Has the planning system contributed indirectly to profits? - Strategic Management

A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency. The justification for central planning is that the consolidation of economic resources can allow for the economy to take advantage of more perfect innovation when making decisions regarding investment and production. In an entirely centralized economy, a universal survey of human needs and consumer wants is required before a comprehensive plan for production can be formulated. The state would require the power to allocate the workforce for production, for setting production values and for overseeing the distribution system of the economy. The most extensive form of a planned economy is referred to as a command economy, centrally planned economy, or command and control economy.

In such economies, central economic planning by the state or government controls all major sectors of the economy and formulates all decisions about the use of resources. Planners decide what should be produced and direct lower-level enterprises to produce those goods in accordance with national and social objectives.Planned economies are in contrast to unplanned economies, i.e. the market economy and proposed self-managed economy, where production, distribution, pricing, and investment decisions are made by autonomous firms based upon their individual interests rather than upon a macro economic plan. Less extensive forms of planned economies include those that use indicative planning in which the state employs "influence, subsidies, grants, and taxes, but does not compel."

This latter is sometimes referred to as a "planned market economy".A planned economy may consist of state-owned enterprises, cooperative enterprises, private enterprises directed by the state, or a combination of different enterprise types. Though "planned economy" and "command economy" are often used as synonyms, some make the distinction that under a command economy, enterprises need not follow a comprehensive plan of production. That is, a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc." but a command economy, while also having this type of regulation, necessarily has substantial public ownership of industry. Therefore, command economies are planned economies, but not necessarily the reverse.

The factors that make for success or failure in business are too numerous and too complex to make it possible to point to one as the determinant factor. But it is difficult to believe that an approach to planning which rationally structures the identification and evaluation of opportunities and the identification and measurement of risks does not in some small way at least contribute to sounder management decisions regarding which opportunities to pursue and which risks to take.


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