Question

Q5: a) Outlin e the situations where scenarios planning can be useful for organizational Decisions A car manufacturer has 2 objectives: to maximize profits and to maximize market share. It evelops 2 scenarios for the next 10 years with strategies and respective scores as given in the following table; b) Objective: Maximize profits Scenarios Green Rule Carbon fuels prevail Strategy 0 100 Status Quo 75 15 Move to Hybrid Cars 60 40 Produce mixed types of cars Objective: Maximize market share Scenarios Green Rule Carbon fuels prevail Strategy 0 70 Status Quo 100 50 Move to Hybrid Cars 30 85 Produce mixed types of cars The company's managers consider that the improvements from the worst market share to the best are only 35% as desirable as the improvements from the worst to the best profit. Prepare and execute an extensive analysis and assessment to recommend the most robust strategy for the company.

Answer 1

5)

a) There are various situations where scenario planning can be useful for organizational decisions. Some of the situations are:

• Suppose the demand of product is increasing at 10%. The organization can assume the growth of 10% for next 10 years and check for capacity versus demand gap. In case there is a huge gap, the decision can be taken to invest on capacity expansion. In this, multiple scenarios can be plotted like : 5% growth, 7% growth, 10% growth etc.
• A company is looking for portfolio diversification and planning to come up with new product. The options available with company are:
  • Produce in-house
  • Import from other subsidiary where it is already produced
  • Get the manufactured by contract manufacturer

Now, all three above options will have different capital requirement and profit margins. Basis the growth potential, company can take up the call. If the volume is low, it is better to import. If the volume is medium, company can plan to get it manufactured by contract manufacturer but cost will be lower than that of import. If volumes are high, company may plan to invest for in-house capability