NCERT Solutions for Class 12 Business Studies Chapter 4: Planning

Hello Students. Are you Searching for Class 12 Business Studies NCERT Solutions of Chapter 4? If yes then you are in the right place. Here we have provided you with the Question and Answers of Chapter 4: Planning. These solutions are written by expert teachers and are so accurate to rely on. These solutions can eliminate any lingering doubts you may have regarding the concepts.

Chapter4. Planning
SubjectBusiness Studies
CategoryNCERT Solutions for Class 12

NCERT Solutions for Class 12 Business Studies can be a great tool for the students who have taken Business Studies stream for higher studies. These NCERT Class 12 Business Studies solutions are written by expert teachers and faculties to make your practice and revision easier. On this page, we have provided you with the complete solutions of Chapter 4: Planning.

NCERT Solutions for Class 12 Business Studies Chapter 4

Planning Solutions

Very Short Answer Questions

Q1) How does planning provide direction?

Answer) Planning states in advance what is to be done. It defines the goals and objectives to be achieved. These goals and objectives as stated in the plan gives direction to the managers about what course of action is to be followed for achieving them. Planning ensures clarity in thoughts so that the right action is taken in the right direction for the achievement of objectives. Planning ensures that each department in the organisation work in a coordinated manner towards the common objective of the organisation. That is, with planning each department knows exactly what is to be done and thereby, moves in the right direction. Without planning work would be done in a haphazard manner with each department going in different directions. Thus, planning ensures smooth functioning towards the desired goals of an organisation.


A company wants to increase its market share from the present 10% to 25% to have a dominant position in the market by the end of the next financial year. Ms Rajni, the sales manager has been asked to prepare a proposal that will outline the options available for achieving this objective.

Her report included the following options – entering new markets, expanding the product range offered to customers, using sales promotion techniques such as giving rebates, discounts or increasing the budget for advertising activities. Which step of the planning process has been performed by Ms Rajni?

Answer) The step of the planning process which has been performed by Ms Rajni is ‘Identifying alternative courses of action’.

There are many ways to act and achieve objectives laid by the management. Ms Raini has listed down all the possible alternative courses of action which can be used to increase the market share.

Q3) Why are rules considered to be plans?

Answer) Rules are set of standards or statements that help us understand what needs to be done. Rules can be considered as plan because of the similarity in their nature. Rule can be considered as a simple type of plan. Planning is mostly involved with thinking and deciding about the action required for future. Similar to these, rules are also statements that help in deciding if any action needs to be carried out or not. Rules can be rigid in nature and needs to be followed. Not complying with the rules can result in disciplinary action that can be taken by organisation.

Q4) Rama Stationery Mart has made a decision to make all the payments by e-transfers only. Identify the type of plan adopted by Rama Stationery Mart.

Answer) Rama Stationery has adopted a payment ‘policy’ of making all payments by e-transfers. A policy is a general statement that aims at channeling the efforts of the organisation in a particular direction.

Q5) Can planning work in a changing environment? Give a reason to justify your answer.

Answer) Planning has a less chance of working correctly in a changing environment. Nature of business is dynamic and it continuously changes. For example, factors like social, political, rules and regulations are prone to changes on a continuous basis. Planning cannot detect such changes and therefore prove not that effective. For example, a company has planned to make white bread but the market demand shifted to brown bread due to people becoming more health conscious. Here the company needed to change its previous plan as market factors were not as per the plan.

Short Answer Questions

Q1) What are the main aspects in the definition of planning?

Answer) Planning is a process of analysing and deciding in advance regarding the tasks that need to be done and the way it should be done. It is a type of mental exercise in which a manager decides on the goals that need to be achieved and the means through which those goals can be accomplished. It involves looking ahead at the future. It can also be defined as setting up of objectives and goals, setting up alternatives and deciding on the appropriate action that needs to be taken.

The following are the main points in the definition of planning:

  • Setting Objectives: Planning must pertain to a particular objective. That is, there must be a definite objective for the achievement of which planning is to be done.
  • Time Period: The plan must be formulated for a definite time period. If planning is not done with a time frame, it may prove futile. This is because with time business environment changes and requires fresh planning and action.
  • Formulating Alternatives for Course of Action: Once the objective is decided, the next task is to decide how it is to be achieved. For the achievement of any objective there can be various alternative course of action. These alternatives must be appropriately formulated.
  • Deciding a Course of Action: From the various available alternatives, the best one must be decided.

Q2) If planning involves working out details for the future, why does it not ensure success?

Answer) Planning is regarded as a forward-looking function and it is helpful in predicting and analysing the events in future. Future is uncertain and therefore cannot be predicted. There exist various forces that can have an impact on the way an organisation function. Such forces are complex and dynamic in nature, which results in changes occurring in short notice. The factors such as social, political, legal, technological, rules and regulations by government can change quickly and due to such uncertainty, one cannot be sure that success can be achieved and hence plans need to be modified in order to adapt to the ever-changing environment. Therefore, it can be said that even though planning involves preparing details of future, it does not guarantee that success will follow.

