Explain the steps in planning process || Business Studies || Chapter 2 || Class 12 || NEB

Procedures or Steps of Planning

It is essential to follow certain procedures or steps to create an effective plan. While there is no one-size-fits-all scientific procedure for developing a good plan, the following steps can be adopted to prepare an effective plan:

1. Analyze Opportunities

   It is the initial step in the planning process. Before preparing a plan, management must assess the strengths, weaknesses, opportunities, and threats (SWOT) arising from the changing business environment. Strengths and weaknesses stem from the internal environment, while opportunities and threats result from external factors.

2. Setting Objectives

   This is the starting point of planning. In this step, the overall objectives of the organization are determined. Objectives should be specific, clear, and practical. Once specific objectives are clarified, they should be further broken down into different departments, branches, sections, and individual goals.

3. Determination of Premises

   Premises are assumptions about the future on which planning is based. These assumptions can be tangible or intangible. Tangible assumptions may include factors like capital investment, production units, sales units, and more. Intangible assumptions could involve goodwill, motivation, employees' morale, and other non-material factors.

4. Determination of Alternatives

   Management must develop various alternative courses of action with the input of experienced and knowledgeable experts in the field. This is because one problem can often have multiple solutions. Therefore, in this step, a number of alternative solutions are generated to achieve the predetermined organizational goals.

5. Evaluation of Alternatives

   All alternatives should be thoroughly examined and assessed in terms of factors such as cost, risk, capital requirements, human resources, technology, and more. Evaluation techniques may be borrowed from various disciplines like mathematics, sociology, economics, etc.

6. Selection of Best Alternative

   This is the pivotal decision-making step. After evaluating the alternatives, the best one is selected based on the current situation, expectations of future changes, practical implications, cost-benefit considerations, and the overall impact of the chosen alternative on the organization's objectives.

7. Formulation of Derivative Plans

   After selecting the best alternative, detailed plans are created at a smaller scale to support the main plan of the organization. These derivative plans specify what, when, where, and who will perform the activities and provide guidance at the departmental level.

8. Budgeting the Plan

   This is the final step in the planning process. Once the best alternative is selected, the master budget for carrying out the required activities is prepared. Budgets for each department, section, or branch are formulated to create a comprehensive master budget.