Home › Free notes › Class 12 Business Studies › Planning

Planning – Class 12 Business Studies notes, important questions and MCQs

NCERT Class 12 Business Studies, chapter 4. Notes, key terms, important questions with answers and MCQs.

Chapter overview

Planning is deciding in advance what to do, how to do it and who is to do it. It bridges the gap between where we are and where we want to go. Planning is the primary function of management, is futuristic and involves decision-making. Plans can be single-use or standing, and include objectives, strategies, policies, procedures, methods, rules, programmes and budgets.

Features and importance

Planning focuses on achieving objectives, is the primary function, is pervasive, continuous, futuristic, involves decision-making and is a mental exercise.
Importance: provides direction, reduces risks of uncertainty, reduces overlapping and wasteful activities, promotes innovative ideas, facilitates decision-making and establishes standards for controlling.
Limitations: leads to rigidity, may not work in a dynamic environment, reduces creativity, involves huge costs, is time-consuming and does not guarantee success.

Planning process

Setting objectives, developing premises (assumptions about the future), identifying alternative courses of action.
Evaluating alternatives, selecting the best alternative, implementing the plan and follow-up action.

Types of plans

Objectives are the end results; a strategy is a comprehensive plan to achieve objectives considering the environment.
A policy is a general guideline for decision-making; a procedure is a sequence of steps; a method is the prescribed way of doing a task.
A rule is a specific statement of what is to be done or not done, with no discretion; a programme is a detailed plan for a project; a budget is a plan expressed in numbers.

Key terms

Planning: deciding in advance what to do, how to do it and who will do it
Premises: assumptions about the future on which plans are based
Policy: a general guideline that directs decision-making
Rule: a specific statement that tells what must or must not be done, allowing no discretion
Budget: a plan stating expected results in numerical terms

Important questions with answers

Explain the importance of planning.2 marks

Planning provides direction by stating in advance how work is to be done; it reduces the risks of uncertainty by anticipating changes; it reduces overlapping and wasteful activities by coordinating departments; it promotes innovative ideas; it facilitates decision-making by evaluating alternatives; and it establishes standards against which performance can be measured in controlling.

Distinguish between a policy and a rule.3 marks

A policy is a general guideline for decision-making that allows managers some discretion in its application, such as a recruitment policy. A rule is a specific statement of what must or must not be done, allowing no discretion, and its violation may lead to penalties, such as 'no smoking in the factory'.

Explain the steps in the planning process.5 marks

The planning process involves several steps. First, setting objectives: the organisation decides what it wants to achieve, and objectives are stated clearly for the whole organisation and each department. Second, developing premises: managers make assumptions about the future, such as demand, prices, government policy and technology, based on forecasts, so that plans rest on a common base. Third, identifying alternative courses of action: there may be several ways to achieve the objectives, and all possible alternatives are identified. Fourth, evaluating alternatives: the positive and negative aspects of each alternative are weighed in terms of cost, risk and likely results. Fifth, selecting an alternative: the best, most feasible and profitable alternative is chosen, sometimes a combination of alternatives. Sixth, implementing the plan: the plan is put into action by organising resources and assigning tasks. Seventh, follow-up action: the plan is monitored to ensure it is being implemented properly and modified if conditions change. This systematic process helps the organisation move from its present position to its desired future position.

Quick revision

Planning: primary, futuristic, decision-making, mental exercise.
Importance: direction, reduced risk, standards for control.
Process: objectives → premises → alternatives → evaluate → select → implement → follow up.
Types: objective, strategy, policy, procedure, method, rule, programme, budget.

Exam tips

Remember the seven steps of the planning process in order.
Distinguish procedure, method and rule with one example each.

Practice MCQs

Deciding in advance what to do and how to do it is
1. organising
2. planning
3. directing
4. controlling
Show answer
Answer: (b) planning. It is the first function.
A plan expressed in numbers is a
1. budget
2. policy
3. rule
4. method
Show answer
Answer: (a) budget. Example: a sales budget.
Planning is called the primary function because
1. it is the last function
2. it precedes all other functions
3. it is done by workers
4. it is optional
Show answer
Answer: (b) it precedes all other functions. Other functions depend on it.
Assumptions about the future on which plans are based are
1. objectives
2. policies
3. premises
4. rules
Show answer
Answer: (c) premises. Forecasts help form them.
'No smoking in the factory' is an example of a
1. policy
2. strategy
3. procedure
4. rule
Show answer
Answer: (d) rule. It allows no discretion.
A general guideline such as 'we sell only for cash' is a
1. rule
2. budget
3. policy
4. programme
Show answer
Answer: (c) policy. It guides decisions.
Which step immediately follows identifying alternative courses of action
1. setting objectives
2. follow-up
3. implementing the plan
4. evaluating alternatives
Show answer
Answer: (d) evaluating alternatives. Each alternative's merits are weighed.
A limitation of planning is that it
1. provides direction
2. sets standards
3. reduces risk
4. may lead to rigidity
Show answer
Answer: (d) may lead to rigidity. Managers may not adjust to change.

All chapters of Class 12 Business Studies

Written by Kundali IQ from standard, well-established facts to help with revision. This is not an official NCERT publication; always read your textbook too.