MELC: Analyze the nature and levels of planning and types of plan.

 Define planning.
 Differentiate the four types of planning.
 Identify the techniques and tools in business decision-making.

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 REVIEW
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Direction: Read the questions carefully. Write the correct answer in your answer sheet.
________1. It is the process by which a nation improves the economic, political, and social well-
being
of its people.
________2. It is a theory about economic growth which depends on the rate of the population of a
certain area and it was proposed by Thomas Robert Malthus.
________3. It is considered by law to be a unique entity, separate from those who own it.
________4. These businesses are owned by one person, usually, the individual who has day-to-day
responsibility for running the business.
________5. It is a single business with two or more people sharing its ownership.

WHAT I KNOW

ACTIVITY 1: Concept Map

Direction: Using a concept map define planning.

PLANNING

WHAT IS IT
1.
What is Planning?
 Planning is the first of essential managerial functions. Planning is important as by nature,
it enquirers about organizational goals and involves decision making about desired ways
and means to achieve goals.
 Planning is the process by which managers establish goals and define the methods by
which these goals are to be attained. Planning involves selecting missions and objectives
and the actions to achieve them; it requires decision making, which is choosing from
among alternative future courses of action.

It is, therefore, a rational approach to achieving pre-

selected objectives.
Planning is thus taken as the foundation for future activities.
Newman has thus defined it as, “Planning is deciding in
advance what is to be done; that is a plan is a projected
course of action.”
So, planning can be thought of as deciding on a future
course of action. It may also be treated as a process of
thinking before doing it.
Management has to plan for long-range and short-
range future direction by looking ahead into the future, by
estimating and evaluating the future behavior of the
relevant environment and by determining the enterprise’s own desired role.

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 Planning involves determining various types and volumes of physical and other resources to be
acquired from outside, to allocate these resources in an efficient manner among competing
claims and to make arrangements for the systematic conversion of these resources into useful
outputs.
As it is clear from the above discussion, plans have two basic components: goals and
action statements.
Goals represent an end state — the targets and results that managers hope to achieve.
Action statements represent the means by which an organization goes ahead to attain its
goals. Planning is a deliberate and conscious act by means of which managers determine a
course of action for pursuing a specific goal.
Planning to a manager means thinking about what is to be done, who is going to do it, and
how and when he will do it. It also involves thinking about past events (retrospectively) and
about future opportunities and impending threats (prospectively).

Planning enquirers about organizational strengths and weaknesses and involves decision
making about desired ways and means to achieve them.
There are, however, differences between decision making and planning. Decisions can be made
without planning but planning cannot be done without making decisions.

Nature of Planning
The nature of planning can be understood by examining its four major aspects. They are;
1. It is a contribution to objectives
 Since plans are made to attain goals or objectives, every plan and all its support should
contribute to the achievement of the organization’s purpose and objectives.
 An organized enterprise exists to accomplish group objectives through willing and
purposeful co-operation.
2. It is primacy among the manager’s tasks
 That planning is the prime managerial function is proved by the fact that all other
functions such as organizing, staffing, leading and controlling are designed to support
the accomplishment of the enterprise’s objectives.
 Planning quite logically, therefore, comes first before executing all other managerial
functions as it involves establishing the objectives necessary for all group efforts. Also, all
the other managerial functions must be planned if they are to be effective.
 Likewise, planning and controlling are inextricably bound up. Control without a plan is
meaningless because the plan provides the basis or standard of control.
3. It is pervasiveness
 Planning is a unique and universal function of all managers. The character and scope of
planning may vary with each manager’s authority and with the nature of the policies and
plans outlined by superiors, but all managers must have some function of planning.
 Because of one’s authority or position in the managerial hierarchy, one may do more or
less planning, but some kind or amount of planning a manager must do.
 According to Weihrich and Koontz; “All managers, from presidents to first-level supervisors
– plan.
4. The efficiency of resulting plans
 Plans should not only be effective, but also efficient. The effectiveness of a plan relates to
the extent to which it accomplishes the objectives.
 The efficiency of the plan, however, means its contribution to the purpose and objectives,
offset by the costs and other factors required to formulate and operate it.
 Plans are efficient if they achieve their objective at a reasonable cost when such a cost is
the measure not only in terms of time, money or production but also in terms of
satisfaction of the individual or group.
 Both conceptual and practical reasons are put forward in support of planning. Two
conceptual reasons supporting systematic planning by managers are limited resources
and an uncertain environment.
4 Types of Plan
1. Hierarchical Plans:
These plans are drawn at three major hierarchical levels, namely, the institutional, the
managerial and the technical core. The plans for these three levels are;
 Strategic plan.
 Administrative or Intermediate plan.
 Operational plans can also be categorized according to frequency or repetitiveness
of use.
2. Standing Plans:
Standing plans are drawn to cover issues that managers face repeatedly. Such a standing
plan
may be called a standard operating procedure (SOP). Generally, five types of standing
plans are used;

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  Mission or purpose
 Strategy
 Policies
 Rules
 Procedures
3. Single-use Plans:
Single-use plans are prepared for single or unique situations or problems and are normally
discarded or replaced after one use. Generally, four types of single-use plans are used.
These are;
 Objectives or Goals
 Programs
 Projects
 Budgets
4. Contingency Plans:
Contingency plans are made to deal with situations that might crop up if these
assumptions turn out to be wrong. Thus contingency planning is the development of
alternative courses of action to be taken if events disrupt a planned course of action.

