Page 82 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Principles and Practices of Management

Notes
When the demand was higher than the forecasts, he had to increase production at very
short notice, and it was extremely difficult to make arrangements for it. It also involved
additional costs towards workers' overtime.

4.2 Premising

Premises are assumptions about the future which provide the basic framework for forecasting
and planning activities. As pointed out by Koontz and O' Donnel, 'premises guide planning.
They spell out the stage of the expected future event which is believed will exist when plans
operate. They are the expected environment plans.'
It is an extremely tough task to fit all the future complexities together to make a forecast. A
manager should have some framework to use for analysing the future. He has to identify certain
forecasting 'goals' such as:
1. General economic premises are assumptions about the level of activity in the total economic
system. Generally, Gross National Product (GNP) is accepted as an indicator of general
business activity.

2. Industry premises are the assumptions a manager makes about the probability of
occurrences in his industry.
3. Company premises should start with a comprehensive survey of the company in relation
to its environment.
Tangible premises are those that can be stated in physical and monetary units like labour hours,
production units. Intangible premises defy quantification.

Task Find the premise behind the following:
1. The demand of sugar is likely to decrease by 12% in the next quarter because people
have started preferring sugar free to sugar.
2. Most of the new generation hogging to malls in the festive season, we must increase
our supply of the teenage garments during the festive season.

Case Study LG Electronics Ltd.

n a bid to expand the market and boost sales, LG Electronics Ltd. identified institutional
sales as a focus area in the calendar year 1999. It plans to triple the target turnover to
I 150 crores from institutional sales. LG has honed its institutional sales strategy by
identifing and proactively targeting five different segments to push the LG range: brand
promotions; the welfare segment (factory workers and office staff); government sector;
direct users (hospitals, hotels); and the canteen stores departments (CSD) of the armed
forces.
A distinct strategy has been tailored for each of the five segments. In brand promotions for
example, the perceived value of the products given as gifts is important, whereas for the
welfare segment aspirational value, convenience and easy financing are prime factors.
Contd...

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