Scenarios of possible events
Scenarios of possible events  

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Scenario methods are a tool of strategic management. They help in preparing of corporate strategy in the long run. These methods predict different types of phenomena that can occur in a changing environment and help managers in preparing for them.
Scenarios of possible events represent the impact of various factors influencing the company, its trends and the capacity of the enterprise to adapt to them.
Building the scenario
Construction of scenarios consists of five stages:
 Identification and development of events in the environment  to do this, managers divide the spheres of business environment, and then choose factors in the sphere that may affect the company's activities in the period for which the strategy is created. Such spheres can be:
 The economic sphere
 Technological sphere
 The social sphere
 Sphere of regulatory and legal matters
 Sphere of international activity
 The political sphere
 The demographic sphere
 Determine the effects of selected factors on the activity of the enterprise  for this purpose managers should determine the trend (increasing, constant, decreasing) of each factor. Then they should assess impact of each factor on a scale of 5 to 5, or 110 (where 5 (1) represents the most negative impact and 5 (10)  the most positive) and the probability of each factor to emerge.
 Calculating the average impact force of a factor to a company by multiplying the assessment and the probability of each factor.
Results of above steps is recorded in following table:
Table. 1. Environment trend analysis
Name of factor  Trend  Evaluation of the impactforce (110)  Probability (01)  The average impact 
Economic sphere  
Factor A 


Factor B 


Sphere of Technology  
Factor K 


Factor L 

Types of scenarios
Based on the above table managers can then create various scenarios. Most commonly used are the following scenarios:
Optimistic scenario
It takes into account the highest rated trend of each factor.
Table 2. Optimistic Scenario
Elements of scenario  The strength of the impact 
Economic sphere  


Sphere of Technology  

Pessimistic scenario
It takes into account the lowestrated trend of each factor
Table 3. Pessimistic scenario
Elements of scenario  The strength of the impact 
Economic sphere  


Sphere of Technology  

The most likely scenario
It takes into account trend, which has the highest probability of occurrence.
Table 4. The most likely scenario
Elements of scenario  Probability  Negative strength of the impact  Positive strength of the impact 
Economic sphere  


Sphere of Technology  

Surprise scenario
It takes account of this trend, which has the lowest probability of occurrence.
Table 5. Surprise scenario
Elements of scenario  Probability  Negative strength of the impact  Positive strength of the impact 
Economic sphere  


Sphere of Technology  

Rating of scenarios
To evaluate the quality of each scenario managers need to create a table containing:
 Deviation from the most optimistic scenario from the most likely scenario, measured as an average difference between effect of each factor of each scenarios.
 Deviation from the pessimistic scenario from the most likely scenario (measured as above)
 The sum of average deviations
Place each factor, determined by the sum of average deviations (first is the factor having the largest deviation)
Table. 6. Evaluation of the results
Name of factor  Optimistic scenario  Pessimistic scenario  Most likely scenario  Deviation OptimisticMostLikely  Deviation PessimisticMostLikely  Sum of deviations  Rank 
Economic sphere  

Average impact force  Average impact force  Average impact force  
Sphere of Technology  

Average impact force  Average impact force  Average impact force 
On the basis of the above table managers creates list of opportunities and threats, which facilitates a clear breakdown of business development opportunities and risk areas. This is the basis for planning of various company strategies.
References
 Hsia, P., Samuel, J., Gao, J., Kung, D., Toyoshima, Y., & Chen, C. (1994). Formal approach to scenario analysis. IEEE Software, 11(2), 33.