Using Scenario Planning to Reshape Strategy SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
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Case Study Description of Using Scenario Planning to Reshape Strategy
This is an MIT Sloan Management Review article. In recent years, organizations have been caught off guard by economic volatility, unexpected political events, natural disasters, and disruptive innovations. In response, the authors note, executives are showing a new interest in scenario planning. Rather than tying their company's future to a strategy geared to one set of events, executives are coming to the view that smart management benefits from a richer understanding of the present possibilities afforded from multiple views about possible futures.Scenario planning came to prominence following World War II and gained recognition in the corporate world in the late 1960s and early 1970s. While several different approaches to scenario planning have emerged since then, this article focuses specifically on the Oxford scenario planning approach. Rather than taking a probabilistic stance (that is, making predictions in percentage terms or as best-case/worst-case scenarios) or a normative stance (that is, envisioning what a future should look like), the Oxford scenario methodology is based on plausibility. By recognizing the part of uncertainty that is unpredictable and by actively exploring the sources of the turbulence and uncertainty, the goal is to iteratively and interactively generate new knowledge and insights to help organizations reperceive their circumstances. During periods of turbulence, unpredictable uncertainty, novelty, and ambiguity (what the authors refer to as TUNA conditions), organizations frequently experience serious challenges that threaten existing value chains, communities, and even whole fields of endeavor. Such conditions can be unsettling and destabilizing on many different levels. A core feature in the Oxford scenario planning approach is making a distinction between the immediate business environment an organization inhabits (where business transactions take place) and the broader environment, or context, in which it operates. Different organizations go about scenario planning in different ways -there is no cookie-cutter methodology, the authors write. This article examines two cases. The first case involves Rolls-Royce plc, a leading supplier of power systems for aircraft and the marine and energy markets; the second case looks at the Royal Society of Chemistry, a London, U.K.-based international organization involved in advancing the field of chemical sciences. In addition to showing how these organizations used scenario planning, the authors discuss the challenges and opportunities of scenario planning more broadly.
Authors :: Rafael Ramirez, Steve Churchhouse, Jonas Hoffman, Alejandra Palermo
Swot Analysis of "Using Scenario Planning to Reshape Strategy" written by Rafael Ramirez, Steve Churchhouse, Jonas Hoffman, Alejandra Palermo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Scenario Planning facing as an external strategic factors. Some of the topics covered in Using Scenario Planning to Reshape Strategy case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Using Scenario Planning to Reshape Strategy casestudy better are - – increasing commodity prices, increasing transportation and logistics costs, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy,
talent flight as more people leaving formal jobs, wage bills are increasing, etc
Introduction to SWOT Analysis of Using Scenario Planning to Reshape Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Using Scenario Planning to Reshape Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Scenario Planning, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Scenario Planning operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Using Scenario Planning to Reshape Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Using Scenario Planning to Reshape Strategy case study
2. Improving business portfolio management of Scenario Planning
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Scenario Planning
Strengths Using Scenario Planning to Reshape Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Scenario Planning in Using Scenario Planning to Reshape Strategy Harvard Business Review case study are -
Ability to recruit top talent
– Scenario Planning is one of the leading recruiters in the industry. Managers in the Using Scenario Planning to Reshape Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Low bargaining power of suppliers
– Suppliers of Scenario Planning in the sector have low bargaining power. Using Scenario Planning to Reshape Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Scenario Planning to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the Using Scenario Planning to Reshape Strategy Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Scenario Planning has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Using Scenario Planning to Reshape Strategy Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Scenario Planning are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High brand equity
– Scenario Planning has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Scenario Planning to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Scenario Planning
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Scenario Planning does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Scenario Planning is present in almost all the verticals within the industry. This has provided firm in Using Scenario Planning to Reshape Strategy case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Strategy & Execution industry
– Using Scenario Planning to Reshape Strategy firm has clearly differentiated products in the market place. This has enabled Scenario Planning to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Scenario Planning to invest into research and development (R&D) and innovation.
Analytics focus
– Scenario Planning is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Rafael Ramirez, Steve Churchhouse, Jonas Hoffman, Alejandra Palermo can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Scenario Planning has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Superior customer experience
– The customer experience strategy of Scenario Planning in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Using Scenario Planning to Reshape Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Using Scenario Planning to Reshape Strategy are -
Skills based hiring
– The stress on hiring functional specialists at Scenario Planning has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Scenario Planning has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Using Scenario Planning to Reshape Strategy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Scenario Planning has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Using Scenario Planning to Reshape Strategy, it seems that the employees of Scenario Planning don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow decision making process
– As mentioned earlier in the report, Scenario Planning has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Scenario Planning even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Workers concerns about automation
– As automation is fast increasing in the segment, Scenario Planning needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Scenario Planning has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of Scenario Planning, firm in the HBR case study Using Scenario Planning to Reshape Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Using Scenario Planning to Reshape Strategy that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Using Scenario Planning to Reshape Strategy can leverage the sales team experience to cultivate customer relationships as Scenario Planning is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Rafael Ramirez, Steve Churchhouse, Jonas Hoffman, Alejandra Palermo suggests that, Scenario Planning is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Using Scenario Planning to Reshape Strategy has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Scenario Planning 's lucrative customers.
Opportunities Using Scenario Planning to Reshape Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Using Scenario Planning to Reshape Strategy are -
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Scenario Planning in the consumer business. Now Scenario Planning can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Scenario Planning can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– Scenario Planning has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Scenario Planning can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Using Scenario Planning to Reshape Strategy suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Scenario Planning to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Better consumer reach
– The expansion of the 5G network will help Scenario Planning to increase its market reach. Scenario Planning will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Scenario Planning to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Scenario Planning to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Scenario Planning can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Scenario Planning has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Using Scenario Planning to Reshape Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Scenario Planning to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Scenario Planning to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Scenario Planning can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Using Scenario Planning to Reshape Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Scenario Planning can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Scenario Planning can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Using Scenario Planning to Reshape Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Using Scenario Planning to Reshape Strategy are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Scenario Planning.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Scenario Planning business can come under increasing regulations regarding data privacy, data security, etc.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Scenario Planning needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Scenario Planning can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Shortening product life cycle
– it is one of the major threat that Scenario Planning is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Using Scenario Planning to Reshape Strategy, Scenario Planning may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Scenario Planning can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Using Scenario Planning to Reshape Strategy .
High dependence on third party suppliers
– Scenario Planning high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Regulatory challenges
– Scenario Planning needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Scenario Planning can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Scenario Planning can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Scenario Planning with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Scenario Planning in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Using Scenario Planning to Reshape Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Using Scenario Planning to Reshape Strategy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Using Scenario Planning to Reshape Strategy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Using Scenario Planning to Reshape Strategy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Using Scenario Planning to Reshape Strategy is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Scenario Planning needs to make to build a sustainable competitive advantage.