SCENARIO ANALYSIS

Scenario Analysis implicitly accepts that decision-makers may be unable to assess the likelihood of unique future events. Point predictions or 'best guesses' may simply turn out to be wrong. Scenario Analysis helps to draw a range of plausible futures.

The analysis can be done qualitatively (i.e. only with "stories") or qualitatively and quantitatively (i.e. modelling both influence factors and dependencies of different scenarios). Scenarios can, for example, serve to analyze possible future developments in markets, political environments, target groups, and regional or global developments. Any kind of analysis of organisational strategies can be enhanced using scenarios.

Scenario Analysis has several advantages:

• multiple scenarios can alert decision-makers to the uncertainties they face in planning for the future,
• scenarios help to overcome the tendency to be overconfident and base planning on a "best guess" about the future,
• scenarios raise the quality of strategic thinking and broaden perspectives,
• scenarios help to develop "robust" strategies regarding different possible futures.

Conditions for the use of Scenario Analysis for the allocation of resources:

• Success of the resource allocation decision depends on "external" changes in the organisation's environment
• A variety of different future scenarios are imaginable