Business StudiesCBSE Class 12 · Planning

Planning Process: Seven Steps Explained (Class 12 Business Studies)

Updated 15 October 2026 · Fact-checked

The planning process has seven steps: setting objectives, developing premises, identifying alternative courses of action, evaluating the alternatives, selecting an alternative, implementing the plan and follow-up action. Each step leads to the next; premises are the assumptions about the future on which all plans are based.

Follow the arrows through the seven steps in order; step 2, premises, means assumptions about the future, and follow-up feeds back to the start.

Illustration drawn for QuestionBuddy.

Understand Planning Process

Planning is a logical, step-by-step process. Board cases describe what a manager did and ask which step it is, so learn each step's action words.

Step 1: Setting objectives. Decide what the organisation wants to achieve. Objectives should be clear, specific and preferably measurable with a time limit, and must be communicated to all departments, which set their own targets in line with them.
*Cue*: 'decided to increase sales by 20% in two years', 'target'.

Step 2: Developing premises. Premises are the assumptions about the future on which plans are built: forecasts of demand, prices, interest rates, government policy, competition, technology. Forecasting is the main tool. Premises must be the same for all managers so that plans are consistent; wrong premises lead to failed plans.
*Cue*: 'assumed that', 'forecast that demand will grow', 'expected the tax rate to stay the same'.

Step 3: Identifying alternative courses of action. List all the possible ways of achieving the objective: routine or innovative.
*Cue*: 'considered three options: a new factory, outsourcing or overtime'.

Step 4: Evaluating alternative courses. Weigh the positive and negative points of each alternative in terms of cost, risk, returns and feasibility.
*Cue*: 'compared the costs, risks and profits of each option'.

Step 5: Selecting an alternative. Choose the best plan: the most feasible and profitable with the fewest negative consequences. Sometimes a combination of alternatives is chosen.
*Cue*: 'chose to outsource', 'decided on a mix of the two'.

Step 6: Implementing the plan. Put the plan into action. This needs the other management functions: organising resources, staffing, directing.
*Cue*: 'hired staff, bought machines and started production as planned'.

Step 7: Follow-up action. Monitor whether the plan is being implemented and activities are going as scheduled; this is a continuous check.
*Cue*: 'reviewed progress every week', 'checked whether the plan was on schedule'.

Order matters. Objectives come first (you cannot assume anything useful without a goal). Evaluation must come before selection. Implementation comes after selection, and follow-up after implementation.

Premises versus forecasting. Premises are the assumptions; forecasting is the technique used to make them. Both appear in the 2024-25 sample paper (Q29).

Planning process versus decision making. Steps 3 to 5 are the decision-making part of planning; that is why 'planning facilitates decision making' is one of its importance points.

Planning Process: key facts

Seven steps: Setting objectives; developing premises; identifying alternatives; evaluating alternatives; selecting an alternative; implementing the plan; follow-up action; Mnemonic: 'Our Pet Is Eating Some Indian Food' (O-P-I-E-S-I-F).
Premises: Assumptions about the future on which plans are based; the same for all managers; Made through forecasting.
Evaluating vs selecting: Evaluating weighs pros and cons of each option; selecting chooses the best (or a combination); Two separate steps.
Implementing vs follow-up: Implementing puts the plan into action; follow-up monitors whether it is going as scheduled; Two separate steps.

How to answer Planning Process questions

Expect 1-mark 'identify the step' items, 3- or 4-mark cases with two or three steps, and a 6-mark 'explain the steps in the planning process'.

1Underline the action word in each line of the case (decided target; assumed; listed options; compared; chose; started; reviewed).
2Match it to the step using the cues.
3Check the order: steps in a case usually appear in sequence.
4Name the step in NCERT's words and quote the line.
5For a 6-mark answer, write all seven steps in order with one line each.

Planning Process in real life

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

Developing premises

Suppose you plan to sell homemade rakhis online. Before deciding how many to make, you assume that last year's demand will grow by 20% and that courier charges will stay the same.

Which step of the planning process are these assumptions?

Try it first, then show the solutionSolution

They are assumptions about the future.
Your plan will be built on them.
This is developing premises.

Answer: Developing premises: assumptions about future demand and costs on which the plan is based.

Memory hook: Premises are the 'if' on which every plan stands.

Evaluating and selecting

Imagine choosing between three coaching options for the entrance exam: an online course, a local institute or self-study with books. You compare fees, travel time and results, and choose the online course plus books.

Which two steps are shown?

Try it first, then show the solutionSolution

Comparing fees, time and results is evaluating alternatives.
Choosing the online course plus books is selecting an alternative (here a combination).

Answer: Evaluating alternative courses, then selecting an alternative (a combination of two).

Memory hook: Weigh first, then pick.

Tricks to remember Planning Process

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

Our Pet Is Eating Some Indian Food
Objectives, Premises, Identify alternatives, Evaluate, Select, Implement, Follow-up.
Use it when: Seven steps in order.
If, options, weigh, pick, do, check
Premises are the 'if'; then list options, weigh them, pick one, do it, check it.
Use it when: Matching action words to steps.
Assume = premises
Whenever a case says 'assumed' or 'forecast', the step is developing premises.
Use it when: The most-tested step.

