Limitations of planning

Correct answer: D. Rigid targets can increase non-financial risks

Only production targets can lead to ignoring safety. In exams, write balance between quantity and safety.

Correct answer: A. Demand may fall due to reduced purchasing power

Sales targets depend partly on the economic conditions of customers. Customer income affects purchasing power, which is the ability to buy goods and services. If a plan assumes that customers will earn a certain amount, but their actual income falls, they may reduce spending, postpone purchases, or choose cheaper products. The sales target based on the earlier assumption may then become unrealistic.

The issue is not that planning itself changes customer income. Rather, the plan used an assumption about the external environment, and that assumption proved wrong. Lower purchasing power can lead to lower demand, so planned sales may not be achieved. The other options deny this relationship or make an unjustified absolute claim. Therefore, option A is correct.

Correct answer: B. Biased information can create a wrong plan

The direct answer is B: biased information can create a wrong plan. Planning requires information that represents the whole relevant market, not only the people who are satisfied. If managers hear only positive opinions, they may wrongly believe that the product, service, price, or delivery is working perfectly. They may then allocate money in the wrong place, ignore defects, or fail to correct causes of dissatisfaction. Option B is correct because selective data produces a distorted picture and therefore weak decisions. Option A is not a necessary result; ignoring dissatisfied customers may actually damage coordination because important problems remain hidden. Option C is an unjustified absolute: biased information does not always reduce cost, and it may increase future costs. Option D is false; poor information makes planning more necessary, not unnecessary. A sound process collects views from satisfied, dissatisfied, new, and lost customers and checks whether the sample is representative. Memory cue: one-sided feedback gives one-sided planning.

Correct answer: C. Financial arrangements and the timing of expansion may be affected

A plan may assume that finance will be available from a bank on time and on stated terms. If the bank changes the interest rate, collateral requirement, loan amount, or approval conditions, the availability of funds may change; consequently, expansion or other planned activities may be delayed. Options A and B have no direct link with changed loan conditions, while D is incorrect because external conditions can change. Exam tip: While stating a limitation of planning, mention uncertainty in future assumptions and external factors.

Correct answer: A. Wrong assessment of social response

Privacy concern affects customer trust. In exams, write social response as external uncertainty.

Correct answer: C. Demand and market share may fall

A substitute product changes price and demand. In exams, treat competitive alternatives as external limitation.

Correct answer: D. Innovation capacity may weaken

Short-term saving can harm long-term innovation. In exams, write balance between short and long term.

Correct answer: A. Natural external uncertainty

A natural event like flood can stop distribution planning. In exams, write natural risk as an uncontrollable factor.

Correct answer: B. Uncertainty of competitor response

The direct answer is Option B: uncertainty of competitor response. A firm can make a plan based on an expectation that competitors will not react, but it cannot control their decisions. Here, competitors immediately launched a new service, so the original assumption became false and the firm’s plan may lose its advantage. Option A is wrong because planning does not control competitors; competitors remain independent market actors. Option B is correct because the unexpected response is the exact uncertainty shown in the case. Option C is wrong because a service is normally connected with the market, customers and competition. Option D is wrong because every plan contains assumptions or expectations about future conditions; the problem is not the absence of assumptions, but an incorrect one. Exam cue: whenever competitors may change prices, products or services, treat their reaction as uncertain and keep the plan flexible.

Correct answer: C. Economic change can alter customer choice

Economic crisis can change customer spending preference. In exams, connect economic environment and demand.

Correct answer: D. Ignored technological risk can disrupt planning

Cyber risk is part of modern technological environment. In exams, link technological risk with changing environment.

Correct answer: A. Wrong forecasting of service capacity weakens planning

Wrong complaint estimation can reduce service capacity. In exams, link service demand also with forecasting.

Correct answer: B. Rigidity of fixed budget

A fixed budget limits the amount of money that can be spent on an activity during the planned period. Such control can prevent careless spending, but it can also become a problem when an unexpected crisis requires immediate action. Protecting the organisation’s reputation may demand expenditure that was not included in the original budget.

If managers cannot move funds or approve extra spending, the organisation may respond too slowly and suffer greater damage. This is the rigidity of a fixed budget, so option B is correct. The other choices concern wages, product design or office discipline and do not explain why crisis-related spending is blocked. The example highlights the need for flexibility in planning.

Correct answer: D. Resistance and low commitment will weaken implementation

Lack of participation reduces ownership of the plan. In exams, connect human participation with implementation.

Correct answer: A. Customer dependence can make planning unstable

Dependence on one major customer increases demand and cash flow risk. In exams, link customer dependence with external uncertainty.

Correct answer: C. Rigid targets can misdirect human behaviour

Very rigid targets can encourage unethical behaviour. In exams, write balance between targets and ethics.

Correct answer: A. Prior consideration of public relations and crisis communication

Public response changes quickly during crisis. In exams, connect crisis communication with uncertain environment.

Correct answer: C. Customer segmentation and service expectation

Customer segments may have different expectations. In exams, link market segmentation with quality of planning.

Correct answer: A. A change in an external party's behaviour can affect planning outcomes

A is correct. While planning, an organisation may depend on external parties such as suppliers. Even if a contract appears stable, a supplier can reduce quality, affecting planned costs, production and customer satisfaction. A long-term contract does not guarantee unchanged quality. Exam tip: Under limitations of planning, mention limited control over external factors and external parties.

Correct answer: C. External dependence on digital infrastructure

The direct answer is C: external dependence on digital infrastructure. The plan depends on a sales app, but the app needs internet connectivity. An internet shutdown is an external event that the company may not fully control. The chain is: single digital channel, loss of internet, app unavailable, orders cannot be processed, and sales stop or fall sharply. Option C is correct because it identifies both the outside dependence and the infrastructure risk. Option A is wrong because employee training may improve use of the app but does not explain a network shutdown. Option B is unrelated; production control concerns making goods, whereas the stated failure is in the sales channel. Option D is also unrelated; wage payment does not explain why app-based sales stop. A stronger plan would include backup channels, offline order procedures, alternative networks, and a communication plan. Memory cue: dependence on one outside system creates concentration risk.

Correct answer: D. Situational decision being blocked by excessive instructions

Too many instructions can block quick decisions. In exams, connect rigidity of planning with decision freedom.

Correct answer: A. The financial viability of the plan may be affected

When a subsidy is withdrawn, the cost of production or a project may rise, changing expected profit, cash flow and return on investment. Therefore, the financial viability of the plan may be affected. A plan cannot control the government’s budget policy; this is an external limitation of planning. Exam tip: Treat changes in government policy or the budget as external factors that can affect planning.

Correct answer: B. Human and internal uncertainty

Employee attrition changes the capacity assumption of a plan. In exams, link human resource risk with implementation.

Correct answer: C. External trade policy barrier

Import restriction is an external legal and trade factor. In exams, write trade policy as a limitation of planning.

Correct answer: D. Change in social environment can make a plan risky

The direct answer is D: change in the social environment can make a plan risky. An advertising message is prepared for a particular social mood and set of values. Those values, public concerns, or interpretations can change. A message that once seemed ordinary may later appear insensitive, offensive, or unsuitable to the audience. If the plan is fixed and is not reviewed, the company may face criticism, loss of trust, or damage to its brand. Option D is correct because it connects changing social conditions with the risk of a fixed promotional plan. Option A is false because markets include people, and people have feelings and social responses. Option B is false because no message remains suitable in every situation; context matters. Option C is false because advertising is a promotional activity that can be planned. The wise response is to monitor social sentiment, test messages, consult diverse groups, and revise communication when needed. Memory cue: a fixed message can become wrong when society changes.