Scenario planning is a tool in strategic planning that relies on the technologies and tools used in managing future uncertainties. It entails developing different representations of the future of a company basing on the assumptions concerning the forces that are driving the market. The process of scenario planning also assists in making the desired future real. The use of scenario planning has increased over time, and research shows that there is a relationship between uncertainty and adoption of the scenario planning techniques. Growing risk enhances the significance of identifying the future trends and the expected business landscape. Therefore, it is evident that the use of scenario has increased because of higher uncertainty and complexity in a business environment.
Situation arranging may include parts of frameworks considering, particularly the acknowledgment that many elements may join in multiple approaches to make at some point astounding prospects (Zanjirani & Hekmatfar, 2009). The strategy additionally permits the incorporation of items that are hard to formalize, for example, novel bits of knowledge about the future, profound moves in qualities, different directions or innovations. Frameworks thinking utilized as a part of conjunction with situation arranging prompts to conceivable situation story lines in line with the fact that the causal relationship between variables can be illustrated. In these situations when scenario planning is coordinated with frameworks thinking the way to deal with situation improvement, it is infrequently alluded to as dynamic conditions.
Scenarios can be established from any time frame, and they offer greater usefulness if it is created for a long period. The use of scenario planning for a range of strategic and planning activities to quickly adapt to the notable highlights of broadening future realm and widening scenario cone of the future possibilities (Chang, 2010). Different factors can play the role of influencing the direction of the future developments.
Scenario planning is used extensively at the corporate level. Additionally, scenarios are applicable in both the private and public institutions especially when there is the need of making a critical decision in the firm (Zanjirani & Hekmatfar, 2009). Shell is the most famous company that uses scenarios at the corporate level. The use of scenarios gives the company the chance of planning for the activities that will take place in the future. Scenario planning is mostly used among the large enterprises in the United States. The other companies do not use scenarios mostly when conducting different activities in their organization.
The process of building a situation also plays a significant role in the learning of a firm. The study indicates that the main benefits of using the scenarios are to improve the decision-making process identifying the new things and issues that may occur in future (Chang, 2010). Additionally, the audience of situations depends on the scope of a scenario project. Therefore, the scenario does not play the role of predicting the future but it explores various plausible future conditions with the aim of extending the sphere of thinking of the people participating in the process of scenario development.
Definition of the term scenario
A scenario refers to a description of the future situation and course of events that gives an individual the chance of moving forward from the original position to the future situation. A scenario does not provide a future forecast of the things that will happen in future, but it provides consistent pictures that might happen without reviewing the probability of it becoming a reality. A scenario is also a plausible, consistent, and alternative picture of the future that consists of the suited premises and the description of the development paths that are built on the current situation. The scenario is also an alternative future that comes from a combination of policies and trends.
The aim of a scenario is to foster the issue of system thinking on the external influencing factors. It also reveals the general assumptions and assists in identifying the strategic gaps and structural changes. Furthermore, it makes the decision makers become more sensitive to the potential and reduce the misjudgments (Ringland, 2014). A scenario can also play the role of improving the inherent flexibility to the environmental uncertainty and offer proper preparations for the possible breakdowns of the systems. It also stimulates communication and strategic thought in firms.
In theories, a scenario is considered as a synthesis of several paths that result in the possible futures. Scenarios are sometimes described as a particular set of variables or events. The idea behind the establishment of a situation is to develop future planning about various possibilities. The scenario is also defined as an important tool in the future studies because it helps to foresee the future as other people make clarifications on some of the issues (Zanjirani & Hekmatfar, 2009). Another definition of a scenario is that it is a narrative description of the possible development or state of affairs overtime. It is useful in communicating speculative thoughts concerning future events and state of affairs overtime. It is significant in expressing speculative thoughts on the future developments of prompt discussion and feedback to help in stimulating the imagination. A scenario is based on the quantitative information although it might also include qualitative information.
Some of the characteristics of a situation include it presents alternative pictures instead inferring trends from the paths. Additionally, it embraces both quantitative data and qualitative perspectives. A scenario can also allow for sharp discontinuities, which can also be evaluated. A situation also needs the decision maker to question the underlying assumptions. Therefore, the situation is regarded as an important tool in strategic planning.
