Rahul started a business of preparing and supplying sweets through home delivery at a place that is used both for production and as a showroom for sale in New Delhi. He made a plan forecasting the sales of different types of sweets in various areas of New Delhi for each month of the year to earn a profit of 15% on capital employed. He set a sales target of ₹1000000 in the current year with an 8% increase every year. He set the criteria of selecting suppliers from whom he would make purchases of raw material. The planning paid off and the business was able to achieve its targets.

Which step is followed by Rahul after setting an objective of sales target of ₹1000000 in the current year with an 8% increase every year?

Developing premises

The correct answer is option 2- Developing premises.

After setting objective, assumptions are made by Rahul which is the step of developing premises.

Planning is a process of decision-making. Planning includes following steps-
(i) Setting Objectives: The first and foremost step is setting objectives. Every organisation must have certain objectives. Objectives may be set for the entire organisation and each department or unit within the organisation.
(ii) Developing Premises: Planning is concerned with the future which is uncertain and every planner is using conjecture about what might happen in future. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises.
(iii) Identifying alternative courses of action: Once objectives are set, assumptions are made. Then the next step would be to act upon them. There may be many ways to act and achieve objectives. All the alternative courses of action should be identified.
(iv) Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative. Each course will have many variables which have to be weighed against each other. The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved.
(v) Selecting an alternative: This is the real point of decision making. The best plan has to be adopted and implemented. The ideal plan, of course, would be the most feasible, profitable and with least negative consequences.
(vi) Implementing the plan: This is the step where other managerial functions also come into the picture. The step is concerned with putting the plan into action, i.e., doing what is required.
(vii) Follow-up action: To see whether plans are being implemented and activities are performed according to schedule is also part of the planning process. Monitoring the plans is equally important to ensure that objectives are achieved.