NCERT Solutions for Class 12 Business Studies Chapter 4: Planning (NCERT 2026–27)
These Class 12 Business Studies Chapter 4 solutions cover Planning, the second of the management functions in the Class 12 Business Studies textbook for the 2026–27 session. Planning is deciding in advance what to do and how to do it, and it is the primary function that precedes organising, staffing, directing and controlling. Below you get the meaning of planning, its features, importance and limitations, the steps in the planning process, and the different types of plans (single-use and standing plans, objectives, strategy, policy, procedure, method, rule, programme and budget), followed by step-by-step answers to every NCERT exercise question, extra practice, MCQs, Assertion–Reason and FAQs.
Class: 12Subject: Business StudiesChapter: 4Chapter Name: PlanningPart: Principles and Functions of ManagementSession: 2026–27
Chapter 4, Planning, defines planning as deciding in advance what to do and how to do it — one of the basic managerial functions that bridges the gap between where an organisation is and where it wants to go. Planning is concerned with both ends (objectives) and means (the action plan to achieve them). The chapter explains the importance of planning (it provides direction, reduces the risks of uncertainty, reduces overlapping and wasteful activities, promotes innovative ideas, facilitates decision making and establishes standards for controlling) and its limitations (it leads to rigidity, may not work in a dynamic environment, reduces creativity, involves huge costs, is time-consuming and does not guarantee success). It then describes the seven steps in the planning process and classifies types of plans into single-use plans and standing plans, along with objectives, strategy, policy, procedure, method, rule, programme and budget.
Key Concepts & Terms
Planning: deciding in advance what to do and how to do it. It is the primary function of management and involves setting objectives and developing appropriate courses of action to achieve them.
Objectives / Goals: the desired future position the management would like to reach; they should be stated in specific, measurable, quantitative terms within a given time period.
Importance of planning: provides directions, reduces the risks of uncertainty, reduces overlapping and wasteful activities, promotes innovative ideas, facilitates decision making, and establishes standards for controlling.
Features of planning: planning focuses on achieving objectives; it is a primary (pervasive) function of management; it is pervasive, continuous and futuristic; it involves decision making; and it is a mental exercise.
Limitations of planning: planning leads to rigidity, may not work in a dynamic environment, reduces creativity, involves huge costs, is a time-consuming process, and does not guarantee success.
Planning process (7 steps): setting objectives → developing premises → identifying alternative courses of action → evaluating alternative courses → selecting an alternative → implementing the plan → follow-up action.
Premises: assumptions about the future (forecasts, existing plans, past information) that form the base material on which plans are drawn; they must be the same for all planners.
Single-use plan: a plan developed for a one-time, non-recurring event or project — e.g. budgets, programmes and projects.
Standing plan: a plan used for activities that occur regularly over time, designed to ensure smooth internal operations — e.g. policies, procedures, methods and rules.
Strategy: a comprehensive plan prepared by top management for accomplishing an organisation’s objectives, covering long-term objectives, a particular course of action, and the allocation of resources.
Policy: a general statement that guides thinking and channelises energy towards a particular direction; the general response to a particular situation (e.g. an admission policy).
Procedure / Method / Rule: a procedure gives routine steps (in chronological order) to carry out activities; a method prescribes the manner in which one step of a procedure is performed; a rule is a specific statement of what must or must not be done, with no flexibility.
Programme & Budget: a programme is a detailed statement of a project, outlining objectives, policies, procedures, rules, tasks, resources and budget; a budget is a statement of expected results expressed in numerical terms (it also acts as a control device).
NCERT Exercises — Full Solutions
All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises. Answers are original, written in CBSE exam-ready style.
Very Short Answer Type
1. How does planning provide direction?
ANSWERPlanning provides direction by stating in advance how work is to be done and what goals or objectives are to be achieved. When objectives are clearly stated, they act as a guide for deciding what action should be taken and in which direction.If goals are well defined, employees know what the organisation has to do and what they must do to achieve those goals, so departments and individuals can work in coordination. In the absence of planning, employees would work in different directions and the organisation would not be able to achieve its desired goals.
2. 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?
ANSWERMs Rajni has performed the step of “Identifying alternative courses of action.”After the objective (increasing market share from 10% to 25%) has been set, the next step is to identify the various ways to achieve it. By outlining options such as entering new markets, expanding the product range, and using sales promotion techniques like rebates, discounts or increased advertising, Ms Rajni has identified the alternative courses of action available for achieving the objective.
