Planning and Decision Making: Process, Types of Plans, Forecasting and Tools Questions

Question 1

Define planning.

Accepted Answer

Planning is deciding organisational objectives and future courses of action in advance to achieve those objectives.

Question 2

What is forecasting?

Accepted Answer

Forecasting is the process of estimating future conditions (like demand, prices or costs) to support planning.

Question 3

State any one type of plan.

Accepted Answer

A policy is a type of plan that provides a general guideline for decision making in recurring situations.

Question 4

What is a budget?

Accepted Answer

A budget is a quantified plan expressed in numbers (money, units or time) for a future period.

Question 5

What is decision making?

Accepted Answer

Decision making is the process of choosing the best alternative among available options to solve a problem or achieve a goal.

Question 6

State any one advantage of planning.

Accepted Answer

Planning provides **direction** by clearly stating what is to be achieved and how work should proceed.

Question 7

Explain the steps in the planning process.

Accepted Answer

Main **steps in planning** are:

1) **Setting objectives**: decide clear and measurable goals.
2) **Developing premises**: assumptions about the future (demand, price, resources).
3) **Identifying alternatives** and **evaluating** them for feasibility, cost and risk.
4) **Selecting the best plan** and preparing **supporting plans** (budgets, policies, schedules).
5) **Implementation and review**: communicate, allocate resources and revise based on feedback.

Flow (write/draw): Objectives → Premises → Alternatives → Evaluation → Selection → Supporting plans → Implementation → Review

Question 8

Differentiate between policy, procedure and rule.

Accepted Answer

Policy, procedure and rule differ in **scope** and **flexibility**:

| Basis | **Policy** | **Procedure** | **Rule** |
|---|---|---|---|
| Meaning | Guideline for decisions | Step-by-step method | Specific instruction |
| Flexibility | Relatively flexible | Fixed sequence | Very strict |
| Example | Credit to approved customers | Purchase order steps | Helmet compulsory |

So, policy guides thinking, procedure guides routine actions, and rules prescribe strict do’s/don’ts.

Question 9

Explain types of plans with examples.

Accepted Answer

Plans can be classified as:

- **Strategic plans** (top level): long-term direction, e.g., entering a new market.
- **Tactical plans** (middle level): departmental plans, e.g., quarterly marketing campaign.
- **Operational plans** (supervisory level): day-to-day plans, e.g., weekly production schedule.

Another simple classification is **standing plans** (policies, procedures, rules) and **single-use plans** (programmes, budgets) used for one project.

Question 10

Explain programmed and non-programmed decisions.

Accepted Answer

**Programmed decisions** are routine and repetitive decisions taken using **policies, rules and procedures** (e.g., sanctioning leave as per policy). **Non-programmed decisions** are new, unstructured and complex decisions requiring **judgement and creativity** (e.g., launching a new product or opening a new branch).

| Basis | Programmed | Non-programmed |
|---|---|---|
| Nature | Routine | Novel/unique |
| Guide | Rules/policies | Managerial judgement |
| Risk | Lower | Higher |

Managers face both types, depending on the situation.

Question 11

Explain standing plans and single-use plans with examples.

Accepted Answer

**Standing plans** are plans used repeatedly for recurring situations, while **single-use plans** are prepared for a specific objective and are used only once.

| Basis | Standing plans | Single-use plans |
|---|---|---|
| Nature | Repetitive | One-time |
| Examples | **Policies**, **procedures**, **rules** | **Programmes**, **budgets**, projects |
| Purpose | Standardise routine decisions | Achieve a specific project goal |

Example: A company’s **leave policy** is a standing plan, whereas a **budget for a product launch** is a single-use plan.

Question 12

Explain decision making under risk using a decision tree (brief).

Accepted Answer

A **decision tree** is a tool to make decisions when outcomes are uncertain. It shows **alternatives**, **possible outcomes** and (if given) **probabilities/payoffs**.

**Steps (brief):**
- List decision alternatives (A, B).
- For each alternative, list possible outcomes (success/failure).
- Assign probability and payoff (if provided).
- Compare expected results and choose the best option.

Flow idea (write/draw):
Decision (A/B) → Outcomes (O1/O2) → Payoff → Choose

Question 13

Explain the concept of bounded rationality and 'satisficing'.

Accepted Answer

**Bounded rationality** (Herbert Simon) means managers cannot be perfectly rational because they face **limitations** of time, information and human capacity. Therefore, instead of searching for the absolute best (optimal) decision, they often choose a decision that is “good enough”. This is called **satisficing**.

### Why rationality is bounded
- **Limited information**: not all alternatives and consequences are known.
- **Time pressure**: decisions must be taken quickly.
- **Cognitive limits**: humans cannot process unlimited data.
- **Uncertainty**: future conditions can change.

### Satisficing (meaning)
- Set minimum acceptable criteria.
- Choose the first alternative that meets those criteria.

| Approach | Key idea | Result |
|---|---|---|
| **Optimising** | Find the best possible option | Takes more time/cost |
| **Satisficing** | Choose a satisfactory option | Faster, practical |

### Example
A manager selects a supplier that meets quality, price and delivery standards instead of spending months searching for the “perfect” supplier.

Question 14

Explain forecasting methods. Give at least one qualitative and one quantitative method.

Accepted Answer

**Forecasting** estimates future conditions to make planning realistic. Methods are broadly:

### 1) Qualitative methods (judgement-based)
- **Delphi technique**: experts give forecasts in rounds; responses are summarised and refined until a reasonable consensus is reached.
- **Jury of executive opinion**: managers collectively forecast based on experience.

### 2) Quantitative methods (data-based)
- **Time series (moving averages)**: uses past sales/demand data to predict future demand.
- **Regression analysis**: estimates future values using relationships between variables (sales vs income).

| Method type | When useful | Example |
|---|---|---|
| **Qualitative** | When data is limited/new product | Expert opinions |
| **Quantitative** | When historical data exists | Moving average |

Good forecasts reduce uncertainty, but managers must review them regularly as conditions change.

Question 15

Explain decision-making process and show it as a flowchart.

Accepted Answer

The **decision-making process** is a systematic method of choosing the best alternative.

### Steps
1) **Identify the problem** (define clearly).
2) **Collect information** (facts, constraints, objectives).
3) **Develop alternatives** (possible solutions).
4) **Evaluate alternatives** (cost, benefit, feasibility, risk).
5) **Select the best alternative**.
6) **Implement the decision**.
7) **Feedback and follow-up** (check results and correct if needed).

### Flowchart (write/draw in exam)
Problem identification → Information collection → Alternatives → Evaluation → Choice → Implementation → Feedback

A good decision is both **effective** (solves the problem) and **practical** (fits resources and constraints).

Planning and Decision Making: Process, Types of Plans, Forecasting and Tools

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