- Recognizing Need for Action
The first step in planning process is the awareness of business opportunity and the need for taking action. Present and future opportunities must be found so that planning may be undertaken for them. The trend of economic situation should also be visualized. For example, if thinking of the government is to develop rural areas as industrial centres, a farsighted businessman will think of setting up units suitable to that environment and will avail the facilities offered for this purpose. Before venturing into new areas the pros and cons of such projects should be evaluated. A beginning should be made only after going through a detailed analysis of the new opportunity.
- Gathering Necessary Information
Before actual planning is initiated relevant facts and figures are collected. All information relating to operations of the business should be collected in detail. The type of customers to be dealt with, the circumstances under which goods are to be provided, value of products to the customers, etc. should be studied in detail. The facts and figures collected will help in framing realistic plans.
- Laying Down Objectives
Objectives are the goals which the management tries to achieve. The objectives are the end products and all energies are diverted to achieve these goals. Goals are a thread which bind the whole company. Planning starts with the determination of objectives. The tie between planning and objectives helps employees to understand their duties. Objectives are the guides of employees. It is essential that objectives should be properly formulated and communicated to all members of the organization.
- Determining Planning Premises
Planning is always for uncertain future. Though nothing may be certain in the coming period but still certain assumptions will have to be made for formulating plans. Forecasts are essential for planning even if all may not prove correct. A forecast means the assumption of future events. The behaviour of certain variables is forecasted for constituting planning premises.
Forecasts will generally be made for the following:
(a) The expectation of demand for the products.
(b) The likely volume of production.
(c) The anticipation of costs and the likely prices at which products will be marketed.
(d) The supply of labour raw materials etc.
(e) The economic policies of the government.
(f) The changing pattern of consumer preferences.
(g) The impact of technological changes on production processes.
(h) The sources for supply of funds.
It is on the basis of these forecasts that planning is undertaken. The success or failure of planning will depend upon the forecasts for various factors mentioned above. If the forecasts are accurate then planning will also be reliable. The effect of various factors should be carefully weighed.
- Examining Alternative Course of Action
The next step in planning will be choosing the best course of action. There are a number of ways of doing a thing. The planner should study all the alternatives and then a final selection should be made. Best results will be achieved only when best way of doing a work is selected. According to Koontz and O’Donnell, “There is seldom a plan made for which reasonable alternatives do not exist.” All the pros and cons of methods should be weighed before a final selection.
- Evaluation of Action Patterns
After choosing a course of action, the next step will be to make an evaluation of those courses of actions. Evaluation will involve the study of performance of various actions. Various factors will be weighed against each other. A course of action may be suitable but it may involve huge investments and the other may involve less amount but it may not be very profitable. The evaluation of various action patterns is essential for proper planning.
- Determining Secondary Plans
Once a main plan is formulated then a number of supportive plans are required. In fact secondary plans are meant for the implementation of principal plan. For example, once production plan is decided then a number of plans for procurement of raw materials, purchase of plant and equipment, recruitment of personnel will be required. All secondary plans will be a part of the main plan.
- Implementation of Plans
The last step in planning process is the implementation part. The planning should be put into action so that business objectives may be achieved. The implementation will require establishment of policies, procedures, standards and budgets. These tools will enable a better implementation of plans.