3. Why are rules considered to be plans?
ANSWERRules are considered to be plans because they are specific statements that inform what is to be done and what is not to be done in a given situation, and therefore guide future action — which is the essence of a plan.A rule reflects a managerial decision that a certain action must or must not be taken (for example, “No smoking in the factory” or “Report for work at 9 a.m.”). They do not allow any flexibility or discretion and are usually the simplest type of plan, helping to enforce discipline and standardise behaviour.
4. 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.
ANSWERThe type of plan adopted by Rama Stationery Mart is a Rule.A rule is a specific statement that informs exactly what is to be done and allows no flexibility or discretion. Since the firm has decided that all payments must be made by e-transfers only — a strict, must-be-followed statement with no exception — it is a rule.
5. Can planning work in a changing environment? Give a reason to justify your answer.
ANSWERYes, planning can still work in a changing environment, though it cannot foresee everything.The business environment is dynamic and consists of economic, political, physical, legal and social dimensions that keep changing, so plans may need to be modified. However, planning is precisely the activity that enables a manager to look ahead, anticipate changes and develop managerial responses to them in advance. By preparing forecasts, planning reduces the risk of uncertainty. Hence, despite a changing environment, planning is not a useless exercise — it provides a base for analysing future courses of action and must be used with caution and flexibility.
Short Answer Type
1. What are the main aspects in the definition of planning?
ANSWERPlanning is deciding in advance what to do and how to do it. The main aspects in this definition are:(i) Setting objectives: planning begins by setting objectives or goals for a given time period, specifying what the organisation wants to achieve.(ii) Developing courses of action: planning then involves formulating various courses of action to achieve those objectives.(iii) Selecting the best alternative: finally, planning means selecting the best possible alternative from among the various courses of action available.Thus, planning is concerned with both ends (what is to be done) and means (how it is to be done), and it provides a rational approach for achieving predetermined objectives.
2. If planning involves working out details for the future, why does it not ensure success?
ANSWERPlanning does not guarantee success even when details for the future are worked out, because of the following reasons:The success of an enterprise is possible only when plans are properly drawn up and implemented. Any plan needs to be translated into action, or it becomes meaningless.Managers have a tendency to rely on previously tried and tested successful plans. But it is not always true that just because a plan has worked before, it will work again. There are many other unknown factors to be considered, and the business environment is dynamic.This kind of complacency and false sense of security may actually lead to failure instead of success. Hence, planning provides a base for action but does not by itself ensure success.
3. What kind of strategic decisions are taken by business organisations?
ANSWERStrategic decisions are major decisions taken by top management that form the organisation’s identity in the business environment. Such decisions include:(i) Whether the organisation will continue to be in the same line of business; or(ii) Whether it will combine new lines of activity with the existing business; or(iii) Whether it will seek to acquire a dominant position in the same market.For example, a company’s marketing strategy has to address questions such as: Who are the customers? What is the demand for the product? Which channel of distribution to use? What is the pricing policy? And how do we advertise the product? These and many more issues need to be resolved while taking strategic decisions.
4. Planning reduces creativity. Critically comment.(Hint: both the points – Planning promotes innovative ideas and planning reduces creativity – will be given).
ANSWERThe statement “Planning reduces creativity” can be critically examined from two opposite viewpoints.Planning reduces creativity: Planning is generally done by the top management, while the rest of the members merely implement these plans. As a consequence, middle management and other decision-makers are neither allowed to deviate from plans nor permitted to act on their own. Much of the initiative and creativity inherent in them gets lost or reduced. Most of the time employees do not even attempt to formulate plans — they only carry out orders. People tend to think along the same lines as others, so there is nothing new or innovative.Planning promotes innovative ideas (the other side): Since planning is the first function of management, it is the most challenging activity, and new ideas can take the shape of concrete plans. It guides all future actions leading to the growth and prosperity of the business.Comment: Therefore, whether planning reduces or promotes creativity depends on how it is carried out. If planning is participative and gives some flexibility to lower levels, it can promote innovation; if it is rigid and confined to the top, it tends to reduce creativity.
5. 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.
