Question

Q5: a) Outline the situations where scenarios planning can be useful for Organizational Decisions [2 marks] b) A car manufacturer has 2 objectives: to maximize profits and to maximize market share. It develops 2 scenarios for the next 10 years with strategies and respective scores as given in the following table; Objective: Maximize profits Scenarios Carbon fuels Strategy Green prevail Rule Status Quo 100 15 75 Move to Hybrid Cars Produce mixed types of cars Objective: Maximize market share 40 60

Answer 1

5 a) usefulness of scenario planning in Organizational decisions:

Scenario planning focuses on an outlook for the future. It is a method through which organizations can form an idea of possible future scenarios and how these may affect their business strategies and objectives. However, making predictions about the future is very difficult and this is why organizations create a variety of possible future scenarios. This is exactly what Scenario Planning focuses on.

It enables organizations to develop their strategies, products and services and adapt these where necessary in an ever changing world. Scenario Planning is about making different scenarios for different future landscapes. Using these scenarios, an organization will be able to make better decisions when problems or changes occur. An organization knows what it needs to be aware of and which decisions will work to its advantage.

There are many factors that cause an organization to change its strategic plans and direction. Organizations are surrounded by a complex and dynamic market with many external environmental changes. Organizations do not control these factors, but they can take them into account

b) Scenario effectiveness

In the case study the car manufacturing company the company is preparing itself for the next 10 years, It is contemplating with 2 scenario which are (i) maximize the profits (ii) maximize market share. under these 2 objectives the company has developed three scenarios.

The company should select the objective of improving the market share and under that it should select "To produce mixed types of cars"

Analysis on why the above strategy is selected:

There is a direct linkage between improving the market share and earning more profits. When the company expands its footprints in various new geographies it will have customer of different age group. So to be popular among all age group the company should have products which are traditional and modern. Hence it should stick to the method of producing mixed variety of cars.

Capturing a dominant share of a market is likely to mean enjoying the highest profits of any of the companies serving that market. It can also mean winning the leadership, power, and glory that go with such dominance. The younger generations are very much attracted to the cars, before they attain 25 years every one looks to own a car. The younger generation will be a vibrant market and to capture that company should new modern cars. Also the environment is getting largely affected due to the pollution created by using carbon fuel. So going green will be the new way. So producing mixed types of cars will result in being more competitive and gaining more market share.

Initially at the time of entering a new market the profitability will not be higher, but over the period of years by gaining market share the fixed cost of the company will reduce and this will result in profit maximization.Capturing the market share will also result in gaining monopoly in certain geographies were there will be no Competition or very minimal.