Planning: Gas Authority of India (GAIL) - New Plans
Planning: Gas Authority of India (GAIL) - New Plans
Planning: Gas Authority of India (GAIL) - New Plans
Planning 4
CHAPTER
L E A R N I N G
GAIL India, which has had a monopoly in the gas transmission
sector is set to see some tough competition in the coming days. OBJECTIVES
While Reliance is poised to get into the trunk pipeline segment,
British Gas is trying to get into the city gas distribution sector. After studying this
GAIL’s new chairman, shares his thoughts on how he plans to chapter, you will be
take the company ahead. able to:
What are GAIL’s main priorities?
Going by its business strategy, the focus areas are gas sourcing, State the meaning
n
transmission, marketing, processing, petrochemicals, globalisation of planning;
and city gas distribution. We are focussing on sourcing of gas from
indigenous finds and through LNG and crossborder pipelines. We Describe the
n
intend to develop the gas market by extending our gas grid from features and
5,600 km to 10,000 km. The city gas project is expected to rise
importance of
from 6 to 45 by the end of the 11th five year Plan.
What are GAIL’s plans for acquiring an exploration and planning;
production (E&P) company abroad?
Explain the
n
GAIL has plans to strengthen its exploration and production
activities. To become a formidable company, GAIL is exploring limitations of
options - acquiring an E&P company is one such option. planning;
What are your Capex plans and how do you plan to fund it?
GAIL’s budgeted Capex plan for FY 06-07 is Rs. 2967.28 crore. Analyse the steps
n
This includes capital expenditure of Rs. 2579.58 crore on pipeline in the planning
and other projects and Rs. 387.7 crore on petrochemical projects. process; and
This will be funded through internal reserves.
What are your plans on city gas distribution? Will GAIL Identity the
n
continue with its plans on fuel management? different types of
We have already established the business successfully in Mumbai,
Delhi, Vadodara, Vijaywada, Agra, Lucknow, Kanpur. Till date GAIL
plans.
has formed eight joint venture companies to implement city gas
projects. The projects have had an impact on the pollution levels.
GAIL is in the process of forming state-wise Joint Ventures with oil
marketing companies to implement city gas projects in Rajasthan.
What are GAIL’s plans to diversify into telecom and what is
the current status?
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ment and other decision makers sometimes may not justify the
are neither allowed to deviate benefits derived from the plans.
from plans nor are they permitted There are a number of incidental
to act on their own. Thus, much costs as well, like expenses on
of the initiative or creativity boardroom meetings, discussions
inherent in them also gets lost with professional experts and
or reduced. Most of the time, preliminary investigations to find
employees do not even attempt out the viability of the plan.
to formulate plans. They only (v) Planning is a time-consuming
carry out orders. Thus, planning process: Sometimes plans to be
in a way reduces creativity since drawn up take so much of time
people tend to think along the that there is not much time left
same lines as others. There is for their implementation.
nothing new or innovative. (vi) Planning does not guarantee
(iv) Planning involves huge costs: success: The success of an
When plans are drawn up huge enterprise is possible only when
costs are involved in their plans are properly drawn up and
formulation. These may be in implemented. Any plan needs
terms of time and money for to be translated into action or
example, checking accuracy of it becomes meaningless. Mana
facts may involve lot of time. gers have a tendency to rely
Detailed plans require scientific on previously tried and tested
calculations to ascertain facts successful plans. It is not always
and figures. The costs incurred true that just because a plan has
worked before it will work again. for all departments, units and
Besides, there are so many other employees. They give direction to
unknown factors to be considered. all departments. Departments/
This kind of complacency and units then need to set their
false sense of security may act own objectives within the broad
ually lead to failure instead of framework of the organisation’s
success. However, despite its philosophy. Objectives have to
limitations, planning is not a percolate down to each unit
useless exercise. It is a tool to be and employees at all levels. At
used with caution. It provides a the same time, managers must
base for analysing future courses contribute ideas and participate
of action. But, it is not a solution in the objective setting process.
to all problems. They must also understand
how their actions contribute to
Planning Process achieving objectives. If the end
Planning, as we all know is deciding result is clear it becomes easier
in advance what to do and how to do. to work towards the goal.
It is a process of decision making. (ii) Developing Premises: Planning
How do we go about making a plan? is concerned with the future
Since planning is an activity there which is uncertain and every
are certain logical steps for every planner is using conjucture about
manager to follow. what might happen in future.