ANSWERThe type of plan highlighted in the given example is a Strategy. Bharti Airtel has prepared a comprehensive plan to respond to competition from Reliance Jio in the business environment — which is exactly what a strategy is.The three dimensions of a strategy are:(i) Determining long-term objectives;(ii) Adopting a particular course of action; and(iii) Allocating resources necessary to achieve the objectives.
6. State the type of plan and state whether they are Single use or Standing plan:
a. A type of plan which serves as a controlling device as well.(budget)
b. A plan based on research and analysis and is concerned with physical and technical tasks. (Method)
ANSWER(a) Budget: The type of plan is a Budget. A budget is a statement of expected results expressed in numerical terms, and since it allows actual figures to be compared with expected figures so that corrective action can be taken, it also serves as a controlling device. A budget is a Single-use plan.(b) Method: The type of plan is a Method. A method provides the prescribed manner in which a task (one step of a procedure) is to be performed and is concerned with physical and technical tasks. A method is a Standing plan.
Long Answer Type
1. Why is it that organisations are not always able to accomplish all their objectives?
ANSWEROrganisations are not always able to accomplish all their objectives because planning suffers from certain limitations:(i) Planning leads to rigidity: A well-defined plan with specific goals and a fixed time frame decides the future course of action, and managers may not be in a position to change it. This rigidity may create difficulty when circumstances change.(ii) Planning may not work in a dynamic environment: The business environment is dynamic, with economic, political, physical, legal and social dimensions constantly changing. It becomes difficult to accurately assess future trends, so planning cannot foresee everything and obstacles arise.(iii) Planning reduces creativity: Since planning is done by top management and others merely implement it, the initiative and creativity of lower levels gets reduced.(iv) Planning involves huge costs: Formulating detailed plans involves heavy costs in terms of time and money (checking facts, scientific calculations, boardroom meetings, expert advice) which may not always justify the benefits.(v) Planning is a time-consuming process: Sometimes plans take so much time to be drawn up that little time is left for their implementation.(vi) Planning does not guarantee success: A plan must be properly implemented; relying on previously successful plans, complacency and unknown factors may lead to failure instead of success.In addition, external factors such as unforeseen events, rise in costs and prices, government interventions and legal regulations also prevent organisations from accomplishing all their objectives.
2. What are the steps taken by management in the planning process?
ANSWERPlanning is a process of decision making that follows certain logical steps. The steps in the planning process are:(i) Setting Objectives: The first and foremost step is setting objectives. Objectives may be set for the entire organisation and for each department or unit. They specify what the organisation wants to achieve (e.g. an increase in sales by 20%) and should be stated clearly so that they give direction to all departments.(ii) Developing Premises: Planning is concerned with the uncertain future, so managers make certain assumptions about the future called premises. These assumptions (forecasts, existing plans, past information about policies) are the base material on which plans are drawn and must be the same for all planners.(iii) Identifying alternative courses of action: Once objectives are set and assumptions made, all the alternative courses of action to achieve the objectives are identified. The course of action may be either routine or innovative.(iv) Evaluating alternative courses: The positive and negative aspects (pros and cons) of each alternative are weighed against each other in the light of the objective to be achieved — for example, the risk-return trade-off in financial plans.(v) Selecting an alternative: This is the real point of decision making. The best plan — the most feasible, profitable and with least negative consequences — is adopted. Sometimes a combination of plans may be selected instead of one best course.(vi) Implementing the plan: This step is concerned with putting the plan into action, where other managerial functions also come into the picture (e.g. arranging labour and machinery if production is to be increased).(vii) Follow-up action: Monitoring the plans to see whether they are being implemented and activities are performed according to schedule is also part of the planning process, ensuring that objectives are achieved.
3. 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. C Ltd. realized that it needs to take steps immediately to improve its market standing in the future. For quality conscious consumers, C Limited plans to introduce new models with added features and new technological advancements. The company has formed a team with representatives from all the levels of management. This team will brainstorm and will determine the steps that will be adopted by the organisation for implementing the above strategy. Explain the features of Planning highlighted in the situation given below.(Hint: Planning is pervasive, Planning is futuristic and Planning is a mental exercise).
