2nd PUC Business Studies Question Bank Chapter 4 Planning

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Karnataka 2nd PUC Business Studies Question Bank Chapter 4 Planning

Question 1.
What is planning?
Answer:

• Planning means setting objectives and targets and formulating an action plan (i.e., determining appropriate course of action) to achieve them.
• In simple, planning is deciding in advance what to do and how to do.
• It is one of the basic managerial of functions.

Question 2.
Define planning. ( 2 Marks )
Answer:
Planning is the process of setting objectives for a given time period, formulating various courses of action to achieve them, and then selecting the best possible alternative from among the various courses of action available.

Question 3.
Explain any four features of planning. ( 4 Marks )
Answer:
Features (or nature) of planning:
Planning function of the management has the following features.

1. Planning focuses on achieving objectives: Planning is purposeful function of management. It is concerned with setting up of objectives along with the activities to be undertaken-to achieve the objectives.
2. Planning is a primary function of management: Planning is a primary function of management as it lays down the base for other functions of management. All other managerial functions are performed within the framework of the plans drawn.
3. Planning is pervasive: Planning function is performed by all levels of management as well as in all departments of the organization.
4. Planning is continuous: Planning is a continuous process. One plan, after its implementation, is being followed by another plan (which is drawn on the basis of new requirements and future conditions).
5. Planning is futuristic: Planning involves looking ahead and preparing for the future. The purpose of planning is to meet future events effectively to the best advantage of an organization. Thus, planning is a forward looking function based on forecasting. For example, based on sales forecasting, a business firm prepares its annual plan for production and sales.
6. Planning involves decision making: Planning essentially involves choice from among various alternatives and activities. Each alternative is evaluated and finally the decision is taken to select the best alternative.
7. Planning is a mental exercise: Planning requires application of the mind. It is basically an intellectual activity of thinking. Thus, planning involves logical, systematic and orderly thinking based on the analysis of facts and forecasts which is necessary for determining the action to be taken.
   (Write any four points)

Question 4.
State any two features of planning. ( 2 Marks )
Answer:
Two features of planning:

1. Planning focuses on achieving objectives.
2. Planning is a primary function of management

Question 5.
State any one features of planning. ( 1 Mark )
Answer:
Planning is a primary function of management.

Question 6.
Which function of management involves decision making? ( 1 Mark )
Answer:
Planning.

Question 7.
Explain the importance of planning with any four points. ( 4 Marks )
Answer:
Importance of planning:
Planning is deciding in advance what is to be done and how it is to be done. The benefits of planning are:

(1) Planning provides direction: Planning provides direction for action by stating in advance how a work is to be done. Planning ensures that the goals or objectives are clearly stated so that the employees of the organization are aware of what the organization has to do and what they must do to achieve these goals.

(2) Planning reduces the risk of uncertainty: Planning helps business enterprise to predict (i.e., foresee) its future uncertain events and enables the organization to face these uncertainties in the best possible manner. Thus, planning helps to develop a remedial action against future uncertainties and reduce the risk of business.

(3) Planning reduces overlapping and wasteful activities: Planning facilitates the co-ordination of the activities and efforts of different divisions, departments and individuals and avoids duplication of activities. Thus, useless and wasteful activities are minimized or eliminated.

(4) Planning promotes innovative ideas: Planning is basically thinking and decision making process. During the process of planning, many new ideas come to the minds of managers. These innovative ideas can take the shape of concrete plans leading to growth and prosperity of the business.

(5) Planning facilitates decision making: Planning targets, objectives and courses of action provide the managers criteria and guidance for the evaluation of the alternatives. It reduces mistakes in decision making. Thus, planning facilitates managers to take rational decisions.

(6) Planning establishes standards for controlling: Planning facilitates control. Planning determines in advance the work to be done, the person responsible for doing it, the time to be taken to do the work and the cost to be incurred. This makes it easy to compare the actual performance with the planned performance. In case there are deviations, corrective actions are taken to remove the deviations. Thus, planning provides the base for control.
(Write any four points)

Question 8.
State any two benefits of planning. ( 2 Marks )
Answer:
Two benefits of planning are:

1. Planning provides direction for action.
2. Planning reduces the risk of uncertainty.

Question 9.
State a benefit of planning. ( 1 Mark )
Answer:
Planning provides direction for action.

