PLANNING PREMISES

One of the essential and often overlooked steps in effective and

coordinated planning is Premising.

Planning Premises are the anticipated environments in which the plans
are expected to operate.
Planning premises include assumptions or forecasts of the future and
known conditions that will affect the course of the plans.
Premising is recognition that plans operate in an environment both
internal and external to the enterprise.
It thus emphasizes the long known fact that management is an open-
system approach.
It is not enough-for the Manager to be responsive to the present
environment.
s Plans operate in the future an effective manager should anticipate the
environment in which his plan will operate and forecast those elements in
the environment! which will affect his plans. ".g.# $hanges in
%echnology! &ocial conditions! Political factors etc.
It is sometimes said! the successful manager is not one who 'ust responds
to changes as they occur! but one who will rather forecast change.
It is often also said that a successful manager is not one who dances to
others tunes! but makes others to dance to his tunes by his ability to
foresee changes in the environment much before they occur.
%his does not mean that everything can be predicted.
%here are in addition short and long range! "conomic! %echnological!
&ocial and Political and even ethical changes that will affect what will or
can be done in the near or far future.
(
Planning Premises depending on the degree of Predictability
)uite Predictable *easonably Predictable +npredictable
".g.# Population ,rowth, ".g.# Price -evels! ".g. &eptember ll
,ross .ational Product changes Population &hift and ttack on /%$!
$ertain %echnological /ar on Ira0 "tc.
%ypes of Planning Premises#
"xternal Premises
,eneral "nvironment Product Market 1actor Market
"conomic %echnological &ocial Political
Internal Premises are those! which are absolutely under the control of
management like investment in plant and machinery! inventory etc.

%angible Intangible
/hich can be 0uantified which cannot be 0uantified
and seen or felt.
2
Degree of controllability

+ncontrollable &emi $ontrollable $ontrollable
".g.# ,rowth of Population ".g.# 1irm ssumptions of -argely decided
1uture price levels! Political the share of the market. 3y company
"nvironment! 3usiness$ycles %ype of -abour %urnover! Management.
Types of Forecasting
"conomic 1orecasting#
1airly reliable economic! premises can be obtained from the forecasts of
employment! productivity! national income! and gross national income
that are available to the planners.
Most! economic forecasts are derived from calculating gross national
product.
,ross national product is calculated by forecasting population!
productivity increases! and unemployment percentage and average
workweek available.

3ut problems occur in estimating such components of ,.P and
government purchases! personal consumption expenditures! business
fixed and inventory investments! residential construction and other
investments.
fter studying broad forecasts of national and regional economic trends!
a company should translate them into their impact on its industry and on
itself.
%his re0uires two basic estimating procedures. One is the 4%op-5own
procedure6 and the other is the 43ottom-+p Procedure6.
7
Technological Forecasting
One of the more interesting aspects of premising in the recent years is the
keen interest being shown on the %echnological 1orecasting.
&ince the pace of %echnological changes are so rapid and drastically
affecting the products and processes of several firms! the firms are
emphasizing more on regular and complete %echnological forecasts
affecting their industry. ".g.# *ate of product obsolesces is very high in
software industry and in steel where the cost of production per tonne of
steel has drastically come down by raising the appropriate technology.
%he 1ollowing are some of the commonly used methods for forecasting
technological changes#
Opportunity Oriented %echni0ues#

%his %echni0ue looks at the future and raises the 0uestion as to whether
a certain product may be made obsolete by a new development.
If yes! is there any %echnological breakthrough that might be expected
which would solve a problem seen to exist in the development of a certain product.
".g.# 8$* has become obsolete with the advent of 8$5 and 585. &imilarly
traditional cameras are on decline with the advent of 5igital $ameras.
One might forecast when it would be possible to economically
desalinate the seawater to overcome the drinking water problem.
,oal Oriented %echni0ue#
In this case a decision is made to reach a certain goal and then analysis is
made to identify the technological needs re0uired to achieve the goal. ".g.# %he +&
deciding to put the man onto the moon in (9:;.
<
5elphi %echni0ue#
&ocial and political 1orecasting#
%his has become increasingly relevant and important with the process of
-P,.
If Mc5onald wants to introduce its product in the Muslim countries! it
has to think twice about it because the culture doesn=t allow the people to consume
pork.
&imilarly political factors also have a significant impact on the
commercial policies like the labor laws! income tax policies etc.
&ales 1orecast#
One of the ma'or planning premises in the typical business enterprise is the
sale forecast.
&ales forecast is very important because it sets the framework on which
most internal plans are constructed and it must be regarded as the dominant
Planning Premise of an "nterprise.
Methods of &ales 1orecasting


>ury of "xecutive &ales 1orce +sers "xpectation +sers Pro'ection &tatistical
Opinion Method $omposite Method of Past sales Methods
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