Scenario_Planning

School of Sport, Performing Arts and Leisure LI4000 (Strategic Applications) “An Essay on the Effectiveness of Scenario Planning in Hospitality Industry for Determining Future Strategies” Student ID no: 1022288 Semester 2 2010/2011 THE EFFECTIVENESS OF SCENARIO PLANNING IN DETERMINING THE FUTURE STRATEGIES (A STUDY ON HOSPITALITY INDUSTRY) Scenario planning, which is often otherwise called scenario thinking or scenario analysis, is a strategic planning method that organizations use to make supple, durable and continuing strategies (Schoemaker, 1995) Pierre (1985) revealed that scenario planning is about determining what could possibly happen in the future. Mercer (1995) identifies that the basic concepts of Scenario planning are relatively very simple when compared to other management topics of study. Schoemaker (2002) defines that companies need to opt scenario planning to pick the gear on changing circumstances, and to have a right strategy in time. Scenario planning helps to test the consistency in business. It is very much needed to make sure that the companies have right contents that are viable and make necessary changes to ensure the feasibility (Schoemaker, 2002). Capon (2008) reckons that “strategy is to provide organizations with directions” to have a clear idea of the paths that a company choose to achieve its aim is very much necessary, and thereby success which is considered as the ultimate goal of any company. Strategy provides focus and overview for managers and other workers in an organization, includes management of internal as well as external stakeholders, creates competitive advantages and allows organizations to foresee the challenges to be dealt with in future regarding competitiveness and sustainability (Capon, 2008). Strategy is originally a term used in military, which has been adopted by managers to define boundaries for their business (Nickols, 2010). Nickols (2010) states “Strategy is about means and the attainment of ends, but not their specification. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained.” Strategic plans or scenario planning was often considered as an ‘official future’, of an organization, in the past. Trend line generation based on understanding the past trends in business was often considered as the most appropriate method of scenario planning (Schoemaker, 1995). These naive guesses are often proved effective, but impulsive changes in social, environmental and economy might have a very negative impact on scenarios set on these kinds of simplistic guesses (Schoemaker, 1995). Scenario planning helps to identify with how the different strands of a composite tapestry move if one or more threads are pulled (Schoemaker, 1995). Scenario planning is believed to be set up on two major components, according to Schoemaker (1995), the first domain revolves around trends, casting the past trends to understand the history of business and thereby initiating a future trend that is expected to happen. The second realms the unpredictable and indeterminable factors like- future interest rates, political factors, economic recessions, innovations in market etc. An incredible blend of these two components can make a coherent scenario planning that is successful in all means (Schoemaker, 1995). Furthermore, Schoemaker (1995) enumerates scenario planning as a much art as science which is as well prone to a range of ensnares both in content and context. Various companies and businesses have understood the importance of scenario planning and adopted its principles in their business strategies in the near past. Schwartz (1991) argues that scenario planning for business was originally the idea of the Royal Dutch Shell in 1970s. The process of scenario planning for businesses is radically different from other long-term planning methods. Schwartz (1991) draws the following procedure for standard scenario planning:- State the focal issue or decision facing the enterprise- The first step in planning a scenario is to commence with the significant decisions that must be made and then step forward outward to the environment. This will keep the procedure decisive and stop it from degenerating into meaningless assumption about never-ending futures. List the key factors that influence this decision- The limitations or opportunities of the decision that is considered should be analyzed. The logic behind the decision must be supported. What is understood on the issue, what should be researched should be analysed. Identify the driving forces that influence these key factors- The driving factors that contribute positively or negatively to the key issues should be understood. This might include; society, economy, politics, markets, customer behaviour, technology and innovation, organizations core competencies and capabilities. Rank the key factors and driving forces by importance and by uncertainty- Identifying the most important and most uncertain driving forces is very much important. This ranking will recognize the factors and forces that will embrace the characters and settings for the set of scenarios that will be developed. This ranking is based on two criteria, which are the degree of significance for the success of the decision or issue under thought and doubt adjoining these factors and forces. Composing plots for alternate futures that could impact the decision- This is considered as the most creative and important part in scenario planning. Developing a range of plausible scenarios whose differences all have a bearing on the decision under consideration is the main objective of this step. System thinking is essential for plausible plot development because it looks for structural relationships that create behaviour. Evaluate the decision in each of the postulated scenarios- Evaluation of each decision is very much important. This is essential to allow an impartial assessment of the decision in each of these possible futures. This replication part requires a suspension of belief to be familiar with that any of these scenarios could happen. Select indicators and signposts for each scenario- This will provide superior insight into what the scenarios is truly relating. This can also provide significant competitive advantage from knowing what the future holds. It opens sharp sensitivity to the events determining the organisation's future and how to deal with those events. (Schwartz, 1991) References: 1. Schoemaker, Paul J.H. “Scenario Planning: A Tool for Strategic Thinking,” Sloan Management Review. Winter: 1995, pp. 25-40. 2. Mercer, David. "Simpler Scenarios," Management Decision. Vol. 33 Issue 4:1995, pp 32-40. 3. Schoemaker, Paul J.H. Profiting from Uncertainty. Free Press, 2002. 4. Capon (2008) http://books.google.co.uk/books'hl=en&lr=&id=BvD4FtMWAloC&oi=fnd&pg=PR13&ots=h6caeMpuQK&sig=cN3KOF2EojpsLnfy_6ZsQqRNN64#v=onepage&q&f=false 5. Wack, Pierre. "Scenarios: Uncharted Waters Ahead", Harvard Business Review. September-October, 1985. 6. Schwartz, P, “The Art of the Long View”, New York: Doubleday, 1991.