Planning Process: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Identify the step · 1 mark · MCQBoard level

The managers of 'Taaza Juices' assumed that the price of oranges would stay stable next year and that demand would rise in summer. Which step of planning is this?
(a) Setting objectives
(b) Developing premises
(c) Evaluating alternatives
(d) Follow-up action

Try it first, then show the solutionSolution

Assumptions about the future are premises (1 mark).

Answer: (b) Developing premises

Example 2: Three steps explained · 3 marks · Short answerBoard level

Explain the first three steps of the planning process. (3 marks)

Try it first, then show the solutionSolution

Setting objectives (1 mark).
Developing premises (1 mark).
Identifying alternative courses of action (1 mark).

Answer: (1) Setting objectives: deciding what the organisation wants to achieve, stated clearly and communicated to all departments. (2) Developing premises: making assumptions about the future, such as demand, prices and policies, on which plans are based; they must be the same for all managers. (3) Identifying alternative courses of action: listing all the possible ways in which the objectives can be achieved.

Example 3: Steps from a case · 4 marks · Short answerHarder board level

'Kiran Cycles' wanted to double exports in three years. Its managers expected the rupee to remain weak, which would help exports. They considered selling through agents, opening a foreign office, or partnering with an online platform, and compared the cost and risk of each. Identify four steps of the planning process, quoting the lines. (4 marks)

Try it first, then show the solutionSolution

'wanted to double exports in three years': setting objectives (1 mark).
'expected the rupee to remain weak': developing premises (1 mark).
'considered selling through agents, opening a foreign office, or partnering': identifying alternatives (1 mark).
'compared the cost and risk of each': evaluating alternatives (1 mark).

Answer: (1) Setting objectives: 'wanted to double exports in three years'. (2) Developing premises: 'expected the rupee to remain weak'. (3) Identifying alternative courses of action: 'considered selling through agents, opening a foreign office, or partnering with an online platform'. (4) Evaluating alternative courses: 'compared the cost and risk of each'.

Example 4: Next steps · 3 marks · Short answerHarder board level

Continuing the case of Kiran Cycles: state and explain the remaining three steps the managers must follow. (3 marks)

Try it first, then show the solutionSolution

Selecting an alternative (1 mark).
Implementing the plan (1 mark).
Follow-up action (1 mark).

Answer: (5) Selecting an alternative: choose the best option, for example partnering with an online platform plus agents in two countries, as the most feasible and profitable. (6) Implementing the plan: put it into action by signing the partnership, appointing staff and arranging shipments. (7) Follow-up action: monitor export figures regularly to check that the plan is on schedule and correct any problems.

Example 5: Why premises matter · 3 marks · Short answerHOTS / competency

Explain why premises should be the same for all managers, and what happens if premises are wrong. (3 marks)

Try it first, then show the solutionSolution

Premises are the base of all plans (1 mark).
Same premises keep departmental plans consistent (1 mark).
Wrong premises lead to wrong plans and failure; plans must be revised (1 mark).

Answer: Premises are assumptions about the future on which every plan is built. If the sales manager assumes demand will rise while the production manager assumes it will fall, their plans will clash; so all managers must work on the same premises for plans to be consistent. If premises are wrong (for example, a demand forecast is too high), the plans based on them fail, causing unsold stock or shortages, so premises must be made carefully and reviewed.

Example 6: Case study: a new café · 4 marks · Case-basedHOTS / competency

Suppose 'Brew Bay' plans to open a café near a college. (i) It aims to serve 300 customers a day within six months. (ii) It assumes that college fees will not rise and students will spend about Rs 150 per visit. (iii) After comparing three locations, it chooses the one nearest the main gate. (iv) Every week, the owner checks footfall against the target.
Identify the step in each of (i) to (iv). (4 marks)

Try it first, then show the solutionSolution

(i) Setting objectives (1 mark).
(ii) Developing premises (1 mark).
(iii) Selecting an alternative (after evaluation) (1 mark).
(iv) Follow-up action (1 mark).

Answer: (i) Setting objectives. (ii) Developing premises. (iii) Selecting an alternative. (iv) Follow-up action.

Where students lose marks in Planning Process

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

Mistake: Wrong order of steps
The process is sequential; marks are given for order in 6-mark answers.
Wrong working
Developing premises, then setting objectives.
Right working
Setting objectives first, then developing premises.
Do this: Use 'Our Pet Is Eating Some Indian Food'.
Usually costs: 1 to 2 marks.
Mistake: Calling assumptions 'objectives'
Objectives are what you want; premises are what you assume.
Wrong working
'Expected demand to rise': setting objectives.
Right working
Developing premises.
Do this: Assume or forecast = premises.
Usually costs: 1 mark.
Mistake: Merging evaluation and selection
They are two different steps.
Wrong working
Step 4: evaluate and select the best.
Right working
Step 4: evaluate; step 5: select.
Do this: Weigh first, then pick.
Usually costs: 1 mark.
Mistake: Missing follow-up action
Students stop at implementation.
Wrong working
Six steps ending with implementation.
Right working
Seven steps ending with follow-up action.
Do this: Remember the last 'check'.
Usually costs: 1 mark.

