Planning is very important as it tells us where to go; it provides direction and reduces the risk of uncertainty by preparing forecasts. 

The importance of planning is explained as follows:

a. Planning provides direction: Planning provides direction for action. Planning ensures that the goals are clearly stated so that they act as a guide for deciding what action should be taken and in which direction. Planning ensures coordination in the work of individuals and various departments of the organization.

b. Planning reduces the risk of uncertainty: Planning is an activity which enables a manager to look ahead and anticipate changes. By deciding in advance, the tasks to be performed, planning shows the way to deal with changes and uncertain events. Changes cannot be eliminated but they can be anticipated and managerial responses to them can be developed. 

c. Planning reduces overlapping and wasteful activities: Planning serves as the basis of coordinating the activities and efforts of different divisions, departments, and individuals. It helps in avoiding confusion and misunderstanding. Planning ensures clarity in thought and action, work is carried on smoothly. It helps to detect the inefficiency and unwanted repetition in work and to take corrective measures to minimize the wasteful activities. 

d. Planning promotes innovative ideas: Planning is the first function of management. New ideas can take the shape of concrete plans. Planning is basically the thinking function of management. It encourages managers for innovative and creative thinking. Thus, planning helps the managers to be more creative and innovative in shaping new courses of action. 

e. Planning facilitates decision making: Planning helps the manager to look into the future and make a choice from amongst various alternative courses of action. Decision making is a process of selecting the best course of action from various available alternatives after evaluating each one of them. 

f. Planning establishes standards for controlling: Planning facilitates control. It determines goals and standards for every individual and department of the organization. This makes it easy to compare the actual performance of the individuals and departments with the standards fixed. In case, there are deviations, corrective measures are taken to remove them. Thus, planning is a prerequisite of controlling. 

The major limitations of planning are given below: 

a. Planning leads to rigidity: In an organization, a well-defined plan is drawn up with specific goals to be achieved within a specific time frame. These plans then decide the future course of action. The managers may not be in a position to change these plans. This kind of rigidity in plans may create difficulty. This rigidity restricts individual freedom, initiative, and creativity. 

b. Planning may not work in a dynamic environment: The business environment is dynamic. Planning anticipates future. It takes into consideration the possible changes in economic, political, legal and social dimensions. But it becomes difficult to accurately assess future trends. Competition in the market can also upset the plans. Planning cannot foresee everything and thus, there may be obstacles to effective planning. 

c. Planning reduces creativity: Planning is an activity which is done by the top management. Usually, the rest of the members just implement these plans. Middle management and other decision makers are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, much of the initiative or creativity inherent in them also gets lost or reduced. 

d. Planning involves huge costs: When plans are drawn up, huge costs are involved in their formulation. These may be in terms of time and money. The cost incurred sometimes may not justify the benefits derived from the plans. 

e. Planning is a time-consuming process: Sometimes plans to be drawn uptake so much of time that there is not much time left for their implementation. 

f. Planning does not guarantee success: The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action. Managers have the tendency to depend on the previously tested and successful plans. But it is not always true that the plans which were successful early will be successful again. 

Therefore, planning does not guarantee success but provides a base for analysis of future courses of action.