ABFM CAIIB notes – Unit 2

Module A : UNIT 2 – Planning

Definitions of Planning

Planning is the process of engaging in thoughtful discussion before undertaking a task, which entails engaging in in-depth contemplation about that task and going into all the details meticulously to be ready with an execution and implementation plan, to save both effort and time.

Process of Planning

The process of planning is based not only on the finances, time frame, infrastructure, and resources, but also since decisions and particular or directional

• What is to be done?
• Where it is to be done?
• How it is to be done?
• When it is to be done?
• Who will execute?

plans, which might be strategical, tactical, or operational, are made based on those considerations.

Steps in Planning Process

1. Opportunity Analysis
2. Objective Establishment
3. Developing Planning Premises
4. Alternatives Identification
5. Evaluating Alternatives
6. Selecting the Best Alternative
7. Formulating Derivative Plan
8. Follow-up and Reviewing the Plan

Importance of Planning

• Helps Goal Creation
• Provides Direction
• Tackles Uncertainty
• Discards overlapping and wasteful activities
• Promotes Innovative Ideas
• Facilitates Decision Making
• Controlling

Advantages of Planning

1. Coordination of Various Activities
2. Optimisation of Resources

iii.        Inspirations and Responsibilities

1. Establishment of Execution Principles
2. Adaptability

Disadvantages of Planning

1. Forestalls Activity: that managers won’t have time to put their plans into action. It is sometimes referred to as “death by plan.”
2. Lack of Concern: it is possible that managers won’t be able to monitor the system’s progress or recognise shifts in the external circumstances.

iii.        Forestalls Adaptability: Even though well-laid plans have the potential to encourage adaptability, sometimes the opposite occurs. Middle and lower-level supervisors may have the mentality that they are required to stick to an arrangement no matter what, even if their experience demonstrates that the arrangement is not working.

1. Hinders Innovativeness: People working for the organisation may get the impression that they are required to carry out the activities outlined in the plans because only that is expected of them, discourages innovations

Management by Objectives

The phrase “management by objective” (MBO) was coined by Peter F. Ducker and first appeared in his book “The Practice of Management,” which was published in 1954.

Management by Objectives is the term given to the process that is used for goal planning and the establishment of clear parameters for those goals (MBO). The MBO technique, in its most fundamental form, refers to a procedure that involves the management and the employees working together to jointly establish, record, and then monitor the goals for a particular period of time.

Process of Management by Objectives (MBO)

MBO process:

• Assess performance achieved against goals set for the employee through frequent performance review meetings between the manager and the subordinate.
• Identify reasons for shortfall and give feed-back for improvement.
• Establish new goals and new strategies for the coming year.

Steps of Management by Objective Process

1. The first thing to do is either establish or alter the organisational goals for the whole company
2. The second step is to communicate to employees the goals and priorities of the organisation.
3. The third step is to encourage participation from the staff members in the process of setting individual goals.
4. The fourt step is to monitoring of the progress made by the staff members is the focus of the fourth step. objective.
5. The fifth step is to evaluate and then reward the progress that employees have made.

Components of Planning

1. Objectives / Goals
2. Policies/ Overviews

iii. Procedures/ Directions/ Rules

1. Programs/ Methods
2. Budgets/Funding
3. Time Schedule.

vii. Core values / Mission/ Vision

viii. SWOT Analysis.

1. Management.

Environmental Analysis

“Environmental Analysis” refers to the process of examining all of the factors, both internal and external, that have an impact on the performance of the organisation. This can be done both systematically and qualitatively.

Advantages of Environmental Analysis

1. Contributes to the accomplishment of goals
2. Identifies and analyses potential dangers
3. Helps understand the developments in the commercial environment
4. Creates awareness of impending dangers of every prospective opportunity
5. Makes predictions about the future
6. Helps recognition of potential dangers and potential benefits

PESTLE Analysis

The acronym PESTLE refers to the following six internal factors that can have an impact on your company:

1. Political
2. Economic
3. Social
4. Technological
5. Legal
6. Environmental

Steps in Pestle Analysis

PESTEL analysis involves three steps:

1. Identify the relevance of each of the PESTEL factors to the firm Politico-Legal Factors
2. Identify and categorize the information for each factor
3. Analyse the data and draw conclusions

Advantages of PESTLE analysis:

1. Cost effectiveness
2. Easy framework
3. Deep understanding d Development alertness
4. Opportunities exploitation

Internal Analysis

The internal environment of a company can be classified into the following broad categories, based on its resources and assets:

1. a) Physical resources like plant and machinery, technology, etc.;
2. b) Financial resources;
3. c) Distribution network;
4. d) Possession of strategic assets, such as access to raw material, locational advantage, regulatory protection, etc.;
5. e) Network/contacts with outside organizations (suppliers, customers, government, distributors, etc.);
6. f) Intangibles, like brand equity, goodwill, reputation, etc.;
7. g) Human resources-profile, skill, managerial competencies; and organizational structure and administrative system, culture and values, and employee motivation/relationship.

Tools of Internal analysis

1. GAP Analvsis: The Gap Analysis is a tool for conducting assessments that gives organisations the ability to analyse and identify internal weaknesses as well as performance deficiencies.
2. Strategy Evaluation: The process of analysing the outcomes brought about by the execution of a strategic plan is referred to as strategy evaluation. In the process of carrying out the evaluation, it is very useful and helpful to check that everybody understands the business strategy and works well with it.
3. SWOT Analysis: SWOT stand for- • Strengths Weaknesses Opportunities and Threats. The SWOT analysis is a useful model for conducting evaluations because it takes into account both internal and external factors simultaneously.

Contingency Planning

Contingency plans can be defined as alternative plans that can be put into effect if certain key events do not occur as expected.

A contingency plan is also defined as an action of designing to assist the company in responding to an event that may or may not occur.

Forecasting

The process of predicting or estimating the future based on the evidence from the past and the present is referred to as forecasting. The scope of forecasts may be comprehensive or limited.

• The process of forecasting gives knowledge about the possible occurrences of the future as well as the implications those events will have for the business.
• It is not possible for forecasting to lessen the complexities and unpredictability of the future. Having said so, it boosts the management’s confidence in their ability to make a decisive essential decision.
• Managers at different levels may be given the responsibility of making forecasts, or external or internal economists and statisticians may be employed for the task.
• Prediction serves as the foundation for premises.
• Since forecasting makes use of a wide variety of methods, another name for the discipline is statistical analysis.

Decision Making

Actual selection of one course of action, from among several alternatives, is called decision-making.

Decision-making is considered to one of the most prominent functions of the management. Decision-making is not confined to planning alone but also embraces other aspects of management like organising, staffing, controlling etc. Because of several constraints faced by the organisation, the management must consider several alternatives and choose the one that is expected to be most appropriate for achieving the goals. Decision making is regarded as part of the planning process as it involves selection from among various alternatives.

Decision Making by Groups

Whenever a group of people makes decisions, the process becomes more comprehensive compared to the way decisions are made by individuals. Whether a particular decision is to be made by an individual or a group depends on the policy of the organisation and thinking of top management. Before the task is assigned to a group to decide on a particular matter, the exact scope of the group’s authority to make that decision, should be clearly spelt out.

NOTE: 

Dear CAIIB Aspirants,

These notes are a part of 2024 CAIIB Video library course of ADVANCED BUSINESS & FINANCIAL MANAGEMENT  (ABFM)  by Motivational Banker. These notes are intended to help you prepare better for your CAIIB exam.

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