ANSWERThe features of planning highlighted in the given situation are:(i) Planning is pervasive: Planning is required at all levels of management and in all departments — it is not the exclusive function of any one level. In the case, the company has formed a team with representatives from all the levels of management, showing that planning is pervasive.(ii) Planning is futuristic: Planning essentially involves looking ahead and preparing for the future based on forecasting. C Ltd. realised that it needs to take steps immediately to improve its market standing in the future and plans to introduce new models with added features and new technological advancements — this reflects the futuristic feature of planning.(iii) Planning is a mental exercise: Planning requires the application of the mind, involving foresight, intelligent imagination and sound judgement; it is an intellectual activity of thinking rather than doing. In the case, the team will brainstorm and determine the steps to be adopted, which shows that planning is a mental exercise.
Extra Practice Questions
Short Answer Type Questions
Q1. Define planning. Why is it called the primary function of management?
ANSWERPlanning is deciding in advance what to do and how to do it; it involves setting objectives and developing courses of action to achieve them. It is called the primary function of management because it lays down the base for all other functions — organising, staffing, directing and controlling are all performed within the framework of the plans drawn. Thus, planning precedes other functions; this is also called the primacy of planning.
Q2. How does planning establish standards for controlling?
ANSWERPlanning involves the setting of goals and standards. These planned goals or standards become the basis against which actual performance is measured during controlling. By comparing actual performance with the standard, managers can find out whether the goals have been attained, and if there is any deviation it can be corrected. Hence planning is a prerequisite for controlling — without goals and standards, finding deviations (a part of controlling) would not be possible.
Q3. Distinguish between a single-use plan and a standing plan.
ANSWERA single-use plan is developed for a one-time, non-recurring event or project and is not likely to be repeated — e.g. budgets, programmes and projects. A standing plan is used for activities that occur regularly over time, is developed once but modified from time to time, and ensures smooth internal operations — e.g. policies, procedures, methods and rules.
Q4. What are premises in planning? Why must they be the same for all?
ANSWERPremises are the assumptions managers make about the future on which plans are based, in the form of forecasts, existing plans or past information about policies. They are the base material upon which plans are drawn. The premises must be the same for all and there should be total agreement on them, because all managers involved in planning need to use the same assumptions so that their plans are consistent and do not conflict with one another.
Q5. Differentiate between a policy and a rule.
ANSWERA policy is a general statement that guides thinking and channelises energy towards a particular direction; it defines broad parameters within which a manager may use discretion to interpret and apply it (e.g. a recruitment or pricing policy). A rule is a specific statement that informs exactly what is to be done or not done, allowing no flexibility or discretion (e.g. “No smoking”). Thus a policy is flexible and general, while a rule is rigid and specific.
Long Answer Type Questions
Q1. Explain the importance of planning in an organisation.
ANSWERPlanning is important because: (i) Planning provides directions — by stating in advance how work is to be done, it gives direction for action and helps departments and individuals work in coordination. (ii) Planning reduces the risks of uncertainty — it enables a manager to look ahead, anticipate changes and develop managerial responses to them. (iii) Planning reduces overlapping and wasteful activities — it serves as the basis of coordinating the activities of different divisions, avoiding confusion and minimising useless and redundant activities. (iv) Planning promotes innovative ideas — being the first function of management, it is the most challenging activity in which new ideas take the shape of concrete plans. (v) Planning facilitates decision making — it helps the manager evaluate alternatives and select the most viable one to take rational decisions. (vi) Planning establishes standards for controlling — it provides the goals or standards against which actual performance is measured, so deviations can be corrected. Thus planning is the foundation of all managerial activity.
Q2. Explain the features of planning.
ANSWERThe features of planning are: (i) Planning focuses on achieving objectives — specific goals and the activities to achieve them are set out in plans, so planning is purposeful. (ii) Planning is a primary function of management — it lays the base for all other functions, which are performed within the framework of plans (primacy of planning). (iii) Planning is pervasive — it is required at all levels and in all departments, though its scope differs (top management plans for the whole organisation, middle management for departments, supervisors for day-to-day operations). (iv) Planning is continuous — plans are made for a specific period, after which a new plan is drawn; framing, implementing and following one plan with another is a continuous cycle. (v) Planning is futuristic — it involves looking ahead and preparing for the future based on forecasting. (vi) Planning involves decision making — it requires choosing from among various alternatives; the need to plan arises only when alternatives exist. (vii) Planning is a mental exercise — it requires foresight, intelligent imagination and sound judgement, being an intellectual activity of thinking rather than doing.
Q3. Explain the various types of plans with examples.
