NCERT Solutions for Class 12 Business Studies Business Studies I Chapter 4: Planning

Chapter at a glance

Exercises – Very Short Answer Type

Question VSA – Q1

How does planning provide direction?

Answer

Planning states in advance what is to be done and how. By setting clear goals and the course of action, it guides all employees and departments towards the same objectives, so that everyone knows what they must do and the organisation does not drift.

By deciding in advance the objectives and the course of action, planning guides everyone’s efforts towards common goals.

Question VSA – Q2

A company wants to increase its market share from the present 10% to 25% to have a dominant position in the market by the end of the next financial year. Ms Rajni, the sales manager has been asked to prepare a proposal that will outline the options available for achieving this objective. Her report included the following options – entering new markets, expanding the product range offered to customers, using sales promotion techniques such as giving rebates, discounts or increasing the budget for advertising activities. Which step of the planning process has been performed by Ms Rajni?

Answer

Identifying alternative courses of action – she listed the different options available for achieving the objective.

Identifying alternative courses of action.

Question VSA – Q3

Why are rules considered to be plans?

Answer

Rules are specific statements that tell what is to be done or not done in a situation. They are decided in advance to guide behaviour and are part of the framework for achieving objectives, so they are considered (standing) plans.

Because they are decided in advance to guide what must or must not be done, they are standing plans.

Question VSA – Q4

Rama Stationery Mart has made a decision to make all the payments by e-transfers only. Identify the type of plan adopted by Rama Stationery Mart.

Answer

Policy – a general statement that guides decisions (here, the mode of payment). (It may also be seen as a rule if no deviation is allowed.)

Policy (a standing plan guiding payment decisions).

Question VSA – Q5

Can planning work in a changing environment? Give a reason to justify your answer.

Answer

Yes, to a limited extent. Planning is based on premises about the future; when the environment changes rapidly, plans may become outdated. But since planning is continuous and flexible, plans can be revised as conditions change.

Partly – a dynamic environment can make plans unsuitable, but because planning is continuous, plans can be revised to meet changes.

Exercises – Short Answer Type

Question SA – Q1

What are the main aspects in the definition of planning?

Answer

Planning is deciding in advance what to do and how to do it. Its main aspects are:

1. Setting objectives for a given time period.
2. Formulating various courses of action to achieve them.
3. Selecting the best course of action from the alternatives.

It bridges the gap between where we are and where we want to go.

Setting objectives, developing alternative courses of action, and selecting the best one to achieve the objectives.

Question SA – Q2

If planning involves working out details for the future, why does it not ensure success?

Answer

1. Future is uncertain – plans are based on premises that may not come true.
2. Changing environment – unexpected changes (economic, political, technological) can make plans ineffective.
3. False sense of security – managers may rely on past successful plans, ignoring new conditions.
4. Implementation – a good plan fails if not implemented properly.
5. Rigidity – managers may stick to plans even when circumstances change.

So planning only increases the chances of success; it does not guarantee it.

Because the future is uncertain and the environment changes; premises may fail, plans may be rigid or poorly implemented – so planning improves but does not guarantee success.

Question SA – Q3

What kind of strategic decisions are taken by business organisations?

Answer

A strategy is a comprehensive plan for accomplishing an organisation’s objectives. Strategic decisions relate to the long-term direction and scope of the business, such as:

1. Whether to continue in the same line of business or diversify.
2. Entering new markets or new product lines.
3. Expansion, mergers, acquisitions or joint ventures.
4. Allocating resources among different activities.
5. Responding to the environment – competition, technology, government policy.

A strategy has three dimensions: determining long-term objectives, adopting a particular course of action, and allocating resources to achieve the objectives.

Long-term decisions about the direction and scope of business – diversification, new markets or products, expansion, mergers and resource allocation – involving long-term objectives, a course of action and resource allocation.

Question SA – Q4

Planning reduces creativity. Critically comment.

Answer

Planning reduces creativity

• Planning is mostly done by top management; middle and lower managers only carry out the plans and are not allowed to deviate.
• Employees simply follow orders, so their initiative and creativity are discouraged.
• Rigid plans make managers avoid new ideas.

Planning promotes innovative ideas

• Planning is a thinking function; it requires managers to think of new ways and alternatives.
• Many new ideas come up during planning, as managers look ahead and anticipate.
• It encourages managers to be creative and innovative in finding the best course of action.

Conclusion: Whether planning reduces or promotes creativity depends on how it is done. If lower levels participate and plans are flexible, planning promotes creativity.

Planning can reduce creativity when it is done only at the top and followed rigidly, but it also promotes innovation because it is a thinking exercise; participative, flexible planning encourages creativity.

