Planning Class 12 Business Studies: Process, Types of Plans and Board Answers

What Planning is about

Weightage: This chapter shares 14 of the 80 theory marks with Organising.Source: CBSE Business Studies (054) syllabus 2026-27, course structure (marks are printed once per group of units)

In real board papers: asked in 2 of the 2 board papers we hold (2026 to 2026), on average 7 marks per paper. See the questions

Key concepts

Importance of planning

NCERT section Importance of Planning

1. Provides directions: states in advance how work is to be done, so everyone knows the goal and the way.
2. Reduces the risks of uncertainty: managers anticipate changes and plan for them, though risk cannot be eliminated.
3. Reduces overlapping and wasteful activities: activities of departments are coordinated, and useless or duplicate work is avoided.
4. Promotes innovative ideas: as the first function, it gives scope for new ideas and creative thinking.
5. Facilitates decision making: the manager evaluates alternatives and picks the best.
6. Establishes standards for controlling: goals set by planning are the standards against which actual performance is measured; without planning there is no controlling.

Worked example

Suppose a company sets a target of selling 2,000 air coolers a month, and later compares actual sales with this figure to see where it falls short. Which point of importance of planning is shown? Explain. (3 marks)

Try it first, then show the solutionSolution

1. Point: planning establishes standards for controlling. (1)
2. Explanation: planning sets goals, which become the standards for measuring actual performance. (1)
3. Link: 2,000 coolers is the standard; comparing actual sales with it is controlling, which would not be possible without the plan. (1)

Answer: Planning establishes standards for controlling.

Features of planning

NCERT section Features of Planning

1. Focuses on achieving objectives: plans are made to reach specific goals.
2. Primary function: it lays the base for all other functions (organising, staffing, directing, controlling are done within the plan).
3. Pervasive: needed at all levels and in all departments, though its scope differs (top: overall plans; middle: departmental; supervisory: day-to-day).
4. Continuous: plans are made for a period; when it ends, new plans follow.
5. Futuristic: looks ahead to meet future events to the organisation's best advantage; it relies on forecasting.
6. Involves decision making: choosing among alternatives; with no alternatives there is no planning.
7. Mental exercise: needs foresight, intelligent imagination and sound judgement (thinking before doing).

Worked example

Explain why planning is called (a) pervasive and (b) futuristic. (4 marks)

Try it first, then show the solutionSolution

1. (a) Pervasive: planning is required at all levels of management and in all departments. (1)
2. Its scope differs: top management plans for the whole firm, middle for departments and supervisors for daily work. (1)
3. (b) Futuristic: planning looks ahead to prepare for future events to the firm's best advantage. (1)
4. It is based on forecasting, e.g. forecasting next year's sales to plan production. (1)

Answer: Pervasive: done at all levels; futuristic: looks ahead using forecasts.

Limitations of planning

NCERT section Limitations of Planning

1. Leads to rigidity: once a plan is fixed, managers may not be free to change it even when needed.
2. May not work in a dynamic environment: the environment changes fast and plans cannot foresee everything.
3. Reduces creativity: middle and lower managers mostly carry out plans made by top managers, so they have little freedom to innovate.
4. Involves huge costs: time and money are spent on collecting data, studies and expert advice.
5. Time-consuming: preparing plans may take so long that little time is left to implement them.
6. Does not guarantee success: success depends on proper implementation; a plan that once worked may fail in new conditions, giving a false sense of security.

Worked example

Suppose a phone maker's five-year plan assumed slow growth in demand for foldable phones. A rival's surprise launch changed buyers' tastes within months, and the plan failed. Which limitation of planning is shown? (1 mark)

Try it first, then show the solutionSolution

1. The environment changed faster than the plan could foresee.

Answer: Planning may not work in a dynamic environment.

Planning process

NCERT section Planning Process

1. Setting objectives: decide what the organisation wants to achieve; objectives must be clear and given to all departments.
2. Developing premises: assumptions about the future (forecasts of demand, policies, interest rates, competition) on which plans are based; they must be the same for all managers.
3. Identifying alternative courses of action: list all the possible ways of reaching the objective.
4. Evaluating alternative courses: weigh the positive and negative points of each (cost, risk, returns, feasibility).
5. Selecting an alternative: choose the best (most feasible, profitable and with the fewest negative consequences); sometimes a combination.
6. Implementing the plan: put it into action, which involves the other functions (organising, staffing).
7. Follow-up action: monitor whether the plan is implemented and activities run as scheduled.

