Planning Premises – Meaning, Importance and Types

Published by: Madhubala Minda

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Planning premises refer to the forecasts or future assumptions or the known factors like existing plans and current policies that have an impact on the planning process.

What is Planning Premises?

Planning premises to a great extent are a set of assumptions about the future environment where the plans are supposed to be executed. It is a part of business management and is considered a systematic and logical estimate of the future events

Definition – Planning Premises is defined as the anticipated environment where business plans controlled by the management are expected to play out. They include assumptions about future events

Meaning of Planning Premises

Meaning of Planning Premises

Planning premises provide a logical groundwork for the estimated events that take place and impact planning. This planning phase is controlled by the management because all the managers in the organization should be in sync with each other while establishing premises

Specific events can impact the policy formation hence the management tries to identify the external events to avoid negative consequences. Business entities make certain assumptions about such events so that they can help to develop effective planning premises.

The management should be aware of the planning premises and should agree with them to achieve organizational objectives

Understanding Planning Premises

There is an intricate link between planning and forecasting as the past influences the current plans that are designed to achieve future objectives. Thus, making certain assumptions about future factors results in an effective planning process.

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These assumptions about the business environment can include known facts for example changes in the tax laws during government policies or expected events that might take place or not, for example, a competitor entering the same product in the same market in business planning.

The managerial personnel make these assumptions based on their experience, intuition, judgement and of course scientific analysis

Importance of Planning Premises

The planning premises provide a useful framework for planning as they are not just certain assumptions about the future events but also predictions of the future course of action. The importance of effective planning premises in a business environment are

  1. Provide help for an organized planning
  2. Minimize the risk of uncertainty
  3. Boosts profitability
  4. Increases effective co-ordination between managers
  5. Reduces the risk of flexibility

Types of Planning Premises

Types of Planning Premises

The managerial personnel is entrusted with establishing the planning premise because of their ability to identify strategic, crucial and limiting factors that will impact the future course of action

Premises in business is based on the following factors

1. Internal and External Premises

The planning of premises is based on factors like internal and external premises. Internal and External premises assumptions deal with the political environment, government policies, competition, market, technology advancement, labour force, sales forecasts, sales volume, social environment, resources needed, quality of management and business policies

Internal Premises

  1. Internal premise refers to the premises that exist within the business environment.
  2. Important internal premises include business methods, materials, money and men
  3. Examples are sales forecasts, investment policies of the business, the competence of managerial personnel and skills of the labour force.
  4. The planning revolves around factors like the competency of the employees or the amount of money a business has at its disposal.
  5. A business entity can control the important internal premises

External Premises

  1. External premises are derived from the external environment that surrounds the business.
  2. Examples of external premises are the money market, government policies planning, economic environment, population growth, business cycles, technological changes and product market.
  3. A business entity can’t control the external premises

2. Tangible and Intangible Premises

Another important factor in the planning of premises is the Tangible and Intangible Premises.

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Tangible Premises

  1. Tangible premises refer to the premise that can be quantitatively measured
  2. Factors impacting the quantitatively measured tangible premises include money, time, capital and resources invested in the business, industry demand and units of production

Intangible Premises

  1.  Intangible premises refer to the anticipated environment that cannot be quantitatively measured or quantified
  2. Examples of intangible premises include employee morale, business reputation, employee motivation, consumer behavior and public relations

3. Controllable, Semi-Controllable and Uncontrollable Premises

Controllable, Semi-Controllable and Uncontrollable Premises are important factors in the planning of premises

Controllable Premises

  1. The controllable premises are the future events controlled fully by the management
  2. In controllable premises, the managers control the future commitments regarding money, machines, money and material

Semi-Controllable Premises

  1. The semi-controllable premises are the future events that the business can control partially
  2. Examples of semi-controllable premises are product demand, trade union relations, marketing strategy

Uncontrollable Premises

  1. The uncontrollable premises are the non-controllable premises
  2. These non-controllable premises are the future events or the external environment that cannot be controlled by the management
  3. Examples of uncontrollable premises are natural calamities, weather conditions, natural disasters

4. Constant and variable Premises

Knowing about the factors that impact constant and variable planning premises is important for a company

Constant Premises

  1. Constant premises refer to the premises that do not change despite any action and continue to behave similarly in every situation
  2. Examples of constant premises include money and men

Variable Premises

  1. Variable premises are the future commitments that change based on a course of action
  2. These premises cannot be predicted or controlled
  3. Examples include management relations, trade union relations, population growth, the sales volume of a company

Establishing Premises of Planning

The methods of establishing premises include

  1. Making realistic forecasting
  2. Calculating the probability of events taking place
  3. Assessing the changes like a government policy, marketing strategy, technology, consumer behavior etc.
  4. Developing the basis of planning with help of systematic investigation and scientific analysis

Predictions of the future occurrences are considered a complex process hence every organization must consider the critical limited assumptions

Developing a process of planning premise includes

1. Selecting the premise

The managers identify the factors that influence organizational development plans

2. Reviewing limitations

It is the time to review the limiting factors that curb the abilities of a company to reach its predetermined goals

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3. Developing alternative premise

Develop alternative premise as well as supporting plans as the premise will keep changing

4. Verifying premise

In an organization there are different departments where premise planning occurs. Verify and confirm before establishing the premise

5. Communicating premise

Support the developed premise by programs and budget and involve all the employees in the planning and establishing process through an open communication channel

Conclusion

Planning premises is an essential tool controlled by the management to a great extent. It has proved its merit in numerous industries like business, manufacturing and management because of its ability to set and achieve objectives successfully.

Planning of premises helps in dealing with future scenarios and preparing a step-by-step process so that the planning process ultimately finds success

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Article by:

Madhubala Minda

Madhubala Minda is a content writer for Digiaide. She writes unique and research-driven content on various Brands, Competitors, Management topics and wellness. With years of content writing under her belt, Madhu Bala is one of the strengthening pillars of Digiaide content team.