(A) Planning: The task of collecting information for the activities to be undertaken in business, consider them in advance and plan out how to do these activities is called planning. Planning is an intellectual process to achieve business goals.

(B) Process of planning:

The stage-wise process of framing a plan is discussed below:

1. Determination of objectives:

• The first step in planning is to set the objectives.
• It is said that, if objectives are determined properly then it becomes extremely useful for the management.
• Planners should set realistic, intellectual and achievable objectives.

2. Clarifying planning premises:

• The forecast or the assumptions about future which provide a base for planning in present are known as planning premises.
• After determining the objective, it is important to clarify the planning premises.
• Forecasting is made after considering the internal and external factors that affects the business unit.
• Unclear and imprecise premises can fail a plan.

3. Collection and analysis of information:

• Once the planning premises is done, the planners gather necessary information. The information may be gathered through direct sources or indirect sources.
• The information is then classified, analyzed and interpreted. This helps to make assumptions for desired results.

4. Preparation of alternative plan:

• After collecting, analyzing and interpreting information, alternative plan is to be made. An alternative plan and list of alternatives help in case if the main plan does not work as planned or if there are some unforeseen changes in the market.
• The list of alternative steps could be whether to sale the goods by producing on our own or by purchasing and re-selling, second alternative for the material to be used, etc.

5. Evaluation of alternatives:

• Once the list of alternatives is prepared, they are evaluated to see if they are suitable alternatives or not.
• How each alternative will affect the business and its processes is evaluated.
• Evaluation of alternatives is an intellectual process. Mathematical and statistical methods are used for the evaluation of alternatives.
• Business, units make use of a subject called Operation Research (O.R.) to ‘ prepare the model of an ideal plan.

6. Selection of the best alternative: The various alternatives are evaluated, analyzed and scrutinized and then the best alternative is selected.

7. Formulation and evaluation of subsidiary plan:

• Over and above the main plan, different projects or alternatives have to be considered as per basic plan or in support of basic plan. These plans are known as subsidiary/derivative plan.
• For example, a car manufacturing company is trying to make a decision to make tyres for its cars. On the other hand, it is also thinking to buy them rather than manufacturing. Such an alternative is considered subsidiary plan.
• Even the subsidiary plan is evaluated to assess that it does not obstruct the basic plan in future.

8. Evaluation of plan:

• Once the basic plan and the subsidiary plan are formed the entire plan is thoroughly evaluated. The business unit takes the help of experts and consultants to evaluate the plan as and when necessary.
• This third-party opinion helps the unit to get a correct opinion and also mistakes if any.
• The business unit follows the principle of ‘Look and Leap’ at every stage i.e. it evaluates the plan at every stage and then moves forward accordingly.