Question 10.
Explain any four limitations of planning. ( 4 Marks )
Answer:
Limitations of planning:
(1) Planning leads to rigidity: Planning makes the subordinate managers to work according to plans. They cannot change the plans even if the circumstances have changed. This kind of rigidity in plans may create difficulty.

(2) Planning reduces creativity: Planning reduces the creativity of the subordinate managers as they have to just implement the plans given by the top management. They are not allowed to deviate from plans and are not permitted to act on their own.

(3) Planning involves huge cost: Planning is a costly process. Huge costs are involved in the formulation of plans. , Collection and analysis of different information, determination and evaluation of the alternative courses of action and selection of the best course of action involve huge expenses, (e.g., expenses on boardroom meetings, discussions with professional experts etc.) Sometimes, the cost incurred on planning may exceed its benefits.

(4) Planning is a time consuming process: Planning process is time consuming. Collection and analysis of the facts and information, determination and evaluation of the alternative courses of action and selection of the best course of action involves much time.

(5) Planning may not work in a dynamic environment: Business functions in a dynamic environment. Therefore, planners cannot foresee everything. Further, planners do not have control over certain dynamic environmental factors like economic, political, legal, social and technological conditions. Any change in these factors (e.g., change in technology) will affect the course of action (i.e., plan).

(6) Planning does not guarantee success: The success of an enterprise is possible only when the plans are properly drawn up and implemented. But planners formulate the plans for the future which is unpredictable. Further, planning based on any wrong information may lead to difficulties. Therefore, planning does not guarantee success.

Despite of its limitations, planning is not a useless exercise. It provides a base for analyzing future course of action.
(Write any four points)

Question 11.
State any two limitations (or disadvantages) of planning. ( 2 Marks )
Answer:
Two limitations (disadvantages) of planning are:

1. It is a.time consuming process.
2. It involves huge cost.

Question 12.
State a limitation of planning. ( 1 Mark )
Answer:
Planning is a time consuming process.

Question 13.
Explain the first two steps taken by management in planning process. ( 4 Marks )
Answer:
Planning is deciding in advance what to do and how to do. It is a decision making process. Every manager has to follow the following logical steps in planning process.

(1) Setting up of objectives: The first step in planning is setting up of objectives (i.e., the end results to be achieved). The objectives should clearly specify what the organization wants to achieve. E.g., earning a profit or 30% on investment. The objectives are set by the top management. The objectives should be set for the entire organization and for each department within the organization. They must be specific, realistic and in measurable terms.

(2) Developing planning premises: Planning is concerned with accomplishment of objectives in uncertain future. Therefore, while formulating plans the manager is required to make certain assumptions (i.e., Planning premises) about the future. For example, manager may assume that tax rate may go up by 2% within a month. Similarly, he may assume that interest fate may go down by 1% in the next week.

Accurate forecasting is important in developing planning premises. Forecasts can be made about the demand for a particular product, policy change, interest rates, tax rates etc. Plans should be formulated by the management within the framework of the planning premises.

(3) Identification of alternative courses of action: Once objectives are set and assumptions are made, then alternative courses of action are to be identified to achieve the set objectives. In fact, there will be more than one way for achieving the same objective.

E.g., if a company wants to increase the profits by 20% over last year’s profit, it can do so by increasing the sales volume or by reducing the cost or by increasing the selling price or by introducing a new product or by a combination of two or three of these factors. Therefore, in the light of the analysis of the information gathered, the management must identify all possible courses of action.

(4) Evaluating alternative courses of action: After identifying the possible alternative courses of action, each of the possible courses of action has to be evaluated. That is, the strengths and weaknesses (i.e., the positive and negative aspects) of each of the possible alternative course of action must be examined against factors like cost including interest and tax, benefits like earnings per share and dividend, risk, availability of facilities etc.

(5) Selecting the best alternative: This is the real point of decision making. After evaluating the positive and negative aspects of each and every possible course of action, the best possible course of action is to be selected. The ideal or best course of action must be feasible, profitable and with minimum negative consequences.

(6) Implementing the plan. The next step is to implement the selected plan. This involves putting the plan into action (i.e., doing what is required) to achieve the set goals. Implementation of plan requires the formulation of policies, procedures, budgets and programmes. Further, it requires delegation of the requisite authority and responsibility to the subordinates. It also requires the co-operation, participation and commitment of the subordinates.

