The process of planning involves taking certain steps in stages. The steps are explained as follows:
(a) Setting objectives. The first step in planning exercises is setting the objectives, providing the rationale for undertaking various activities as well as indicating the direction of efforts. Moreover, objectives point to the end-result of planning activity.
(b) Establishing the planning premises. It consists of forecasting future conditions and events which are likely to have bearing on the pursuit of goals like market demand for goods, cost of raw materials, state of technology, intensity of competition, government policies, interest rates, tax rates, etc. Such forecasts give an insight of how the future is likely to behave. Certain assumptions about the conditions expected to prevail are derived from the forecast. These are known as the planning premises which form the base of plans.
(c) Identifying alternative courses of action. When the forecasts are available and premises are established, a number of alternative courses of action have to be considered.
(d) Evaluating alternative courses. Planning requires that each alternative should be evaluated taking into account the relevant facts and the **** and cons of each alternative.
(e) Selecting and alternative. After evaluation of various available alternative courses, the time comes for selecting the best plan and to implement it practically. The plan will be justified best in terms of feasibility, profitability and with least adverse outcomes. Sometimes a firm may also go for combination of plans instead of selecting one best course.
