Question
Lira Ltd. is a company manufacturing designer sock. While making its plan, the company takes into consideration the business environment. It constantly adapts itself to changing
environment by making changes in its plan, however it become difficult for the managers of the company to accurately foresee future trends in the changing environment. Competition in the market upsets its financial plans; then sales targets have to be revised
and, accordingly cash budgets also need to be modified since they are based on sales figure.
- What characteristic features of business environment are highlighted in the above lines? State any two.
- State and explain the limitation of planning highlighted in the above lines.
- Identify any two types of plans mentioned in the above para by quoting the lines from it.
Solution
- Features of business environment:
- Business environment is dynamic as it keeps on changing.
- Business environment is uncertain as it is difficult for the managers to accurately foresee future trends in the environment.
- Planning may not work in a dynamic environment.
The organization has to constantly adapt itself to change in environment by making changes in its plans. However, since planning cannot foresee everything, there may be obstacles to effective planning. - Two types of plans:
- Strategy: 'While making its plan, the company takes into consideration the business environment.'
- Budget: ‘Competition in the market upsets its financial plans; then sales targets have to be revised … accordingly cash budgets also need to be modified since they are based on sales figures.’
