Steps in the planning process

Planning is not a random process but one that generally follows certain steps. However the steps vary depending on the nature of the plan i.e. whether major or minor. In an exam situation always use an example to illustrate the planning process such as plan to buy company car, plans to introduce computers etc.

Step 1:    Identification of opportunities

This step includes a preliminary look at possible future opportunities and deciding what the strengths and weaknesses of the organization are. The manager must have a careful scan of competition, customers, and the external environment.

Step 2:    Establishing objectives

Here the manager must answer the question of "where the organization wants to go, how and when to get there". Objectives must be established for the entire organization and then for each unit.

Step 3:    Consider planning premises

Need to establish in what environment internal or external the firm's plans will operate. Questions like what kind of markets will there be? what quantity of sales? what prices? costs? wage rates? tax rates and policies. In premising the manager establishes and obtains agreement to utilize and disseminate critical planning premises, which are forecast data of factual nature applicable to the organizations plans, laws and policies.

Step 4:    Determine alternative courses

The alternative courses of action should be determined. For each plan there can be several and different ways of approaching the objectives.

Step 5:    Evaluate the alternatives

The alternative courses should be examined and the strengths and weaknesses determined in the light of the objectives. The risks and returns involved in each alternative should be examined.

Step 6:    Select one course of action

This is the point of decision making, deciding which out of the alternative course of action should be selected for adoption.

Step 7:    Formulate derivative plans

To support the basic plan, some derivative plans are required - for example most plans may go with the hiring of staff and this needs other smaller plans.

Step 8:    Numberise the plans by budgeting

The plans must be given meaning by converting them into budgets, for example by showing the incomes, costs and expenses to be expected. Budgets when well formulated become important standards against which planning progress can be measured.