Question SA – Q5

In an attempt to cope with Reliance Jio’s onslaught in 2018, market leader Bharti Airtel has refreshed its ₹ 149 prepaid plan to offer 2 GB of 3G/4G data per day, twice the amount it offered earlier. Name the type of plan highlighted in the given example. State its three dimensions also.

Answer

Type of plan: Strategy – a comprehensive plan to meet the challenge of competition.

Three dimensions of a strategy

1. Determining long-term objectives – retaining market leadership and market share.
2. Adopting a particular course of action – revising the plan to give double data.
3. Allocating resources necessary to achieve the objective – network capacity, finance, marketing.

Strategy; its dimensions are determining long-term objectives, adopting a course of action and allocating resources.

Question SA – Q6

State the type of plan and state whether they are Single use or Standing plan: a. A type of plan which serves as a controlling device as well. b. A plan based on research and analysis and is concerned with physical and technical tasks.

Answer

a. Budget – a statement of expected results in numerical terms; it is also a control device (actual performance is compared with it). It is a single-use plan.

b. Method – the prescribed way in which a task is to be performed, based on research and analysis. It is a standing plan.

1. Budget – single-use plan; b. Method – standing plan.

Exercises – Long Answer Type

Question LA – Q1

Why is it that organisations are not always able to accomplish all their objectives?

Answer

Because of the limitations of planning:

1. Planning leads to rigidity – once plans are made, managers may not be able to change them even when circumstances change.
2. Planning may not work in a dynamic environment – economic, political, technological and social conditions keep changing; plans based on premises may fail.
3. Planning reduces creativity – employees follow orders without initiative.
4. Planning involves huge costs – collecting information, experts’ fees, etc.; costs may exceed benefits.
5. Planning is a time-consuming process – little time may be left for implementation; opportunities may be lost.
6. Planning does not guarantee success – success depends on implementation; managers may develop a false sense of security.

Besides, objectives may be unrealistic, resources inadequate, or plans poorly implemented.

Because planning has limitations: rigidity, failure in a dynamic environment, reduced creativity, high cost, time consumption and no guarantee of success – plus unrealistic goals or poor implementation.

Question LA – Q2

What are the steps taken by management in the planning process?

Answer

1. Setting objectives – clearly stating what the organisation wants to achieve, for the whole organisation and each department.
2. Developing premises – making assumptions about the future (demand, policies, technology, competition), which form the base of plans.
3. Identifying alternative courses of action – listing all possible ways to achieve the objectives.
4. Evaluating alternative courses – weighing the pros and cons of each, in terms of cost, risk and contribution to objectives.
5. Selecting an alternative – choosing the best plan (or a combination); this is the real point of decision-making.
6. Implementing the plan – putting it into action; allocating resources and tasks.
7. Follow-up action – monitoring whether plans are being implemented as intended and modifying them if needed.

Setting objectives, developing premises, identifying alternatives, evaluating them, selecting the best alternative, implementing the plan and following it up.

Question LA – Q3

An auto company C Ltd. is facing a problem of declining market share due to increased competition from other new and existing players in the market. Its competitors are introducing lower priced models for mass consumers who are price sensitive. C Ltd. realized that it needs to take steps immediately to improve its market standing in the future. For quality conscious consumers, C Limited plans to introduce new models with added features and new technological advancements. The company has formed a team with representatives from all the levels of management. This team will brainstorm and will determine the steps that will be adopted by the organisation for implementing the above strategy. Explain the features of Planning highlighted in the situation.

Answer

1. Planning is pervasive – “a team with representatives from all the levels of management”. Planning is done at all levels and in all departments, though its nature and scope differ.
2. Planning is futuristic – “needs to take steps immediately to improve its market standing in the future”. Planning looks ahead; it involves forecasting future conditions and preparing for them.
3. Planning is a mental exercise – “this team will brainstorm and will determine the steps”. Planning requires thinking, foresight, imagination and sound judgement.
4. (Also) Planning focuses on achieving objectives (improving market share) and involves decision-making (choosing new models with added features for quality-conscious consumers).

Planning is pervasive (all levels involved), futuristic (preparing for future market standing) and a mental exercise (brainstorming); it also focuses on objectives and involves decision-making.

Topic checklist

• ☒ Meaning, importance and features of planning (VSA 1; SA 1; LA 3)
• ☒ Limitations of planning (VSA 5; SA 2, 4; LA 1)
• ☒ Planning process (VSA 2; LA 2)
• ☒ Types of plans (VSA 3, 4; SA 3, 5, 6)

Total questions answered: 14 of 14