Scenario Development

University:
California State University, Northridge
Course:
BUS 104 | Introduction to Business
Academic year:

2023
Views:

140

Pages:

2
Author:

JJIssac

SCENARIO DEVELOPMENT Scenario development involves creating alternative plausible future scenarios. It is useful when accurate forecasts are difficult due to many influencing variables. Scenarios allow integrated consideration of multiple variables in explaining alternative futures and implications. They describe in detail how certain events may unfold and impact the organization. Steps to develop scenarios: 7. Make contingency plans for each scenario. Alternative scenarios are common in economic planning too. The Planning Commission of India has scenarios on growth rates, poverty etc. under different assumptions. Common scenarios are most likely, optimistic, pessimistic. But more than 3 scenarios also occur. Methods of Scenario Building:  Premising: Draws scenarios from basic assumptions about key variables and trends. Sometimes exaggerates certain tendencies toward extreme outcomes.  Systems diagram: Explores strategic options from the present system of organizational activities.  Critical site: Identifies key decision points like board meetings and anticipates scenarios based on possible decisions.  Newspaper headline: Posits hypothetical future headlines and maps back to current industry developments and strategies.  Logical possibilities: Generates additional scenarios based on existing ones. 1. Identify key strategic issues affecting the industry/firm and prioritize them. 2. Select the most important issues to focus scenario development on. List organizational assumptions on those issues and variations. 3. Prepare preliminary descriptions of the issues and how they evolved, including economic, political, social, cultural influences. Involve industry experts. 4. Draw out issue implications for organizational performance. What has/can the organization do to address them? Identify variables it can and cannot control. 5. Develop detailed future scenarios under best case, worst case, most likely assumptions. Assess performance implications. 6. Discuss with top management and refine scenarios. In sum, scenario development is a key forecasting technique when the future is uncertain. It integrates complex variables to explain alternative futures and implications. The aim is to formulate contingency strategies to address diverse possibilities.