Appropriate Planning Techniques and Tools in Business Decision-making

1. Marginal Analysis

Marginal analysis weighs the benefits of an input or activity

against the costs. This type of analysis helps business
leaders determine whether and activity or input is
providing the maximum return-on-investment
(ROI). Marginal analysis is an effective tool for decision-
making because it takes preferences, resources, and
informational constraints into account, so managers can
make more optimal decisions based on this information.
To conduct a marginal analysis, you need to change a
variable, such as the quantity of an input you use, or the volume of output you produce. Once
you’ve identified that variable, determine what the increase in total benefits would be if one
more unit of the control variable were added. This is considered the marginal benefit of the
added unit. Likewise, the marginal cost of the added good should also be calculated. The
marginal cost is – you guessed it – the increase in total cost if one more unit of the control
variable were added. If the marginal benefit outweighs the marginal cost, then there is a “net
benefit” and the marginal unit of the variable should be added.
2. SWOT Diagram

When you are planning to make a significant change in your

business, SWOT diagrams can help you break down the situation
into four distinct quadrants:
 Strengths: What does your company do better than its
competitors? Think of both internal and external strengths
that you possess.
 Weaknesses: Where can your company improve? Try to take
a neutral approach and consider what factors may be hurting
your business.

 Opportunities: Look at your strengths and think of how you can leverage them to create
new openings for your business. Also consider how eliminating a specific weakness could
open you up to a new opportunity.
 Threats: Determine what challenges stand in the way of achieving your goals. Identify the
primary threats to your organization.
A SWOT Analysis can help you identify the forces that influence a strategy, action, or initiative.
This information can then be used to guide you in the right direction and support your business
decisions. To get the full picture, it’s essential to take multiple viewpoints into account. When
you enlist the help of other team members and stakeholders, it is easier to spot trends, patterns,
and connections between the quadrants. Taking a collaborative
approach can also offer deeper insight into potential opportunities
and threats you may not have been able to identify alone.
3. Decision Matrix

When you are dealing with multiple choices and variables, a decision
matrix can bring clarity to the disarray. A decision matrix is similar

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to a pros/cons list, but it allows you to place a level of importance on each factor. That way, you
can more accurately weigh the different options against each other.
How to Create a Decision Matrix:
 List your decision alternatives as rows
 List relevant factors as columns
 Establish a consistent scale to assess the value of each combination of alternatives and
factors
 Determine how important each factor is towards making your final decision and assign
weights accordingly
 Multiply your original ratings by the weighted rankings
 Add up the factors under each decision alternative
 The option that scores the highest wins
Decision Matrix Example:
In this example, a company is trying to make a decision about which vendor they should work
with for an upcoming project. The factors they are using to evaluate each option are: capabilities,
reputation, reliability, and price. They care more about the capabilities and price than the
reputation and reliability of the vendor, so they weighted the importance of those factors
accordingly. Based on the results from their decision matrix, they should be able to confidently
decide on Vendor 2.

4. Pareto Analysis
The Pareto Principle helps in identifying changes that will be the most
effective for your business. The principle is named after economist
Vilfredo Pareto, who found that an 80/20 distribution occurs regularly
in the world. In other words, 20% of factors frequently contribute to
80% of the organization’s growth.
An example of this principle applying to business management would
be 80% of sales coming from 20% of your customers. A business can
leverage the Pareto Principle by identifying the characteristics of the
top 20% of their customers and finding more customers like them.
When you can identify what small changes will make the largest
impact, you are able to prioritize the

decisions that have the highest level of influence. This allows managers to dedicate their energy
and resources on what will actually move the needle for their business.
The Next Step: Reviewing Your Decision & Making Adjustments

Once you’ve determined which techniques best aid in

your decision-making, you can’t stop there. Being able to
consistently make the right decisions is too important. In
fact, decision effectiveness is 95% correlated with
financial performance, so it is critical for managers to
keep track of the decisions they make and how they turn
out. Decision-making is an on-going process, and the best
way to keep up is to use data dashboards.
Dashboards allow managers and executives to get
information from multiple data sources in one system, so
they can see how the business is performing against their goals. Plus, company data can be
accessed in real-time, so managers can make quick decisions and adjustments based on what is
working and what is not. Interested in seeing how a dashboard can help you make more
informed, objective decisions?

 WHAT’S MORE

ACTIVITY 2:
Direction: Differentiate the four types of planning. (20 points)

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ACTIVITY 3:
Direction: Identify the techniques in business decision-making and give its meaning and
importance in making a business.
Techniques in meaning importance
business decision-
making

ACTIVITY 4: KWL Chart

Know What Learn

ASSESSMENT

ACTIVITY 5: Identification
Direction: Read the question carefully and write your answer in the space provided.
________________1. It is the process by which managers establish goals and define the methods by
which these goals are to be attained.
________________2. This technique helps in identifying changes that will be the most effective for
your business.
________________3. This analysis can help you identify the forces that influence a strategy, action,
or initiative. This information can then be used to guide you in the right
direction and support your business decisions.
________________4. It helps business leaders determine whether and activity or input is providing
the maximum return-on-investment. What type of analysis is this?
________________5. It is similar to a pros/cons list, but it allows you to place a level of importance
on each factor.
________________6. These plans are drawn at three major hierarchical levels, namely, the
institutional, the managerial and the technical core.
________________7. ___________ enquirers about organizational goals and involves decision
making about desired ways and means to achieve goals.
________________8. This are prepared for single or unique situations or problems and are normally
discarded or replaced after one use. What type of plan is this?
________________9. These plans are made to deal with situations that might crop up if these
assumptions turn out to be wrong.
________________10. These plans are drawn to cover issues that managers face repeatedly.