Q3) What kind of strategic decisions are taken by business organisations.

Answer) Strategy refers to a broad outline for the business of an organisation. It has three broad objectives- to determine the objectives, to decide the course of action, and appropriate allocation of objectives for the achievement of the objectives. Following are a few strategic decisions which a business organisation may look out for.

  1. Deciding about which line of business should be taken.
  2. Whether a new line of production should be adopted or not.
  3. What position should the company aim for in the existing market.
  4. What kind of pricing policy should be used.
  5. Decisions regarding the advertising policy and costs.

Q4) Planning reduces creativity. Critically comment.

(Hint: both the points – Planning promotes innovative ideas and planning reduces creativity – will be given).

Answer) Planning promotes innovation. The formulation of plans and policies is an intellectual process that requires creativity and innovation on the part of the managers. However, once a plan is formulated, the manager may not be able to change it. This rigidity creates hurdles when unforeseen changes come about and thereby reduces creativity.


In an attempt to cope with Reliance Jio’s onslaught in 2018, market leader Bharti Airtel has refreshed its ₹ 149 prepaid plan to offer 2 GB of 3G/4G data per day, twice the amount it offered earlier. Name the type of plan is highlighted in the given example.? State its three dimensions also.

Answer) The type of plan that is adopted by Bharti Airtel is Strategy. Strategy is devised by keeping the business environment prevalent at the time.

The three dimensions of strategy are:

  1. Determining long term objectives
  2. Adopting a particular course of action
  3. Allocating resources necessary to achieve the objective

Q6) State the type of plan and state whether they are Single use or Standing plan:

i. A type of plan which serves as a controlling device as well. (budget)
ii. A plan based on research and analysis and is concerned with physical and technical tasks. (Method)


Answer i). Budget – A type of plan which serves as a controlling device as well. A budget is a Single-used plan which is developed for a one time project or event.

Answer ii). Method – A plan based on research and analysis and is concerned with physical and technical tasks. Method is a Standing plan as it is used for activities which occur regularly over a period of time.

Long Answer Questions

Q1) Why is it that organisations are not always able to accomplish all their objectives?

Answer) Organisations create plans in order to meet the desired objectives. It is an essential part of activity for any organisation and it forms the basis for its functioning. But sometimes it happens that not all things will go as per the plan that is done. Unforeseen situations can lead to changes in the business environment than can result in cancelling of plans that were created by the organisations. Planning has its own sets of limitations that can cause obstruction in the completion of objectives of an organisation. Some of the limitations are discussed here that can cause organisational objectives remaining unfulfilled

  1. Planning is rigid by nature. Once a plan is created about the objectives that need to be achieved and the course of action that needs to be followed, the manager is unable to make any changes. This type of quality makes it difficult in times of unforeseen changes in business environment. The plans that are created need to have certain amount of flexibility so that it can adjust according to the changing nature of the business environment. Rigidity in plans form an obstacle in completion of the organisation’s objectives.
  2. Business environment is highly dynamic in nature and is therefore uncertain. Planning is unable to foresee those changes and thereby fails to execute accordingly when the situation is not exactly favourable. It causes failure in accomplishing the desired objectives. Therefore, an organisation must adapt to function as per the changing business environment.
  3. Formulating plans involves huge investment in form of time and money. Planning is based on future happenings; therefore, it requires a great amount of thinking and analysis of environment. It can also involve calculations that determine the facts and figures, which will be used to determine the course of action. These activities involve high costs and it can happen that the benefits derived from the planning is less than the amount invested for planning.
  4. A good plan is not going to ensure success. Managers are often seen to try out plans that have been successful in the past. It cannot be said that a plan will work well if it was shown to be successful in the past, as the prevalent situations may be completely different than the current one. Also, sometimes it is thought that planning can prevent any issues from arising, however it is not considered that planning is not a solution for future, it is just a base for predicting future events that may or may not happen.
  5. Planning is a time-consuming task; it works for determining future happenings and how to cope with them. Therefore, it involves lot of research and analysis which can be time consuming and result in actions getting delayed.

Q2) What are the steps taken by management in the planning process?

