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Scenario planning has been created for testing business strategies for a series of options for future development. The method was proposed in the 1940’s by Hermann Kahn, a famous futurist who worked at the Rand Corporation and the Hudson Institute.

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Like traditional planning, scenario planning begins with an attempt to determine what is predictable and what is not. But the scenario is beyond the scope of trends or models. Its task is to comprehend the “driving forces”, the so-called “causal texture”, which forms a common structure for the scenarios. Then within this structure, you can develop several stories for different conditions or options for the future.

Scenario planning is the next stage after scenario forecasting, as a result of which various variants of events (scenarios) were obtained in the conditions of uncertainty of the future business environment. At this stage, the resulting scenarios are used to compile specific plans in qualitative and quantitative terms.
Scenario analysis is used to build scenarios of possible development of the company, as well as to study these scenarios. The method is used to select the most appropriate control alternative. Scenario method provides an opportunity to look at the situation from different points of view and to assess the consequences and risks when choosing a scenario.

For most companies this approach is radical. Companies have traditionally preferred the “one solution” strategy, staking on a well-defined, in their opinion, future and drawing up appropriate plans. Large companies, as a rule, do not have experience with several equally possible options for the future. But as soon as they recognize that the future can not be predicted, the need to calculate several variants of development becomes obvious.

Scenario planning is associated with the idea of existence in ambiguous, changing conditions. It can be applied at various levels.

The ability to predict development trends is an important management advantage in an ever-changing business environment. The scenario method focuses the attention of the company’s management on the probability of certain specific events that are characteristic of a market economy. The scenario method combines various data that can be obtained with the help of other methods, both qualitative and quantitative.

The use of this approach gives the company some flexibility and helps to develop both strategic and tactical management decisions and alternative activity plans.

Scenario forecasting can include different scenarios. Two opposite scenarios are usually distinguished:

Pessimistic scenario. In this version, all factors negatively affect the state of the company. This scenario shows the worst case scenario.

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