An introduction to strategic management

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The Business Environment
2
The scenario approach
Structured investigation through consideration
of- Political - policies, power structures,
alliances, etc. Economic - global markets,
currencies, growth, etc. Social - demographics,
culture, skills, etc. Technological - IT,
communications, logistics, etc. Ecological -
climate, energy, sustainability, etc.
3
Examples of Driving Forces

• Economic
• greying population
• debt burdens
• changing profile of employment
• global competitiveness
• Societal
• 2 billion teenagers by 2001
• declining literacy standards
• rise of single parent families
• role of women in society
• the have and have nots
• portfolio workers

• Technological
• genome project
• superhighway
• multi-media
• Political
• EU pressures
• WTO/NAFTA/ASEAN
• north/south divide
• rise of nationalism
• Ecological
• ozone layer depletion
• refuse/rubbish disposal
• changing weather
• water shortages

4
PESTLED analysis Scania in the UK in 1990s

• Technological
• complexity in truck design
• innovation in on-board management systems
• channel tunnel - rail freight
• innovation in fuel consumption/emission control
  technology
• alternative fuels
• IT logistics distribution
• Legal
• dealers Block exemption review
• EU harmonisation
• truck sizes increases/scale efficiencies
• Ecological
• EU emissions
• lobby for rail freight
• engine service requirements
• increasing public concern re health, QoL etc
• Demographic
• changing shopping habits influencing rates of
  growth and geographical distribution of retailers

• Political
• restrictive government transport policies
• change in government more restrictive
• rail privatisation
• investment in rail infrastructure
• EU pressure to regulate road haulage companies eg
  truck size, driver hours, registration
  requirements
• toll roads
• restriction in central road building
• excise duty on diesel
• increasing levels of truck road tax
• Economic
• effects of economic cycles and demand for new
  trucks
• FX fluctuations
• single EU currency
• increasing interest rates/new vehicle
• Social
• lobby of governments to reduce road traffic
  congestion
• increase in demand for clean cities

5
Questions

• What are the key driving forces?
• In the past?
• In the future?
• What are key uncertainties?

6
Scenarios serve four main purposes-

• Prospective anticipating and understanding risk
• Entrepreneurial discovering new strategic
  options
• To help managers break out of their established
  mental constraints and get closer to seeing
  possible reality
• To evaluate the robustness of strategic options
  given different possible futures

7
Scenario Planning

• Use PEST analysis
• To identify main areas of uncertainty
• With major potential impact in terms of
• - Key environmental influence
• - Drivers of change

HI
Use up to 5 of these factors for scenario building
Potential Impact
LO
LO
HI
Uncertainty
8
The scenario approach - Driving forces

• Define driving forces that will impact upon the
  future business environment

• Outline 2 polar extremes of possible outcomes
  from it.

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Developing Scenarios

• Establish scenario dimensions
• identify horizon year
• brainstorm on external environment
  PEST/STEEP/PESTLED
• cluster and label issues to establish scenario
  agenda
• set up scenario 2 by 2 matrix
• identify scenario themes - what is most relevant
  to the case organisation?
• label scenarios with titles which are memorable
  and represent the dynamics of the situation
• describe scenario stories in the horizon year

13
Key environmental variable ranking chart
Most predictable outcome
Predictable Planning Region
Least impact
Most impact
Problematic Planning Region
Least predictable outcome
14
Scenario End-State Design Chart
Key variable 1 Pole 1
Scenario 1
Scenario 2
Key variable 2 Pole 2
Key variable 2 Pole 1
Scenario 4
Scenario 3
Key variable 1 Pole 2
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Scenario Implications

• Consider your scenarios on behalf of your case
  organisation and ask the following questions
• Can you identify drivers of change? What are they
  and what might be the impact for the case
  organisation?
• Who are the key actors driving change?
• What are the implications for competition in the
  future?
• What are the implications for customers and
  markets in the future?