Planning is based on extensive information from external sources as well as from internal records from within the firm. It encompasses decisions and actions, both long-term and short-term.
Short-term planning (decisions and actions) relates to maintaining (and maximizing) profits according to the opportunities available. In the ever-changing external environment and the non-static internal environment in the firm, appropriate guidance and support should be extended to plan and take decisions. Minimization of loss is one essential aspect in short-term planning - often arising in the context of price reduction by a competitor, whereby the sale revenue can be put into jeopardy. Reduction in own price and incentives would help. Maintaining of, and possibly improving on, current levels of profit is the other essential aspect of short-term planning. As an example, approved purchase schedules of raw materials may be revised whenever purchasing prices are reducing in the market. For this purpose, an efficient information system would be appropriate .and needed.
Long-range planning subscribes to continuity and development of the firm. It may be rather helpful to bracket long-term planning with the role in decision-making - as treated further on.
However, planning can be over different time-spans. One scheme of classification is as under : Operating budgets are for 1 to 1-1/2 years; perspective (or extended) budgets are for 2 to 5 years; strategy plans and budgets are for 5 to 10 years; secular planning is for longer than 10 years; this period of time is also called the planning horizon.
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