The following points highlight the three main types of plans that are made to achieve the objectives through the company policies. The plans are:- 1. Strategic Plans 2. Intermediate-Range Plans 3. Short-Range Plans.
Type # 1. Strategic Plans :
They determine both the major objectives of an organisation and the policies and strategies to achieve those objectives. Strategic plans are of long-run in nature and give general guidance to the organisation. The subject matter covered includes profits, pricing, capital expenditures, production, marketing, personnel and others. These high-level plans, even if not in written forms, exist in the thinking of corporate-level officials.
A typical ‘Strategic Plan’ for a firm looks like:
Type # 2. Intermediate-Range Plans :
They are detailed plans for carrying out and coordinating the functions of a firm. These plans usually cover a three-to-five-year period and are mainly concerned with implementing the strategic plans. For example, the strategic plan may earmark a certain growth rate in the organisation, and the intermediate plan will provide the means, through either acquisition or merger, and new product development, to fulfill this requirement.
Type # 3. Short-Range Plans :
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These are actually one-year plans for carrying on the actual work. They are very detailed and include some of the following : inventory replenishment, production schedules, advertising budgets, despatching schedules, distribution network, zone-wise or sales person-wise quotas, etc.
In developing plans to accomplish objectives, the management must continually analyse:
(i) The organisation’s mission,
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(ii) The objectives and policies,
(iii) the external economic/social/political/cultural conditions, and
(iv) The outlook for the organisation and its overall present position.
It is important to note that each of these factors is constantly changing, causing the previous planning to become partially or wholly inadequate.
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The changing external environment reveals the importance of population growth, the changing patterns of distribution, increasing education and skill levels, the rapid growth rate of technology, new production techniques, and the regulatory measures of the government.
The industry outlook determines the individual firm’s future existence. A declining industry will not continue supporting healthy firms. The nature of an industry’s product or service can greatly affect its demand and thus, the company’s plans. A demand for a product or service is influenced by the number of uses it has, its durability, the number of substitutes it has, and the type of customers who seek to use it.
The cost factor of the industry also needs analysis. Labour and material costs, taxes, and capacity of the industry have a major influence on the profitability of a firm. The analysis of the industry outlook will indicate the environment in which a company must conduct its operations.
The financial information needed to develop plans and forecasts is the firm’s position within the industry and its ability to capitalise on future developmental strategies. Key factors to consider would be the reputation of the company and its products/services, the ratio of company sales to industry sales, the efficiency of the equipment and plant, and the ability of the management.
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Timing and co-ordination:
Timing and co-ordination of plans—whether strategic or intermediate or short- range—are also important. Timing means that all the things, the plan calls for, happen when they are supposed to happen. Co-ordination means that all of the units in the organisation that have a role in the plan are working together, much as a football team must do in making a play, work, or a company of actors must to insure a successful performance.