(i) Setting Objectives: The first Therefore, the manager is required
and foremost step is setting to make certain assumptions
objectives. Every organisation about the future. These assum
must have certain objectives. ptions are called premises. Assu
Objectives may be set for the mptions are the base material
entire organisation and each upon which plans are to be
department or unit within the drawn. The base material may be
organisation. Objectives or goals in the form of forecasts, existing
specify what the organisation plans or any past information
wants to achieve. It could mean about policies. The premises
an increase in sales by 20% or assumptions must be the
which could be objective of the same for all and there should
entire organisation. How all dep be total agreement on them. All
artments would contribute to managers involved in planning
the organisational goals is the should be familiar with and
plan that is to be drawn up. using the same assumptions. For
Objectives should be stated clearly example, forecasting is important
Planning 105
ronment will affect an organisations There are policies for all levels
strategy. Strategies usually take the and departments in the organisation
course of forming the organisations ranging from major company policies
identity in the business enviro to minor policies. Major company
nment. Major strategic decisions policies are for all to know i.e.,
will include decisions like whether customers, clients, competitors etc.,
the organisation will continue to whereas minor polices are applicable
be in the same line of business, or to insiders and contain minute details
combine new lines of activity with the of information vital to the employees
existing business or seek to acquire of an organisation. But there has to be
a dominant position in the same some basis for divulging information
market. For example, a company’s to others.
marketing strategy has to address Policies define the broad param
certain questions i.e., who are the eters within which a manager may
customers? what is the demand function. The manager may use
for the product? which channel of his/her discretion to interpret and
distribution to use? what is the pricing apply a policy. For example, the
policy? and how do we advertise decisions taken under a Purchase
the product. These and many more Policy would be in the nature of
issues need to be resolved while manufacturing or buying decisions.
formulating a marketing strategy for Should a company make or buy its
any organisation. requirements of packages, transport
services, printing of stationery, water
Policy and power supply and other items?
Policies are general statements that How should vendors be selected
guide thinking or channelise energies for procuring supplies? How many
towards a particular direction. Policies suppliers should a company make
provide a basis for interpreting strategy purchases from? What is the criteria
which is usually stated in general terms. for choosing suppliers. All these
They are guides to managerial action answers would be addressed by the
and decisions in the implementation Purchase Policy.
of strategy. For example, the company
may have a recruitment policy, pricing Procedure
policy within which objectives are set Procedures are routine steps on how
and decisions are made. If there is an to carry out activities. They detail
established policy, it becomes easier the exact manner in which any
to resolve problems or issues. As such, work is to be performed. They are
a policy is the general response to a specified in a chronological order. For
particular problem or situation. example, there may be a procedure for
108 Business Studies
a control device from which deviations sales and the cash outflows would
can be taken care of. But making a generally be the costs and expenses
budget involves forecasting, therefore, associated with the operations of the
it clearly comes under planning. It is business. The net cash position is
a fundamental planning instrument determined by the cash budget i.e.,
in many organisations. inflows minus (–) outflows = surplus
Let us take an example of Cash or deficiency.
Budget. The cash budget is a basic The management has to hold
tool in the management of cash. It is adequate cash balances for various
a device to help the management to purposes. But at the same time, it
plan and control the use of cash. It is should avoid excess balance of cash
a statement showing the estimated since it gives little or no return.
cash inflows and cash outflows The business has to assess and
over a given period. Cash inflows plan its need for cash with a degree
would generally come from cash of caution.
Key Terms
Planning Objectives Goals Decisions
Standards Controlling Premises Assumptions
Alternatives Strategy Policy Procedure
Rule Programme Budget
Summary
Planning
Planning is deciding in advance what to do and how to do. It is one
of the basic managerial functions.
Planning therefore involves setting objectives and developing an
appropriate course of action to achieve these objectives.
Importance of Planning
Planning provides directions, reduces risks of uncertainty, reduces
overlapping and wasteful activities, promotes innovative ideas,
facilitates decision making, establishes standards for controlling.
Features of Planning
Planning focuses on achieving objectives; It is a primary function
of management; Planning is pervasive, continuous, futuristic and
involves decision making; It is a mental exercise.
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Limitations of Planning
Planning leads to rigidity; reduces creativity; involves huge costs; It
is a time consuming process; Planning does not work in a dynamic
environment; and does not guarantee success.
Planning Process
Setting objectives: Objectives may be set for the entire organisation
and each department or unit within the organisation.
Developing premises: Planning is concerned with the future which is
uncertain and every planner is using conjucture about what might
happen in future.
Identifying alternative courses of action: Once objectives are set,
assumptions are made. Then the next step would be to act upon them.
Evaluating alternative courses: The next step is to weigh the pros
and cons of each alternative.
Selecting an alternative: This is the real point of decision making.
The best plan has to be adopted and implemented.
Implement the plan: This is concerned with putting the plan into action.
Follow-up action: Monitoring the plans are equally important to
ensure that objectives are achieved.
Types of Plans
Objectives: Objectives therefore can be said to be the desired future
position that the management would like to reach.
Strategy: A strategy provides the broad contours of an organisation’s
business. It will also refer to future decisions defining the
organisations direction and scope in the long run.
Policy: Policies are general statements that guide thinking or
channelise energies towards a particular direction.
Procedure: Procedures are routine steps on how to carry out activities.
Rule: Rules are specific statements that tell what is to be done.
Programme: Programmes are detailed statements about a project which
outlines the objectives, policies, procedures, rules, tasks, human and
physical resources required and the budget to implement any course
of action.
Budget: A budget is a statement of expected results expressed in
numerical terms. It is a plan which quantifies future facts and figures.
Exercises
Short Answer Type
1. What are the main points in the definition of planning.
2. How does planning provide direction?
Planning 111
Activities
Interview a local small-business manager about how their objectives
are set and the time taken to achieve them. How do their answers
compare with what you have learnt in the chapter.
Case Problem
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.
Questions
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?