The process that involves planning in business management is not only a complicated one but also has a variety of types. All these types of plans fall under different categories and serve different purposes.
In this article, we’ll look at the different types of planning based on their categories.
Classification of the Types of Planning
1. Classification on the Basis of Hierarchy or Levels in the Organization
a) Strategic Plan
Strategic Plans involve decisions about an organization’s long-term goals such as its growth and survival etc. These are made keeping in mind the overall organizational objectives.
It is a high-level planning done by top-level management in the organization. This type of planning is concerned with the judicious allocation of resources for achieving all the goals in the long run.
Before planning a strategy, the organization needs to take a look outside and be aware of the economic conditions, and other environmental factors, which can either provide an opportunity for growth or pose a threat. It also requires looking inside to find out weaknesses and strengths.
b) Tactical Planning
Tactical planning is taken care of by mid-level management. It involves breaking down broad strategic goals and objectives into specific and more manageable tasks that can be completed within a shorter time period, maybe ranging from a few weeks to a few months.
Tactical plans typically focus on divisional or departmental activities like marketing, production, finance, personnel, etc.
c) Operational Planning
Operational planning is for short time periods. It is required for day-to-day activities providing the organization with details to clearly identify the who, what, when, why, and where of all parties involved.
Operational plans are created by lower-level management such as unit supervisors and foremen. They are the most specific plans that help businesses run smoothly.
2. Classification on the Basis of Use
a) Single-Use Plans
Single-use plans are made for a specific objective or purpose. They outline the plan of action employees can take to achieve a specific project. Once employees reach the final objective of the project, the plan no longer exists and gets discarded.
Different types of Single Use Plans are – Programmes, Budgets, and Strategies.
b) Standing Plans
Standing plans are created to deal with situations that occur repeatedly. This type of plan gives broad guidelines for repetitive activities, and once developed might be implemented in similar situations in the organization.
They especially help lower-level managers take care of recurring activities and routine decisions while top-level managers can concentrate on important strategic issues. Examples of standing plans are objectives, rules, policies, and procedures.
3. Classification on the Basis of Flexibility
a) Flexible Plan
A flexible plan can be changed according to the time and situation. It is not specific in terms of its procedures and allocation of resources. Such plans only provide guidelines to the members, and the members can modify the plans according to their facility and requirements.
b) Specific Plan
A specific plan, on the other hand, is developed for a particular department or unit. It clearly guides the members of an organization about the tasks or activities to be performed and resources to be used.
4. Classification on the Basis of Time
a) Short-term Plans
Short-term plans are usually made for specific functional areas. It involves looking into the immediate future of the company. They are related to the operational goals of the enterprise.
For example – plans devised to retain or promote sales, or to train workers so that labor turnover rate is reduced.
These plans are normally made for a period of 1-2 years.
b) Medium-term Plans
These plans are generally made for a period of 2-5 years.
These are the supporting plans that help in achieving long-term goals. These plans are related to the tactical goals of the organization.
For example – plans made for analyzing the impact of advertisement campaigns for the expansion of business into new markets.
c) Long-term Plans
These plans are normally made for a period of 5-15 years. These involve making plans for the long-term future of the business such as long-term resource allocation and strategies for market and technological advantage.
Long-term planning provides businesses ample time to not only make plans and put them in place but also to revise their long-term plans periodically so that external changes can be reflected in the business and industry. They aim to achieve the strategic goals of businesses.
For example – investment in fixed assets that generate returns over a long period of time.
5. Classification on the Basis of Functional Areas
a) Production Plans
Production plans set the targets of production. They are designed in accordance with the production policy of organizations.
Firms may produce throughout the year, pile inventories, and sell them only during peak season; or produce only during the peak season when there’s a demand. In the latter case, they can diversify into other areas. This will keep their plant and machinery occupied during the slack season.
b) Marketing Plan
These plans are designed by marketing managers. These plans help in selling products and/or developing new products to increase share of the market. These also help to plan for sale either in cash or credit; if it decides to sell on credit, then it determines the credit terms and policies for the sales department.
Production and marketing plans together aim to satisfy consumer needs and are interdependent. Therefore understanding consumer buying behavior is important.
c) Financial Plan
Financial planning deals with the preparation of a budget. Finance managers prepare this plan for raising and utilizing financial resources effectively.
Financial plans to meet the fixed and working capital requirements of the firm. Finance managers also plan for financial cuts during recessionary economic conditions and on the other hand, raise additional funds during the boom.
Financial planning generally implies estimating the expenses an organization will incur, and the revenues it hopes to earn.
d) Human Resource Plan
These plans forecast the nature and size of human resources required by the business to achieve its strategic and other goals. They forecast not only quantitative (how many people are needed) but also qualitative (what type of people are needed) human resource needs of the organization.
These also plan for ways, how people can be developed so that they can contribute to organizational goals effectively.
The Closing Lines
These were the different types of planning based on different classes. All businesses do not need all types of plans as every business is different in their nature. Some businesses might work on only one plan, while some need more than one.
But the type of plan or plans needed by each one will vary from business to business.
