plausible, should reflect more extreme outcomes that might require very different strategic responses. 6. Analyze industry structure and business/competitive environment that prevails under each scenario Test the impact of key uncertainties and variables under each scenario 7. Analyze payoffs from various strategies under various scenarios What works under different scenarios 8. Pick a strategy that delivers the best performance across the different scenarios in a manner consistent with management’s risk tolerances Commit to the strategy that works best under what you believe is the most likely scenario (and risk losing big) Attempt to cover all contingencies (at high cost) Hedge, i.e., pick the strategy that yields an acceptable outcome under any strategy (and risk mediocrity) Avoid disaster, i.e., pick the strategy whose worst case outcome under any of the scenarios is least bad (and risk even greater mediocrity) Minimize regrets – choose a strategy that will work well under the most favorable circumstances (and possibly risk disaster) Preserve flexibility/options (and risk forfeiting any early mover advantages due to lack of commitment)
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- Summer '19
- scenario planning, key uncertainties, Prof. Salorio