Planning & Decision Making: Steps, Types, Styles & Cases

TAKEAWAYS:

• Planning is a purposeful, future-oriented process that aligns resources with goals (e.g., NTC’s 5-year infrastructure expansion plan).
• Rational decision-making follows a logical 7-step model but is limited by bounded rationality (e.g., Google’s 15% R&D budget allocation).
• Decisions are classified by structure (programmed vs. non-programmed) and conditions (certainty, risk, uncertainty).
• Decision-making styles (directive, analytical, conceptual, behavioral) shape outcomes (e.g., Pathao’s rapid expansion vs. NEPSE’s cautious IPO listings).
• Ethical planning (e.g., Himalayan Java’s fair-trade coffee sourcing) balances profit with social responsibility.
• Case studies (e.g., Heathrow Terminal 5’s $8.6B failure) teach how poor planning leads to catastrophic outcomes.

1. Planning: The Foundation of Management

Planning is the primary function of management—it sets the direction for all other functions (organizing, leading, controlling). Without planning, businesses operate reactively, risking inefficiency or failure.

1.1 Definition and Purpose

Planning is:

"The process of setting objectives and determining the actions needed to achieve them, given the organization’s resources and environment."

Key purposes:

• Provides direction (e.g., Ncell’s 4G network rollout).
• Reduces uncertainty (e.g., Daraz’s holiday inventory forecasts).
• Encourages innovation (e.g., eSewa’s UPI integration).
• Facilitates control (e.g., Nabil Bank’s loan default tracking).

1.2 Types of Plans

Plans vary by time horizon, scope, and flexibility. Use this table to compare:

**1.3 Steps in the Planning Process

Worked Example: Nabil Bank’s Loan Approval Plan

1. Objective: Approve 10,000 SME loans in 2024 with <5% default rate.
2. Premises: Interest rates at 10%, GDP growth at 5%, unemployment at 8%.
3. Alternatives:
   • Option 1: Manual underwriting (slow, high default risk).
   • Option 2: AI-driven credit scoring (faster, lower risk).
4. Evaluation: Option 2 reduces processing time by 60% and defaults by 30% (based on pilot data).
5. Implementation: Deploy AI tool in all branches.
6. Monitoring: Track default rates monthly; adjust interest rates dynamically.

2. Decision Making: Choosing the Right Path

Decisions are the core of planning. Poor decisions lead to failures like Heathrow Terminal 5’s $8.6B overrun (underestimated passenger traffic, poor cost control).

2.1 Rational Decision-Making Model

Simon’s 7-step model assumes perfect logic, but real-world constraints (time, info, biases) limit it.

Limitations:

• Bounded rationality: Managers can’t consider all options (e.g., Daraz’s supplier negotiations).
• Satisficing: Choosing "good enough" (e.g., Kathmandu traffic lights timed for average flow, not peak hours).
• Biases: Overconfidence, anchoring (e.g., NEPSE investors fixating on past stock trends).

2.2 Conditions of Decision Making

Decisions are made under 3 conditions, each requiring different approaches:

Worked Example: Daraz’s Inventory Planning Under Uncertainty

• Problem: Demand for diwali gifts fluctuates wildly.
• Approach:
  • Best case: Sell 50,000 units (high marketing spend).
  • Worst case: Sell 20,000 units (low stock).
  • Decision: Order 35,000 units (70% of best case) to balance risk and opportunity.

3. Programmed vs. Non-Programmed Decisions

Decisions are classified by structure and frequency.

4. Decision-Making Styles

Managers use 4 styles (based on Kotter’s model), each suited to different situations:

Case Study: Pathao’s Growth Strategy

• Style Used: Conceptual (long-term vision) + Analytical (data on rider demand).
• Decision: Expand from Kathmandu to Pokhara using ride-hailing + delivery model.
• Outcome: 30% market share in 2 years (vs. 5% for competitors).

5. Ethical Planning and Decision Making

Ethics ensures decisions are fair, transparent, and sustainable. Nepal’s business environment demands this due to:

• High corruption perceptions (Transparency International rank: 117/180).
• Religious and cultural expectations (e.g., fair treatment of Dalit suppliers).

Examples in Nepal:

1. Himalayan Java: Sources coffee from marginalized farmers at 20% above market rate.
2. Nabil Bank: Offers microloans to women entrepreneurs (default rate: 2%).
3. NTC: Solar home system subsidies for rural areas (reduced kerosene use by 40%).