Worked example

Suppose the owners of an eco-friendly décor start-up decided their goal was to reach 500 customers in a year, then assumed that online demand for such products would keep rising. Identify the two steps of the planning process and state the next step. (3 marks)

Try it first, then show the solutionSolution

1. Deciding the goal of 500 customers: setting objectives. (1)
2. Assuming online demand will rise: developing premises. (1)
3. Next step: identifying alternative courses of action, e.g. selling through its own website, online marketplaces or a shop. (1)

Answer: Setting objectives and developing premises; next, identifying alternative courses of action.

Single use and standing plans

NCERT section Types of Plans

Single use plans are made for a one-time event or project that is not likely to recur; their duration depends on the project. Examples: programme, budget.

Standing plans are used again and again for activities that occur regularly; they bring uniformity and save time in routine decisions. Examples: policy, procedure, method, rule.

Basis	Single use plan	Standing plan
Use	Once, for a non-recurring situation	Repeatedly, for recurring situations
Examples	Programme, budget	Policy, procedure, method, rule
Life	Ends with the event	Long, revised when needed

Worked example

Suppose a school prepares a detailed plan for its golden jubilee celebration next year. Is this a single use or a standing plan? Give a reason. (1 mark)

Try it first, then show the solutionSolution

1. A jubilee happens once; the plan will not be used again.

Answer: Single use plan, because it is for a one-time event.

Types of plans: objective, strategy, policy, procedure

NCERT section Types of Plans

1. Objective: the end result the firm wants; ideally quantitative and measurable with a time limit, e.g. 'raise sales by 10 per cent this year'.
2. Strategy: a comprehensive plan for achieving objectives; it covers three dimensions: determining long-term objectives, adopting a particular course of action, and allocating resources for it. It takes the business environment into account (e.g. a marketing strategy for a new product: pricing, promotion, distribution).
3. Policy: a general statement that guides thinking or channels energies in a particular direction; e.g. a recruitment policy, a pricing policy, 'we sell only for cash'. It gives a basis for interpreting strategy.
4. Procedure: the routine steps, in chronological order, for carrying out activities; it details the exact manner of doing work, e.g. the steps for buying raw material or for admission.

Worked example

Suppose a company decides that 'all new staff will be recruited only through campus placement, giving preference to local colleges'. Identify the type of plan and say whether it is single use or standing.

Try it first, then show the solutionSolution

1. A general statement guiding recruitment decisions: policy. (1)
2. It will be used again and again whenever staff are hired: standing plan. (1)

Answer: Policy; a standing plan.

Types of plans: method, rule, programme, budget

NCERT section Types of Plans

5. Method: the prescribed way or manner in which a particular task is to be done; it is part of one step of a procedure. The best method saves time and effort, e.g. a method of training for new staff.
6. Rule: a specific statement of what is to be done or not done; there is no discretion and violating it may lead to a penalty, e.g. 'no smoking in the factory'. It is the simplest type of plan.
7. Programme: a detailed statement about a project that outlines the objectives, policies, procedures, rules, tasks, resources and budget needed for it, e.g. a programme for launching a new product line.
8. Budget: a statement of expected results in numerical terms (a plan quantified), e.g. a sales budget forecasting sales in units and rupees; it is also a control device.

Worked example

Suppose a hospital displays a notice: 'Visitors are not allowed in the ICU after 8 p.m. Violators will be fined.' Identify the type of plan and give one difference between it and a policy. (3 marks)

Try it first, then show the solutionSolution

1. Type of plan: rule. (1)
2. A rule is a specific statement of what must or must not be done, with no discretion and a penalty for violation. (1)
3. A policy is a general guideline that allows discretion in its application; a rule allows none. (1)

Answer: Rule; unlike a policy, a rule leaves no discretion.

Planning in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Importance of Planning
• Planning Process
• Types of Plans: Single Use and Standing Plans

Planning: key facts

Importance (6)

Directions, Uncertainty reduced, Overlapping reduced, Innovation, Decision making, Standards for controlling

Mnemonic 'DUO IDS'.

Features (7)

Objectives, Primary, Pervasive, Continuous, Futuristic, Decision making, Mental exercise

Planning is the primary function.

Limitations (6)

Rigidity, Dynamic environment, Creativity reduced, Huge costs, Time-consuming, No guarantee of success

Each is the flip side of a strength.

Planning process (7 steps)

1. 1.Objectives
2. 2.Premises
3. 3.Identify alternatives
4. 4.Evaluate
5. 5.Select
6. 6.Implement
7. 7.Follow-up

Premises are assumptions (forecasts).

Single use vs standing

Single use: programme, budget. Standing: policy, procedure, method, rule

Objectives and strategy are discussed as types of plans but are not usually classed as single use or standing in NCERT's list.