Exam tips

Planning process steps were a 6-mark question in the 2023-24 sample paper (Q32(a)), a 4-mark question with forecasting in the 2024-25 sample paper (Q29), and 'developing alternatives' was a 1-marker in the 2026-27 sample paper (Q14).
In cases, quote the exact line for each step; steps usually appear in order in the paragraph.
Know the term 'premises' and its link with forecasting.
If a case shows only some steps, you may be asked to state the next step; keep the order in mind.
Planning and Organising together carry 14 marks in 2026-27.

Practice questions on Planning Process

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

Q1 · 1 mark · MCQBoard level
Which is the first step in the planning process?
(a) Developing premises
(b) Setting objectives
(c) Identifying alternatives
(d) Implementing the plan
Hint
What comes before any assumption?
Answer
(b) Setting objectives.
Q2 · 3 marks · Short answerBoard level
What are planning premises? Why are they important? (3 marks)
Hint
Assumptions; base of plans.
Answer
Planning premises are assumptions about the future, such as forecasts of demand, prices, interest rates and government policy, on which plans are based. They are important because every plan rests on them; correct and uniform premises make plans realistic and consistent across departments, while wrong premises make plans fail.
Q3 · 1 mark · Assertion-reasonHarder board level
Assertion (A): Evaluating alternatives and selecting an alternative are the same step.
Reason (R): Evaluation weighs the positive and negative points of each option, while selection chooses the best.
(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
R describes two different actions.
Answer
(d) A is false (they are separate steps 4 and 5); R is true.
Q4 · 3 marks · Short answerHarder board level
'Nirmal Detergents' hired 20 salespersons, printed leaflets and began its rural sales drive exactly as decided. Every fortnight it compared village-wise sales with the plan. Identify the two steps and explain them. (3 marks)
Hint
Doing, then checking.
Answer
(1) Implementing the plan: putting the selected plan into action by hiring staff, printing material and starting the drive; it involves organising and staffing. (2) Follow-up action: monitoring the plan, here by comparing village-wise sales every fortnight to check that activities are going as scheduled.
Q5 · 3 marks · Short answerHarder board level
Distinguish between 'identifying alternative courses of action' and 'evaluating alternative courses'. (3 marks)
Hint
List versus weigh.
Answer
Identifying alternatives means listing all the possible ways of achieving the objective, both routine and innovative (step 3). Evaluating alternatives means examining each option's positive and negative points, such as cost, risk, returns and feasibility, in the light of the objective (step 4). Identification produces the options; evaluation judges them.
Q6 · 6 marks · Long answerHarder board level
Explain the steps in the planning process. (6 marks)
Hint
Seven steps in order.
Answer
(1) Setting objectives. (2) Developing premises: assumptions about the future, the same for all managers. (3) Identifying alternative courses of action. (4) Evaluating alternatives: pros and cons of each. (5) Selecting an alternative: the best, or a combination. (6) Implementing the plan: putting it into action with the other functions. (7) Follow-up action: monitoring that activities go as scheduled. Six marks for clear explanation of the steps in correct order.
Q7 · 4 marks · Short answerHOTS / competency
A company skipped 'developing premises' and went straight from objectives to choosing a plan to build a large new factory. Demand later fell sharply. Explain what went wrong and how the planning process should have been used. (4 marks)
Hint
No assumptions, no alternatives evaluated.
Answer
Without developing premises, the company did not forecast demand or other future conditions, so it had no realistic basis for its plan. It also skipped identifying and evaluating alternatives, so it never compared the factory with options such as outsourcing or expanding in stages. Following the process, it would have forecast demand (premises), listed options, weighed their risks, chosen a flexible option, implemented it, and monitored demand through follow-up to adjust in time.

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.List the seven steps of planning.Show answer
Objectives, premises, identifying alternatives, evaluating, selecting, implementing, follow-up.
2.What are premises?Show answer
Assumptions about the future on which plans are based.
3.Which step follows evaluation?Show answer
Selecting an alternative.
4.Which step involves organising and staffing?Show answer
Implementing the plan.
5.What is the last step?Show answer
Follow-up action.
6.Which technique is used to develop premises?Show answer
Forecasting.

Planning Process: frequently asked questions

What are the steps in the planning process?

Setting objectives, developing premises, identifying alternative courses of action, evaluating alternatives, selecting an alternative, implementing the plan and follow-up action.

What are planning premises?

They are assumptions about the future, such as demand, prices, policies and competition, on which plans are based. All managers should use the same premises.

Can more than one alternative be selected?

Yes. Sometimes the best plan is a combination of alternatives rather than a single one.

What is follow-up action in planning?

It is monitoring the plan after implementation to check whether activities are going according to schedule, so that problems can be corrected.