Consider the following statements about the limitation ‘Planning may not work in a dynamic environment’:
(A) The environment consists of economic, political, physical, legal and social dimensions.
(B) Cash budgets need to be modified since they are based on production figures.
(C) Planning cannot foresee everything, and thus there may be obstacles to effective planning.
(D) The organisation has to constantly adapt itself to changes in the environment.
(E) Planning may not work in a dynamic environment because managers rely on previously tried and tested plans.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (C) and (D) only
(A) The environment consists of economic, political, physical, legal and social dimensions. — Correct. Change in any of these dimensions can upset a plan.
(B) Cash budgets need to be modified since they are based on production figures. — Incorrect. Cash budgets are based on sales figures. When sales targets are revised, the cash budgets change too.
(C) Planning cannot foresee everything, and thus there may be obstacles to effective planning. — Correct. Future trends cannot be judged accurately when the environment keeps changing.
(D) The organisation has to constantly adapt itself to changes in the environment. — Correct. The environment is dynamic, so the organisation keeps adjusting.
(E) Planning may not work in a dynamic environment because managers rely on previously tried and tested plans. — Incorrect. Relying on tried and tested plans belongs to another limitation, planning does not guarantee success.
NCERT (2026-27 Edition): “(ii) Planning may not work in a dynamic environment: The business environment is dynamic, nothing is constant. The environment consists of a number of dimensions, economic, political, physical, legal and social dimensions. The organisation has to constantly adapt itself to changes. It becomes difficult to accurately assess future trends in the environment if economic policies are modified or political conditions in the country are not stable or there is a natural calamity. Competition in the market can also upset financial plans, sales targets may have to be revised and, accordingly, cash budgets also need to be modified since they are based on sales figures. Planning cannot foresee everything and thus, there may be obstacles to effective planning.” “(vi) Planning does not guarantee success: 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. It is not always true that just because a plan has worked before it will work again. Besides, there are so many other unknown factors to be considered. This kind of complacency and false sense of security may actually lead to failure instead of success. However, despite its limitations, planning is not a useless exercise. It is a tool to be used with caution. It provides a base for analysing future courses of action. But, it is not a solution to all problems.” |