distribution plan are sectional plans. In fact, basic plan cannot be effectively implemented without derivative plans. These plans are derived within the objectives, policies, budget, strategies, etc. Plans are also formulated for buying materials, equipment and for hiring and training workers, etc. Another instance- the basic production plan requires a number of things such as availability of plant and machinery, training of employees, provision of adequate  finance, etc. To ensure the success of a basic plan, the derivative plans must indicate the time schedule and sequence of performing various tasks. H) IMPLEMENTATION AND PROVIDING FOR FOLLOW-UP: Once the organisation is prepared with all necessary things, the written plan is implemented. The written plans are officially put to action or are translated into action. As a matter of fact , success of any plan is measured by the result obtained. Arrangement for follow-up action should be made. The plan in operation should be reviewed after certain interval to ensure their relevance and effectiveness. It would ensure compliance and help in achieveing the objectives and goals for which plans were adopted and implemented. In the course of implementing plans, certain facts may come to light that were not even thought of earlier. In the light of these changed conditions, plans have to be revised. Without such regular follow-up, plans may become out-of-date and useless. Management can notice shortcomings in time and initiate suitable remedial steps. IMPORTANCE OF PLANNING: Planning is an essential activity carried out in all organizations in the modern world. No organization can achieve its goals without planning. Planning help an organization in the following ways:- A) A base for management: Planning is a foundation of management. Without planning there is no management. Terry has rightly pointed out, “planning is vital in management because it is basic to the other fundamental management functions. Without the activities determined by planning, there would be nothing to organise, no one to actuate, and no need to control.” B) Planning provides direction: Planning provides direction and a sense of purpose for the organization. Without plans and goals, organization merely reacts to daily occurrences without considering what will happen in the long-run. It helps an organization decide what to do and when to do. It reduces aimless activity and makes action more meaningful. C) Planning provides a unifying framework: A plan tells everyone what the organization hopes to achieve and what contribution each department must make, and who is to utilize resources to achieve the goals. Plans serve as the basis of coordinating the efforts of  different divisions, departments and people. Planning forces people to continually address their efforts to the most important work rather than the least important. D) Planning is economical: Effective plans coordinate organizational work and eliminate unproductive effort. Facilities are employed to the best advantage. Waste motions and idle facilities are removed. It also helps an organization to utilize its physical and human resources in an economical way,and it leads to efficiency of operations. E) Planning reduces the risks of uncertainty: Planning is concerned with future. Future is filled with uncertainties and changes. These uncertainties and changes make the task of a manager much more complicated and risky. In order to face this situations planning is essential. Planning helps in evaluating the situations, provides alternative courses of action and leads to growth and proseperity. Planning helps an organization to cope with an uncertain future. It helps management to anticipate the future and prepare for the risks by making necessary provisions to meet the unexpected turn of events. Planning minimizes the chances of mistakes and unpleasant surprises because objectives, policies and strategies are formulated after a careful scrutiny of internal as well as external environment. It keeps management alert to environmental changes, and manages the uncertain future in a useful way. F) Ensuring effective control: Planning acts as a foundation stone for effective control. Without planning control cannot be exercised. It is because of the fact that planning provides standards for measuring the performance of the subordinates. Planning also helps in estimating time and cost of operations through the process of budgeting and forecasting.