Three dimensions of strategy

Long-term objectives + course of action + allocation of resources

Strategy considers the business environment.

How the board asks Planning

The question patterns to expect, and the method that works for each.

Tricks to remember Planning

Short memory aids. Say each one aloud once, then use it on a question the same day.

• Importance: 'DUO IDS'

  Directions, Uncertainty, Overlapping, Innovation, Decision making, Standards for controlling.

  Use it when: Six points of importance.

• Process: 'Old Parrots Inspect Every Seed In Fields'

  Objectives, Premises, Identify alternatives, Evaluate, Select, Implement, Follow-up.

  Use it when: Seven steps in order.

• Types of plans: 'O SPP MRPB'

  Objective, Strategy, Policy, Procedure, Method, Rule, Programme, Budget: 'Our School Prefers Proper Manners, Rules, Programmes and Budgets'.

  Use it when: Listing the eight types.

• Procedure vs method

  Procedure = the staircase (all steps in order); method = how you climb one step.

  Use it when: Telling procedure from method.

Planning: board-level solved questions

Ordered from board level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section E style)

Read the situation, then answer every part. In the board paper this is a 4-mark question split into 1 + 1 + 2 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in Planning

The slips examiners see most often, and what to write instead.

• ✗Mistake: Confusing procedure and method

  Both describe how work is done.

  Wrong working

  The sequence of steps for processing a loan application is a method.

  Right working

  The sequence of steps is a procedure; the way one step is done (e.g. how documents are verified) is a method.

  ✓Do this: Procedure = chronological steps; method = manner of doing one task.

  Usually costs: 1 mark.

• ✗Mistake: Writing 'evaluating alternatives' when the case shows only listing them

  Steps 3 and 4 are close.

  ✓Do this: Listing options = identifying; weighing their pros and cons = evaluating.

  Usually costs: The identification mark.

• ✗Mistake: Calling a policy a rule

  Both guide behaviour.

  ✓Do this: A rule has no discretion and a penalty; a policy is general and flexible.

  Usually costs: 1 mark.

• ✗Mistake: Writing 'planning eliminates risk'

  Overstatement of 'reduces the risks of uncertainty'.

  ✓Do this: Planning reduces risk by anticipating changes; it cannot remove it, and it does not guarantee success.

  Usually costs: Accuracy mark.

• ✗Mistake: Explaining strategy without its three dimensions

  Students write only 'a comprehensive plan'.

  ✓Do this: Add: long-term objectives, a course of action and allocation of resources, keeping the environment in mind.

  Usually costs: 1 mark in a 2-mark part.

NCERT exercise guide: Planning

What each exercise in the NCERT chapter tests, how to approach it, and a question of the same kind solved step by step. Questions here are written in our own words.

Planning: previous year questions

• Asked in 2 of the 2 board papers we hold (2026 to 2026), on average 7 marks per paper; 7 questions in all, counting OR alternatives. In 4 of 4 sample papers.

Counted from the real papers on our previous year papers page, not estimated. Average marks are over every board paper we hold, with an OR pair counted once. Chapter tags are ours.

Solved board questions from Planning

Real questions from recent papers. Try each one first, then open our step-by-step solution with marks per step.

Every Planning question, by year

Practice questions on Planning

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · MCQBoard level

   Which of the following is a single use plan?
   (a) Policy (b) Rule (c) Budget (d) Procedure

   Hint

   Made for a period or a project.

   Answer

   (c) Budget

2. Q2 · 1 mark · Assertion-reasonBoard level

   Assertion (A): Planning is a primary function of management.
   Reason (R): Planning lays down the base for all other functions of management.
   (a) Both A and R are true and R is the correct explanation of A.
   (b) Both A and R are true but R is not the correct explanation of A.
   (c) A is true but R is false.
   (d) A is false but R is true.

   Hint

   Other functions are done within the plan.

   Answer

   (a)

3. Q3 · 1 mark · Very short answerBoard level

   Name the step of the planning process in which assumptions about the future are made.

   Hint

   Forecasts.

   Answer

   Developing premises.

4. Q4 · 3 marks · Short answerHarder board level

   State how planning (a) leads to rigidity (b) reduces creativity. (3 marks)

   Hint

   Fixed plans; top makes them.

   Answer

   (a) Once plans are fixed, managers may not be able to change them even when circumstances change, which makes the organisation rigid (1.5). (b) Plans are made by top management; middle and lower managers only implement them and are not allowed to deviate, so their initiative and creativity are not used (1.5).