Definition of scenario planning
Scenario planning can be defined as a discipline that helps in rediscovering the original entrepreneurial power regarding creative foresight in greater complexity, substantial uncertainty, and accelerated change. It can also be defined as a method for learning concerning the future by understanding the impact and nature of the important driving forces that influence our future. Scenario planning refers to a strategic planning approach used by some of the organizations to make flexible long-term plans. Furthermore, people consider situation management as having a different meaning to some of the individuals. Scenario management has three main disciplines, which include human-computer interaction, strategic management, and software and systems engineering (Chang, 2010). There is also inadequate unified research framework in scenario planning because there are various disciplines. Currently, situations are becoming popular and useful for any individual establishing a strategy on something that seems to remain uncertain and fast changing.
Scenarios are supposed to be detailed and intricate as imagination allows. Research should be done beyond the things that are expected in the future because they should show inconceivable and disaster change. Some of the companies also consider scenarios as preferences or projections. Furthermore, there are credible stories that are used in describing the various paths that result in the alternative in the futures. Exploring the different paths uncovered by scenarios, different businesses can examine the actions that should be taken to serve the company and ensure that it survives and becomes successful. Additionally, people and businesses should not consider scenarios as the forecast for the future rather it should be regarded as a compilation of what-ifs. Through this, scenarios will be adequately evaluated and planned.
Situation planning is an essential arranging strategy that a few associations use to make adaptable long haul arranges. It is in expansive section an adjustment and speculation of great strategies utilized by military insight. Scenario planning is an important tool as it helps an organization to prepare for the future. The aim of scenario planning is discovering is exploring the alternative ways that the situation can be developed to from the current fundamental uncertainties (Ramirez & Wilkinson, 2016). Additionally, it aim is to make maximum utilization and relevant knowledge in the borders of the customary academic insights. Furthermore, the construction of the interdisciplinary scenarios may result in having an improved understanding of the complex interactions between the driving forces propelling individuals to the future.
The first strategy was that a gathering of investigators would create recreation diversions for approach producers. The diversions consolidate known realities about the future, for example, socioeconomics, topography, military, political, mechanical data, and mineral stores, with the main main impetuses recognized by considering social, specialized, monetary, natural, and political (STEEP) patterns (Ringland, 2014). In applications, the accentuation on gaming the conduct of rivals was decreased. At Royal Dutch/Shell, for instance, situation planning was seen as changing outlooks about the exogenous piece of the world, preceding particular planning systems.
Origins of scenario planning
Scenario planning was developed first for utilization in the military although the concept comes from theoretical studies. The air force of the United States utilized scenario planning when trying to determine the things that the enemy might attempt to conduct. Through this kind of strategy, they were prepared for anything. The first person to relate to issue of scenario planning in the 1960s was Herman Khan. Furthermore, in 1970sscenario planning came into light when Pierre Wack developed his planning department. The department was influential in oil shock price of 1973 which swept the countries. During this time, a shell went from being a weak oil firm to being one of the largest oil companies in the world. The reason is that only Shell that was prepared for what might take place in the future. Therefore, Wack made the scenarios real and made individuals understand the detrimental impacts that might happen if precautions were not taken immediately (Chermack, 2011). Therefore, when the shock came, the shell was very prepared as compared to the other oil companies. Therefore, the shell is regarded as the firm that placed scenario planning on the map. After people had heard of the unique and sustainable strategy that was developed by Wack, other companies developed their planning departments quickly.
Most researchers trait the acquaintance of scenario planning with Herman Kahn finished his work of US Military in the 1950s at RAND Corporation where he built up a method of depicting the future in stories as though composed by individuals later on. He received the expression "situations" to illustrate these stories. In 1961, he established the Hudson Institute where he extended his case work to social determining and an open approach. One of his most questionable employments of situations was proposing that an atomic war could be won (Chermack, 2011). Though Kahn is referred to as the father of scenario planning, in the meantime Kahn was building up his techniques at RAND, Gaston Berger was creating similar strategies at the Center d'Etudes Prospective which he established in France. His technique, which he named 'La Prospective,' was to create standardizing situations without bounds, which were used as a guide in detailing open arrangement. In the mid1960s different creators from the French and American organizations commenced distrib...
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