ANSWERBased on what they seek to achieve, plans can be classified as: Objectives — the desired future position the management wants to reach, stated in specific measurable terms (e.g. increasing sales by 10%). Strategy — a comprehensive plan by top management for accomplishing objectives, covering long-term objectives, a course of action and resource allocation (e.g. a marketing strategy). Policy — a general statement that guides thinking towards a direction (e.g. a recruitment policy). Procedure — routine steps, in chronological order, on how to carry out activities (e.g. procedure for requisitioning supplies). Method — the prescribed manner of performing one step of a procedure (e.g. a particular training method). Rule — a specific statement of what must or must not be done, with no flexibility (e.g. “No smoking”). Programme — a detailed statement of a project outlining objectives, policies, procedures, rules, tasks, resources and budget. Budget — a statement of expected results in numerical terms (e.g. a sales or cash budget), which also acts as a control device. These plans are also grouped as single-use plans (budgets, programmes, projects) and standing plans (policies, procedures, methods, rules).
MCQs & Assertion–Reason
1. Planning is best defined as:
(a) doing things in the present (b) deciding in advance what to do and how to do it (c) measuring actual performance (d) arranging physical resources
2. Which of the following is NOT a feature of planning?
(a) Planning is pervasive (b) Planning is futuristic (c) Planning is a mental exercise (d) Planning guarantees success
3. “Planning precedes other functions of management.” This refers to which feature?
(a) Planning is continuous (b) Planning is the primary function of management (c) Planning is futuristic (d) Planning reduces creativity
4. The first step in the planning process is:
(a) Developing premises (b) Selecting an alternative (c) Setting objectives (d) Follow-up action
5. Assumptions about the future on which plans are based are called:
For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.
A-R 1. Assertion: Planning is the primary function of management.
Reason: All other managerial functions are performed within the framework of the plans drawn, so planning precedes them.
A-R 2. Assertion: Planning is a useless exercise in a dynamic environment.
Reason: The business environment is dynamic and planning cannot foresee everything.
A-R 3. Assertion: Planning establishes standards for controlling.
Reason: Planning provides the goals or standards against which actual performance is measured.
A-R 4. Assertion: A rule is considered to be a plan.
Reason: A rule is a specific statement that informs what is to be done and guides future action.
Reason: Planning involves a choice from among various alternative courses of action.
Answer key: 1-(A), 2-(D), 3-(A), 4-(A), 5-(A).
Exam Tips & Common Mistakes
How to score full marks in this chapter
Memorise the six points of importance, the seven features, the six limitations and the seven steps of the planning process in the exact NCERT order, each with a one-line explanation. For case-based questions, first name the feature/step/type of plan, then quote the line from the case that proves it, then explain — this two-line structure earns full marks. Learn the textbook examples (IOCL planning, Polaris expansion, Bharti Airtel strategy, Rama Stationery rule). For “types of plans”, remember the grouping: single-use plans (budget, programme, project) vs standing plans (policy, procedure, method, rule).
Common mistakes to avoid
Confusing the importance of planning with its features — these are two different headings.
Mixing up policy (general, flexible, discretion allowed) with a rule (specific, rigid, no flexibility).
Confusing a method (manner of doing one step) with a procedure (sequence of steps).
Wrongly classifying a budget as a standing plan — it is a single-use plan (policy/procedure/method/rule are standing plans).
Skipping or reordering the seven steps of the planning process, or merging “evaluating” with “selecting” an alternative.
Forgetting that planning does not guarantee success, and that it can still work (with caution) in a changing environment.
Frequently Asked Questions
What is Chapter 4 of Class 12 Business Studies about?
Chapter 4, Planning, explains planning as deciding in advance what to do and how to do it. It covers the meaning, features, importance and limitations of planning, the seven steps in the planning process, and the different types of plans — single-use and standing plans, objectives, strategy, policy, procedure, method, rule, programme and budget.
What are the steps in the planning process?
The planning process has seven steps: (1) setting objectives, (2) developing premises, (3) identifying alternative courses of action, (4) evaluating alternative courses, (5) selecting an alternative, (6) implementing the plan, and (7) follow-up action.
What is the difference between a single-use plan and a standing plan?
A single-use plan is made for a one-time, non-recurring event or project (such as budgets, programmes and projects), while a standing plan is used for activities that occur regularly and is modified from time to time (such as policies, procedures, methods and rules).