Answer) Planning means deciding in advance what is to be done and how it is to be done. It involves a few logical steps. Following are the steps to be followed by the management while making plans

Follow-up Action

  • Setting up the Objectives: The first step in the planning process is the setting up of objectives and goals. Any business enterprise needs certain objectives to work upon for. Managers need to state these objectives very clearly so that right direction can be taken for achieving goals. Moreover, the objectives stated in the plan must sink in to all levels in the organisation. It provides a direction to the individual departments/units so that they can work towards the common objectives of the organisation. Unless the goals are not defined, the functions of the management cannot move forward.
  • Developing the Premises: Planning is based on certain assumptions regarding the future. These assumptions are known as premises. The assumptions are regarding the future predictions, previous plans and current policies and facts. Mangers at all levels of the organisation involved in the planning should follow the same assumptions. These assumptions are very important for the organisation as they decide the path for the plans to be made. Thus, for successful planning correct premises should be proposed.
  • Identification of the Alternatives: Once the objectives and assumptions are developed, a need arises to identify the different courses of action that can be followed. There can be number of ways to achieve a defined objective. The managers need to think carefully about these various routes. This involves innovation and creative mind so that new ways can be developed in order to accomplish the goals.
  • Evaluation of the Alternatives: After identifying the different paths of actions the managers need to evaluate them. This evaluation is based on the utility and the consequences of the options. Managers must assess the pros and cons of each alternative. For example, which route will incur less cost or which option can help in achieving the goals in lesser time. In light of such aspects the right evaluation of different alternatives should be done.
  • Selection of the Best: Selecting the best alternative involves opting for the method that is most viable as per the objective. Here, the managers should use their skills and knowledge for judging and selecting the best alternative in terms of profitability, costs and workability. Depending on the situation, a combination of different routes may also be taken up instead of just one.
  • Implementation: Implementation of the alternatives requires other functions of management to step into the process. It involves organising and directing the work according to the chosen path and policies. Implementation is concerned with following the opted path of action and deciding how that is to be used in order to be successful.
  • Follow-up Action: For assessing the whole working and implementation of the plans, a continuous supervision of the actions are required. Keeping an eye on the activities to be performed is an important part of planning itself, as it helps to ensure the proper working of a plan. Thus, a thorough follow-up action increases the success of a plan and thereby, the achievement of the objectives.


An auto company C Ltd. is facing a problem of declining market share due to increased competition from other new and existing players in the market. Its competitors are introducing lower priced models for mass consumers who are price sensitive. For quality conscious consumers, the company is introducing new models with added features and new technological advancements.


  1. Prepare a model business plan for C Ltd. to meet the existing challenge. You need not be very specific about quantitative parameters. You may specify which type of plan you are preparing.
  2. Identify the limitations of such plans.
  3. How will you seek to remove these limitations?


Answer 1). The types of plans that can be adopted are strategy and policy.

A strategy provides the broad contours of a plan for achieving the objectives of an organisation. It includes determining long-term objectives, adopting the required course of action and allocating the necessary resources. Policies, on the other hand, are the statements that act as a guide to channelise the efforts of the organisation in a particular direction. They provide the basis for the interpretation of the organisation’s strategies and define broad parameters for the functions of the management. They are usually flexible in nature. With strategies and policies the company would be able to draft the plan and take steps to survive in the increased market competition.

Answer 2). The following are the limitations of strategy and policy.

  • Rigidness: Planning is rigid in nature. Once a plan regarding the objectives to be achieved and the course of action to be followed is formulated, the manager may not be able to change it. Such rigidity creates hurdles at times of unforeseen changes. Rigidity in plans sometimes creates obstacles in the completion of the objectives.
  • Cannot Deal With Dynamic Environment: Business environment is dynamic and thereby, very uncertain. However, planning cannot foresee such changes and fails at times of changes and uncertainties. This may lead to failure in the accomplishment of objectives.
  • Gigantic Costs: Formulation of plans involves huge costs in terms of time and money. As planning is based on future predictions, it requires a lot of thinking and analysing. It involves scientific calculations along with the figures and the facts, which are to be used in formulating the course of action. This involves high costs. Moreover, sometimes it might also happen that the benefits derived from planning fall short of the costs incurred.
  • False Security: Good planning does not mean a guarantee to success. Often the mangers tend to rely on pretested plans that have worked well in the past. However, it is not always true that if a plan had worked well in the past, it will also be successful in the future. Many unforeseen changes may crop up that may fail the plan. Sometimes managers think that planning can prevent the problems from occurring, however, they neglect the fact that planning just provides a base for predicting the future. It does not give straight away solutions to the problems.
  • Time Consuming: Formulating plans is a very time consuming task, as it involves looking forward in the unforeseen situations. It involves a lot of research and evaluation. This increases the time consumed by the managers and the actual actions may get delayed.

Answer 3). The following are the steps that can be taken to remove the limitations of planning.

  • The plans must not be too rigid in the sense that certain degree of flexibility must be provided to the managers to deal with the unforeseen changes that might come up in the course of planning.
  • The planning must be done keeping in mind that the business environment is highly dynamic in nature. The plans should be such that they can be easily adjusted as per the need of the hour.
  • The cost and the time invested in the course of planning should be curtailed.
  • It must not be the case that only the pretested plans are relied upon. New plans can be drafted as per the situation and circumstances.

That’s it. These were the solutions of NCERT Class 12 Business Studies Chapter 4 – Planning. Our team hopes that you have found these solutions helpful for you. If you have any doubt related to this chapter then feel free to comment your doubts below. Our team will try their best to help you with your doubts.

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