(7) Follow up action: Planning process involves follow up action. It is necessary to check the progress in the
implementation of plans and to note down deviation for taking necessary action. Follow up action will ensure that objectives are achieved effectively and efficiently. Thus, starting from setting of objectives till follow up action, planning process involves performance of many important activities. (Write first two points)

Question 14.
State the different steps taken by management in planning process.
Answer:
Every manager has to follow the following logical steps in planning process.

• Setting up of objectives
• Developing planning premises
• Identification of alternative courses of action
• Evaluating alternative courses of action
• Selecting the best alternative
• Implementing the plan
• Follow up action

Question 15.
As a manager what logical steps you follow in planning process before executing a project. ( 5 Marks )
Answer:
As a manager, I would like to follow the following logical steps in planning process before executing a project.

Question 16.
State the function of management which determines the objectives of an organization. ( 1 Mark )
Answer:
Planning

Question 17.
Mention the first step of planning process. ( 1 Mark )
Answer:
Setting objectives

Question 18.
State the first two steps in planning process. ( 2 Mark )
Answer:
First two steps in planning process are:

1. Setting objectives
2. Developing planning premises.

Question 19.
What are ‘planning premises’? ( 2 Marks )
Answer:
Planning premises are the assumptions about the future conditions and events like trends in population, changes in political and economic environment, variation in production cost and prices, government and legal regulations. These assumptions are the base material upon which plans are to be drawn. Based on forecasts made about the demand for a particular product, policy change, interest rate, tax rate etc., planning premises are developed (i.e., assumptions are made)

Question 20.
What is ‘decision making’ in planning? ( 2 Marks )
Answer:
Decision making is a process of selecting the best course of action from various available alternatives after evaluating each one of them.

Question 21.
Which function of management involves decision making? ( 1 Mark )
Answer:
Planning

Question 22.
What is single – use plan? ( 1 Mark )
Answer:
A plan developed for a one-time event or project is called a single – use plan, e.g., budgets.
(Note: These plans are prepared for non-recurring situations, the duration of this plan may be a day, a week or a month, depending upon the type of the product. For example, a plan to organize an event or a seminar or conference may be for only one day).

Question 23.
Give an example for single use plan. ( 1 Mark )
Answer:

1. Budgets
2. Programmes
3. Projects
   (Write any one example)

Question 24.
What is standing plan? ( 1 Mark )
Answer:
A plan designed and used for activities that occur regularly over a period of time is called standing plan e.g., policies.
(Note: It is usually developed once but is modified from time to time to meet business needs as required. It enhances efficiency in routine decision making)

Question 25.
Give an example for standing plan. ( 1 Mark )
Answer:

• Policies
• Procedures
• Methods
• Rules
  (Write any one example)

Question 26.
Give an example for a plan which is neither a single – use plan nor a standing plan. ( 1 Mark )
Answer:

1. Strategy
2. Objectives
   (Write any one example)

Question 27.
Explain any two types of plans. ( 4 Marks )
Answer:
Based on what the plans seek to achieve, the plans can be classified as:

(1) Objectives: Objectives are the desired end result which the management of an organization seeks to achieve by its operations.

In simple, an objective is what the management of an organization wants to achieve, i.e., the end result of activities. For example, an organization may have an objective of increasing sales by 20%, or it may have an objective of earning a 30% profit on investment and so on. All other managerial activities are directed towards achieving these objectives. Objectives are usually set by the top management. They serve as a guide for overall business planning.

The objectives should be specific, realistic and in measurable terms. Usually objectives are put in the form of written statement of desired results to be achieved in a given period of time.

(2) Strategy: Strategy is a comprehensive plan for achieving (i.e., accomplishing) the objectives of an organization. This comprehensive plan includes three dimensions:

• Determining long term objectives.
• Adopting a particular course of action to achieve the objectives, and
• Allocating resources necessary to achieve the objective

Major strategic decisions will include decisions like whether the organization will continue to be in the same line of business, or combine new lines of activity with the existing business.
Strategies are formulated by the top management for the successful accomplishment of the objectives in the competitive environment.

(3) Policy: Policies are general statements that guide thinking of decision makers. They are guides to managerial action and decisions in the implementation of strategy. For example, the company may have a recruitment policy, pricing policy, purchase policy, sales policy etc. within which objectives are set and decisions are made.

Policies define the broad parameters within which a manager may function. For example, sales policy of a company states that goods should be sold only on cash basis, then sales manager cannot permit salesman to sell goods on credit basis. Thus, a policy makes it easier to resolve problems or issues.

