week 2 discussion

week 2 discussion - The only certainty in business is...

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The only certainty in business is uncertainty. For that reason, scenario planning was invented as a tool used by managers to essentially plan for the unplanned. Scenario planning is used to manager to prepare for the unruly external forces a company will undoubtedly experience. If these things are not planned for adequately, then the firm may very well be a victim of circumstances and it could mean the difference between survival and success (Ehrhardt & Brigham, 2009). Apparently, scenario planning has its history based in the military. It was used a Herman Kahn to plan for different scenarios in a possible thermonuclear war (NetMBA, 2010). Businesses soon took note, and Shell used scenario planning to gain an advantage over its competitors during the oil crisis of the early seventies. Scenario planning is not the ability to tell the future. It is actually an effort to think about different scenarios that are possible, and from there strategize and come up with possible solutions for varying scenarios. The real challenge is creating viable solutions for these possibilities (Ehrhardt & Wachowicz, 2006). A typical scenario planning event is set up somewhat like a workshop. It includes high level executives and the idea is to include as many people in the industry that is related to the company. Taking the Shell oil company as an example, if they were to use scenario planning, they would probably have a meeting that included not only the top managers, but industry leaders involved in the drilling, distribution, and sale of oil. They would also most likely include industry experts that could counsel them on alternative energies, and strategies in the event of a supply shortage. The aforementioned example is actually quite reminiscent of the BP oil spill in the Gulf of Mexico that devastated the area in the summer of 2010. The question of whether or not they utilized scenario planning is up for debate, however based upon how they handled the situation and the way the media interpreted it, I would venture to argue that if BP did utilize scenario planning then they may not have strategized the handling of public relations well enough. The scenario planning process is divided into seven steps. Step number one is to dissect the scope of the planning and its time frame. Essentially how far in advance are they planning for, and how far-fetched are the scenarios to be imagined. Step two is to identify what the present situation that will serve as a starting point for each of the speculated scenarios. This is so that all of the scenarios can be on the same starting page. Step three is to identify certain scenarios that are almost certainly going to occur. Step four is to identify what are the major and most important uncertainties in the environment. An addendum to this step is that if the scope of scenario planning is to be wide, then the variable on the environment can be macro in nature; ie political, economic, social, and technological. Step 5 is to identify the more important forces. NetMBA.com has a nice technique for doing this.
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This note was uploaded on 12/02/2011 for the course ECON 101 taught by Professor Smith during the Spring '11 term at Ill. Chicago.

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week 2 discussion - The only certainty in business is...

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