Academic journal article E+M Ekonomie a Management

Scenarios and Their Application in Strategic Planning

Academic journal article E+M Ekonomie a Management

Scenarios and Their Application in Strategic Planning

Article excerpt

Introduction

The impetus for the origin and development of scenarios or scenario thinking were failures of many strategic decisions based on one projection of the future, specifically on values of fundamental factors which influence consequences of these decisions. A great deal of attention has been paid to scenarios since the 70s of the past century. The company Shell was a pioneer of the scenario approach in the strategic decision-making process. Heiden [17] points out that since the 80s of the past century Shell has insisted on the evaluation of every important project against the set of scenarios elaborated. Since then scenarios have become an important tool of creative thinking development when considering possibilities of the future development. Similarly, scenarios became an important tool of decision support, especially of strategic nature. Over the past years scenarios were applied stepwise even in the Czech Republic. Contemporary methods of scenarios construction work on need to ensure flexibility of the strategic plan and get the firm ready for a quick reaction when setting trigger points specifying the corresponding scenario which come to pass. Processing business environment information, known as Business Intelligence, becomes necessity. Strategic scenarios contain approaches of strategic planning, risk management and managerial decision. At the same time demands on the CEO staff grow. Apart from experience and intuition relevant knowledge foundation and work with information sources creates important managerial competences. The goal of this article is to describe the scenario formation methodology in strategic planning processes and to discuss their possible impact on meeting company's strategic goals. Finally, the impacts of risks on strategic planning processes are exemplified by a business case.

1. Scenario Concept

The concept of scenarios is not uniform. The existing differences are usually reflections of the use of decision aspects in scenarios, which are applied to a different extent. It deals with mixing possibilities of external environment development which is not usually influenceable or partly influenceable by the decision-making subject on the one hand and an intentional selection of a certain action variant by this subject on the other hand.

The former concept is prevalent in professional literature. According to Gugan [15], scenarios provide alternative views of the future. They identify some fundamental events, key players and their motivation and offer different perspectives of the future world development. The development and application of scenarios are thus conducive to searching for ways how to challenge future uncertainties. According to Schoemaker [29], scenarios represent internally consistent pictures of the future which are based on a certain group of mutually interlinked factors of both a qualitative and quantitative nature. As per Schoemaker, the starting point of their formation should be specification of what we know about the future development, such as trends, on the one hand and specification of what we do not know, such as key uncertainties, on the other hand. Every scenario is then based on interconnection of these trends and uncertainties. An analogical concept is held by Foster [7]. According to him, scenarios represent a certain picture of the future which combines qualitative and quantitative characteristics. According to Pearson and Lyons [26], the scenario formation comes out of factors which are both uncertain and have a key impact on the system. As per Tessun and Hermann [30], scenarios identify the key driving forces of the development including their mutual dependences which are further tied with existing opportunities and risks. Van der Heijden [18] supports and adheres to the same concept of scenarios. Scenarios, as opposed to usual prediction methods, are focused on the identification of discontinuities in the development and help the organization cope with sudden changes and noticeably contribute to its survival. …

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