Thus, by providing guidelines for thinking and action, policies enable the decision makers to take decisions without any confusion.

(4) Procedure: Procedures are routine steps on how to carry out activities. They provide details about the exact manner in which any work is to be performed. They are specified in a chronological order. For example, there may be a procedure for requisitioning supplies before production. Thus, procedures are specified steps to be followed in particular circumstances, e.g., (1) Procedure for purchase of materials. (2) Procedure for recruitment of staff.

(5) Method: Methods provides the prescribed ways or manner in which a task has to be performed. It deals with a
task comprising one step of a procedure and specifies how this step is to be performed. The method may vary from task to task.

Selection of proper method saves time, money and effort and increases efficiency. For imparting training to employees, different methods can be adopted. For example, for higher level management – orientation programmers, lecturers and seminars may be organized; whereas for the supervisory level – on the job training methods are appropriate.

(6) Rule: Rules are specific statements that inform what is to be done. It reflects the managerial decision that a certain action must or must not be taken. In simple, rules are the specific statements which prescribe the code of behaviour to the people of the organization. E.g., Wear ID cards in the work place.

(7) Programme: Programmes are detailed statement about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action. E.g., Programme for opening 10 new branches by the end of the year 2018.

(8) Budget: A budget is a statement of expected results expressed in numerical terms. It is a plan which quantifies facts and figures. For example a sales budget may forecast the sales of different products in each area for a particular month.
Examples of budgets:

1. Cash budget
2. Sales budget
3. Production budget

Question 28.
Mention any two types of plans. ( 2 Marks )
Answer:
Two types of plans

1. Objectives
2. Strategy

Question 29.
State a type of plan. ( 1 Mark )
Answer:
Objectives

Question 30.
What do you mean by ‘objectives’? ( 2 Marks )
Answer:
Objectives are the desired end results which the management of an organization seeks to achieve by its operations. e.g., an organization may have an objective of increasing sales by 20%.
OR
Objectives are the desired future position that the management would like to reach.

Question 31.
What is a strategy? ( 2 Marks )
Answer:
Strategy is a comprehensive plan for accomplishing (i.e., achieving) the objectives of an organization. It is a course of action which helps to beat the competition.

Question 32.
What is a policy? ( 2 Marks )
Answer:
Policies are general statements that guide thinking or channelize energies towards a particular direction. They are guides to managerial action. They define the broad parameters within which a manager may function.
Example of policies

• Pricing policy,
• Recruitment policy

Question 33.
Give an example for policy. ( 1 Mark )
Answer:

• Pricing policy,
• Recruitment policy,
• Purchase policy
  (Write any one)

Question 34.
What is procedure? ( 2 Marks )
Answer:
Procedures are routine steps on how to carry out activities. They provide details about the exact manner in which any work is to be performed.

Question 35.
What is ‘method’ under planning? ( 1 Mark )
Answer:
Method is the prescribed ways or manner in which a task has to be performed.

Question 36.
State the meaning of ‘Rule’. ( 1 Mark )
Answer:
Rules are specific statements that inform what is to be done. They are simplest type of plans.

Question 37.
Give the meaning of programme. ( 2 Marks )
Answer:
Programmes are detailed statements about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action.

Question 38.
What is a budget? ( 1 Mark )
Answer:
A budget is a statement of expected results expressed in numerical terms. It is a type of plan. E.g., sales budget.

Question 39.
Give an example of budget. ( 1 Mark )
Answer:

1. Sales budget
2. Cash budget
   (Write any one)

I. Multiple choice questions (1 Mark each)

Question 1.
Which of the following statement is not correct with regard to planning?
(a) It is a mental exercise
(b) It provides direction for the future actions
(c) It is end function in the process of management
(d) It involves setting objectives and developing courses of actions
Answer:
(c) It is end function in the process of management

Question 2.
Which of the following is not the feature of the planning?
(a) It focuses on achieving objectives
(b) It involves identification and division of work
(c) It is primary function of the management
(d) It is a pervasive function
Answer:
(b) It involves identification and division of work

Question 3.
Which of the following is an example for the single use plan?
(a) policy
(b) procedure
(c) budget
(d) method
Answer:
(c) budget

Question 4.
Which of the following is an example for standing plan?
(a) Budget
(b) programmes
(c) strategy
(d) policies
Answer:
(d) policies

Question 5.
Which of the following is not a type of plan?
(a) objectives
(b) coordination
(c) budget
(d) rule
Answer:
(b) coordination