Scenario Planning Approach to Strategic Management of Small Travel Business in Malaysia

Article excerpt

INTRODUCTION

In recent times, change has become an ultimate issue for organizational survival. To keep abreast with the latest in products, designs and innovations of competitors and incorporating a copycat strategy is not the recipe for long-term success. Only organizations that have the ability to scan the environment effectively with a shared mental model, leading to innovation within can see success and profit potential in the long run. This is the field of strategic management and scenario planning, an alternative tool to strategic management, ensures long-term sustainable survival of an organization. Many strategic planners have found scenario planning as crucial part of strategic management for envisioning the future by producing plausible multiple futures (scenarios) (Van der Heijden, 1996).

A failure to envision seeing the micro and macro environment of an organization has by and large been the root cause for ineffective strategic planning. The three main reasons that have been identified to blind the organizations are:

Operational ineffectiveness: Operational ineffectiveness is one of the causes for low profitability in organizations. Companies that are able to get more out of their inputs, by way of eliminating waste, employing advanced technology, and motivating employees, stand to have higher profitability than competitors because they are able to reduce operating costs. However, not all efficiency models and theories need to be employed and organizations have a choice on their preference. For example, 'zero-defect' can be introduced as a Total Quality Management principle because it leads to efficiency and overall lower expenditure in costs, but then again it is one that a company can live without.

It must be emphasized that although operational ineffectiveness is one of the contributors for failures in organizational processes, it does not, however, drive a company out of competition, at least in the short term. There is a false assumption in organizations that operational activities are a part of strategy. It is certainly an essential element in organizations but however, its ineffectiveness is not the root cause for organizational failures.

Business Successes: Strategic management rethink is more in need for successful companies than those who are struggling. Successful companies are in danger of suffering from strategic failure in times of rapid change (Wack, 1985). Because of their success story they will be locked into strong assumptions and therefore their procedures and policies will be hard to change. In other words, change is not in the agenda. For an instance, IBM, the dominant in the mainframe computer market, failed to envision the growing market for personal computers (Kay, 2001). However, the fact remained that they were the best in mainframe computing. It was their position in the comfort zone that led to their absence in organizational learning coupled with lack of environmental scanning. Had they been open to change, IBM could have very well been the market leader in personal computers as well.

Over dependence on forecasting: Forecasting is important in businesses, especially in situations when an industry is in a state of slow incremental change. However, the limitations of forecasting are overlooked by organizations that emphasizes on these figures for their business development decisions. If the past is a good indication of future, businesses can never fail. The answer seems simple, the predictions went wrong, but the question then arises, 'Can one or two years of failed predictions bring down a business?' Perhaps not, but the lead-time taken to rectify the situation may be the cause. The oil crisis of 1973 is a perfect example. Since the industry was used to an exponential growth of 6 per cent annually, oil companies maintained their capacity expecting the same level of growth. The demand started falling in 1973 and the industry took 2 years to discover that anything at all happened and then a further 6 years to work out the real impact of the crisis (Van der Heijden, 1996)

Forecasting requires identifying what is to be forecasted. …