5. Q5 · 3 marks · Case-basedHarder board level

   Suppose a manager of 'Sona Foods' compares three suppliers on price, quality and delivery time before deciding. Which step of the planning process is this? Explain it and state what comes next. (3 marks)

   Hint

   Weighing pros and cons.

   Answer

   Evaluating alternative courses of action (1): the positive and negative aspects of each option (here price, quality and delivery time) are weighed in the light of the objective (1); next is selecting an alternative (1).

6. Q6 · 4 marks · Short answerBoard level

   Explain (a) objective and (b) method as types of plans. (4 marks)

   Hint

   End result; manner.

   Answer

   (a) Objective: the end result the organisation wants to achieve; it should be measurable and time-bound, e.g. increase sales by 10 per cent in a year (2). (b) Method: the prescribed way or manner in which a particular task is to be done, as part of a step of a procedure, e.g. the method of training new salespeople; the right method saves time and effort (2).

7. Q7 · 4 marks · Case-basedHarder board level

   Suppose 'Welworth Textiles' made a detailed five-year plan, but sudden changes in fashion and a new tax made it useless within a year; the managers still believed the plan would succeed because it had worked earlier. Identify two limitations of planning and explain them. (4 marks)

   Hint

   Change and false security.

   Answer

   Planning may not work in a dynamic environment: the business environment (fashion, taxes) changes in ways a plan cannot foresee (2). Planning does not guarantee success: a plan that worked earlier may fail in new conditions, and relying on it creates a false sense of security (2).

8. Q8 · 3 marks · Short answerHarder board level

   Distinguish between policy and procedure on three bases. (3 marks)

   Hint

   Meaning, purpose, flexibility.

   Answer

   Meaning: policy is a general statement that guides thinking; procedure is a sequence of steps for doing an activity. Purpose: policy guides decision-making; procedure guides action. Flexibility: a policy allows discretion; a procedure must be followed in its fixed order.

9. Q9 · 6 marks · Long answerHOTS / competency

   'Planning establishes standards for controlling, and controlling makes planning effective.' Explain the statement and add any two other points of importance of planning. (6 marks)

   Hint

   Goals become standards.

   Answer

   Planning sets goals; these goals are the standards against which actual performance is measured, so without planning there is nothing to control (2). Controlling compares actual results with planned ones and corrects deviations, so the plan is achieved, making planning effective (2). Other points: planning provides directions, so everyone knows what to do and how; planning reduces the risks of uncertainty by anticipating changes (1 + 1).

10. Q10 · 4 marks · Case-basedHOTS / competency

    Suppose a mobile-network company, facing a price war from a new rival, decided to cut tariffs, bundle free streaming and offer extra data to existing users. Identify the type of plan and explain its three dimensions using the case. (4 marks)

    Hint

    Comprehensive plan responding to the environment.

    Answer

    Strategy (1). Long-term objective: to protect its market share against the rival (1). Course of action: tariff cuts, free streaming bundles and extra data (1). Allocation of resources: money and network capacity committed to these offers (1). It was made in response to the business environment (competition).

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.Define planning.Show answer

   Deciding in advance what to do and how to do it.

2. 2.Six points of importance of planning?Show answer

   Directions; reduces uncertainty; reduces overlapping and waste; innovative ideas; decision making; standards for controlling.

3. 3.Seven features of planning?Show answer

   Focuses on objectives; primary; pervasive; continuous; futuristic; involves decision making; mental exercise.

4. 4.Six limitations?Show answer

   Rigidity; may not work in a dynamic environment; reduces creativity; huge costs; time-consuming; no guarantee of success.

5. 5.Seven steps of the planning process?Show answer

   Setting objectives, developing premises, identifying alternatives, evaluating alternatives, selecting an alternative, implementing, follow-up.

6. 6.What are premises?Show answer

   Assumptions about the future on which plans are based (forecasts).

7. 7.Examples of standing plans?Show answer

   Policy, procedure, method, rule.

8. 8.Examples of single use plans?Show answer

   Programme, budget.

9. 9.Three dimensions of strategy?Show answer

   Long-term objectives, a particular course of action, allocation of resources.

10. 10.Which plan has no discretion and a penalty?Show answer

    Rule.

11. 11.Which plan is also a control device?Show answer

    Budget.

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Can you define planning and give the six points of importance?
• ☐Can you explain why planning is pervasive, futuristic and a mental exercise?
• ☐Can you list and explain the six limitations?
• ☐Can you write the seven steps of the planning process in order and spot them in a case?
• ☐Can you distinguish single use and standing plans with examples?
• ☐Can you identify the eight types of plans from statements?
• ☐Can you tell policy from rule and procedure from method?

Planning: frequently asked questions