It’s the basic process by which we use to see our goals and determine the means to achieve them. It bridges between where we are and where we want to go. It involves setting missions, objectives and actions to achieve them.


This specifies the future conditions that a manager hopes to achieve.

These are means or specific activities planned to achieve the objectives.

A manager cannot plan without giving consideration to the future events and factors that affect what will be possible to accomplish.

These are constraints on the course of action.

By the end of the topic you should be able;

  • To state the characteristics of planning
  • To discuss the importance of planning
  • To highlight the steps in the planning process
  • To explain by use of examples the methods that are used in the forecasting

A plan specifies all kinds and amounts of resources required, as well as the potential sources and allocations of those resources to causes of action.

A plan includes ways and means to implement the intended actions. It involves the assignment and direction of workers to carry out the plan.


1. To co-ordinate the efforts
The work of individuals and groups must be co-ordinated and planning is an important technique for achieving the co-ordinated effort.

2. Preparing for change
Effective plan allows room for change by preparing those to be affected by the change and those to implement the changes

3. Developing performance standards / setting
As plans are implemented, specific set targets in the plans must be realized if performance is to be rated as good.

4. Developing managers
Planning involves high levels of intellectual activities because those who plan must be able to deal with abstract and uncertain ideas and information. Therefore, they must think about the present and the future and show their relationships. That enhances their analytical ability.

5. A source of funding
Plans are used by the donors and other financiers to determine the projects that they are willing to finance. They are therefore used by organisations to source for funding. Better plans easily attracts the funding.

6. Budgeting
Individual department will normally prepare their departmental plans which has the costing part, which ultimately can be taken by the organisation in order to prepare the master budget. This is realized by adding up the budgets of different departments within
the organisation


1. Take time to plan don’t be in a hurry;
Enough time should be taken to carry out an accurate situation analysis so that all factors are considered.

2. Planning can be top down or bottom up;
Managers can formulate plans and pass on to the workers to implement them (top down).

3. Communication
Communication be done to those who are to implement the plans and those to be affected by the plans. Communication should be done at the earliest possible time.

4. Flexibility
Plans should be flexible so that changes in the environment can be considered to ensure success of the plan.

5. Evaluation
A decision must be taken on how and when evaluation is to take place. If the plan is faced with hitches then it should be revised.


1. Strategic plans
These are long range plans made by top level managers and give a guideline to other plans within the organization. They are the supreme plans within the company

2. Operational plans
These are plans made by departmental mangers and affects day to day running of those departments. They are derived from strategic plan. They are routine like plans which are made on daily basis

3. Policies
These are general statements or understanding that guides the thinking in decision making. They define an area within which a decision is to be made and that it must be consistent to the objectives. They are the guidelines which are strictly followed for
uniformity and consistency of the decisions taken and the actions undertaken

4. Procedures
These are plans that establishes a required method of handling future activities. They are chronological sequence of required actions.

5. Budget
It is a plan statement for a given period of time in future exposed in financial terms. It shows revenue and expenditure to be undertaken. Budget are never violated easily without the management’s intervention


1. Environmental analysis;
This is where an accurate examination of the organization strengths and weaknesses is appreciated. This assists in formulation plans that will be achievable.

2. Setting objectives
This specifies the expected results and indicates the end points. It shows where we want to be and what we want to accomplish and when.

3. Consider the planning premise
This is where the environment or place where the plan is to be executed is prepared. This helps to reduce implementation problems. This includes acquiring of extra space and specialized equipments

4. Evaluate the alternative courses
This is where an evaluation to identify the most fruitful, applicable, cost effective and less risky alternatives are taken.

6. Selecting a course of action
This involves making a choice on which course of action to take. Is where the plan is adopted.

7. Formulate the supporting plans
This involves getting items and facilities to help in the implementation of the plan. It includes buying of equipment materials, hiring and training of workers e.t.c.

8. Preparation of the badges
This shows the overall costs for the plan where the resources will be got and how they will be allocated or used.


1. Planning is costly and time consuming process. Time is required when forecasting is done but sometimes there is limited time and the outcome is hard to implement.
2. Its a future oriented activity based on forecast. There is unreliable and inadequate data on the future thereby making planning difficult.
3. Planning becomes rigid due to internal inflexibility which in turn reduces personal initiative and freedom and causes delay in decision making. Internal inflexibility includes

  • Rigid policies
  • Procedures and limited resources.

4. External factors beyond the control of an organization affects its planning process the factors includes;

  • Government control and legislation
  • Technological changes
  • Trade unions pressure e.t.c.

5. Planning fails due to incorrect plans being formulated because of lack of commitment, delegation and excessive reliance on past experience.


1. Set realistic and achievable goals.
2. Communicate the assumption on which plans are formulated to all departments and people.
3. Encourage participation of all stake-holders so as to ensure their right commitment.
4. Ensure there is proper co-ordination of the plans.
5. Reconcile both short term and long term plans.
6. Encourage creativity in planning. Creativity helps to identify the best alternatives.
7. Consider the company’s financial position.
8. Reduce the level of internal flexibility so that changes in the environment can be considered.


This is where the focus is on one line of business. The strategy is used by firms to gain a competitive advantage through efficiency and specialization.

It is where a firm maintains one line of business for a long time because growth or expansion cause for an extra cost.


  • Vertical integration
    This is where one firm acquires another that is in the same business and process of production. If the acquired firm is a head in the process of production and nearer to the consumer the process is called forward vertical integration e.g. Kenya Breweries buys all restaurants so that they can be able to deal with the consumers. But if the acquired firm is behind in the process is called Backward vertical integration.
  • Horizontal integration
    This is where one firm buys another that is in the same industry and level of production e.g Mumias Sugar Company buying Sony Sugar Company.
  • Diversification strategy
    This is where a firm engages or starts producing other products to be able to minimize chances of making losses.
  • Mergers
    This is where two or more companies dissolve and come together to do business under a new name or identity.
  • Joint venture
    This is where two or more firms continue existing and doing their initial businesses but come together and starts a new common business under a new name.

This is where shareholders are given money for their shares at a higher rate by the company. Then later the company resales those shares at a very high price to raise capital.

This is the last option resort by companies if their survival is threatened and its not competing effectively therefore it lays off some workers.

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