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Principles of Planning and Forecasting

Principles of Planning and Forecasting

The guidelines of principles of planning are as follows:

1. Principle of primacy of planning: As discussed earlier planning is the prime function of management and precedes all the other functions.

2. Principle of verifiable objectives: The objectives set must be clear, achievable and verifiable in order to attain a feasible management model.

3. Principle of planning premises: The contributing factors in the external environment are government policies, economic factors, market standing, and consumer preferences etc. that decide the success of planning. Planning is done based on these assumptions but nevertheless, all the factors external to the business have to be thoroughly analyzed to ensure concrete planning.

4. Principle of limiting factor: Cost is one of the major limiting factor; production cost has to be factorized to ensure economy of scale and potential resources needed for a business in the likes of men, material and other physical resources have to be taken into consideration.

5. The commitment principle: Planning and decisions whether short term or long term is valid only for a particular period. The long term plan is nothing but the future impact of today’s decisions. Decisions concerning new product development by a company aims at creating an impact for the next 15 years or so while decisions concerning sales target has to be accomplished on a periodic basis- monthly or quarterly.

6. Principle of flexibility: A plan should be flexible and give room for contingencies like losses incurred through unexpected events.

7. Principle of navigational change: Plans while suggested to have built-in flexibility are also subjected to periodical review in the light of environmental fluctuations. A business can not stick to a long term plan devised originally since it is equally important to check on events and expectations periodically.

planning and forecasting


Forecasting is a management technique that relies on both past experiences and present assumptions to predict the future. Again this serves as an important premise for the planning process. The conditions of the external environment though out of one’s control, if properly estimated, can lead an organization to produce wonderful results.


  • Economic forecast: To gauge the general economic scenario and its effect on sales.
  • Technological forecast: To predict what new technologies can be developed, when and how to bring feasibility to the operations involved.
  • Competition forecast: To look into the competitor strength and tactics and know where one stands.
  • Social forecast: To predict the attitude of people and social conditions.
  • Supplier’s forecast: Reveals the response of suppliers.


1. Quantitative time series analysis: Monthly sales data is plotted in a chart and the past data helps in consolidating the sales volume and fluctuations in sales. Sales trend is determined and the assumption is that, the future will reflect the past and present trend and hence can be projected. If there is a lull in sales, reasons for the decline can be known by taking feedback from various quarters like, suppliers, consumers and employees.

2. Derived forecast: The forecast done for a specific purpose may be reused for another purpose. For example a census data can help you to determine the demography of a particular geographical area that might help you to reach your target customers.

3. Casual methods: If the underlying cause for the variable can be determined, the forecast can be arrived mathematically and produce quite accurate results. Social media marketing is very popular now a days and instantly you know how many hits are received for a particular product and the ratio of conversion into sales.

4. Brain storming: People with knowledge and expertise assemble in order to discuss the pros and cons of a particular idea, be it the launch of a new product, product promotion or withdrawal of a product line.

Brain Storming Ideas

5. Delphi method: In this method, each and very expert is contacted independently and opinions are drawn without the knowledge of the responses of other experts. After collecting all the responses, each participant considers the responses of other expert authors and suggests revisions. Three or four rounds later, a consensus is arrives at and the unique feature of this method is no direct debate or discussions.