Ethical Decision-Making Framework:

mindmap
  root((Ethical Decision))
    Utilitarian["Maximize overall benefit (e.g., NTC’s rural electrification)"]
    Rights["Respect stakeholders' rights (e.g., Daraz’s supplier contracts)"]
    Justice["Fair distribution (e.g., NEPSE’s IPO lottery for retail investors)"]
    Virtue["Act with integrity (e.g., Chaudhary Group’s CSR disclosures)"]

## In the Real World

1. eSewa’s Transaction Approval

   • Idea: Programmed decisions (rule-based fraud detection).
   • How: If a transaction > Rs. 50,000, eSewa triggers manual review (non-programmed). This balances speed and security.
   • Impact: Reduced fraud by 60% in 2023.

2. Daraz’s Inventory Planning

   • Idea: Decision-making under uncertainty (scenario planning).
   • How: Uses machine learning to predict demand for 50,000+ products. For example, during Dashain, Daraz orders 30% more prasad boxes than last year’s sales.
   • Impact: Reduced stockouts by 45% and overstock waste by 20%.

3. Nabil Bank’s Loan Approval

   • Idea: Rational decision-making model (7 steps).
   • How:
     • Step 1: Problem = High SME loan defaults.
     • Step 2: Objective = Reduce defaults to <5%.
     • Step 3: Alternatives = Manual checks vs. AI scoring.
     • Step 4: AI reduces defaults by 30% in pilots.
     • Step 5: Deploy AI bank-wide.
   • Impact: Approved 12,000 loans in 2023 with 4.2% default rate.

4. Pathao’s Rider Pricing

   • Idea: Analytical decision-making style.
   • How: Pathao uses real-time demand data to adjust surge pricing (e.g., +50% during Dashain traffic). This maximizes driver earnings while keeping riders satisfied.
   • Impact: 25% higher rider retention during peak hours.

## Exam Tip

How This Unit is Tested (Based on Past Papers):

1. Case Analysis (30–40 marks)

   • Pattern: You’ll get a real or hypothetical scenario (e.g., Heathrow Terminal 5, TGSS e-commerce).
   • What to do:
     • Identify the planning/decision-making issue (e.g., poor cost estimation).
     • Apply the 7-step rational model or programmed/non-programmed framework.
     • Suggest ethical alternatives (e.g., "Terminal 5 could have used modular construction to reduce costs").
   • Example Question: "Analyze why Heathrow Terminal 5 failed and how NTC could avoid similar mistakes."
     • Answer Structure:

       1. **Problem**: Overestimated passenger capacity (planning flaw).
       2. **Root Cause**: Lack of **contingency planning** for delays.
       3. **NTC’s Lesson**: Use **scenario planning** for infrastructure projects (e.g., test fiber optic rollout in phases).
       4. **Ethical Angle**: Terminal 5’s cost overrun harmed taxpayers; NTC should prioritize **transparency** in budget revisions.
       

2. Short Definitions (5–10 marks)

   • Common Terms:
     • Programmed decision: "A repetitive decision with a standard response (e.g., approving a Khalti transaction under Rs. 10,000)."
     • Bounded rationality: "Limited decision-making due to time, info, or cognitive constraints (e.g., Daraz’s supplier negotiations)."
     • Contingency plan: "Backup plan for crises (e.g., NEPSE’s market circuit-breaker)."

3. Comparison Tables (10–15 marks)

   • Expected: Compare programmed vs. non-programmed, decision-making styles, or planning types.
   • Tip: Use real examples (e.g., "NTC’s bus route scheduling is programmed; its smart city project is non-programmed").

4. Worked Examples (10–15 marks)

   • How to Score:
     • Show all steps (e.g., 7-step rational model).
     • Use numbers (e.g., "If Nabil Bank’s default rate drops from 8% to 5%, savings = Rs. 200M").
     • Link to Nepal (e.g., "This applies to Pathao’s dynamic pricing").

Common Mistakes to Avoid:

• ❌ Ignoring ethical implications (examiners love this!).
• ❌ Vague answers (e.g., "Planning is important" → Wrong. Say "Planning reduces uncertainty by 30% in SMEs, as shown by Nabil Bank’s loan data.").
• ❌ Forgetting real-world ties (always relate to Nepali companies).

Model Answer Starter for Case Questions:

"The case highlights [core issue, e.g., ‘poor contingency planning’]. Using Simon’s rational model, we see that [step 3: alternatives] was missing—[company] should have considered [alternative, e.g., ‘phased construction’]. Ethically, [company] failed to [e.g., ‘consult stakeholders’], unlike [Nepali example, e.g., ‘Himalayan Java’s farmer partnerships’], which balances profit with social responsibility."