Simulation scenarios

Simulation scenarios
See also
EFE matrix Scenarios of processes in environment Strategic planning models Strategic management functions Scenarios of states in environment Scenarios of possible events Sensitivity analysis Strategic scenarios method Strategic fit

Simulation scenarios - are used an assessment of the value of the strategic decisions. These decisions differ from each other in terms of the impact of the environment on company's situation.

Simulation scenarios are used in management to model and test different potential outcomes of a decision or action. This can help managers to better understand the potential risks and benefits of different options, and make more informed decisions.

Simulation scenarios applications

Simulation scenarios can be used in a variety of management applications, including:

• Financial forecasting: Simulation scenarios can be used to model different economic and market conditions and their impact on a company's financial performance. This can help managers to identify potential risks and opportunities, and make more informed decisions about investments, financing, and other financial matters.
• Supply chain management: Simulation scenarios can be used to model different supply chain scenarios and their impact on costs, delivery times, and inventory levels. This can help managers to identify potential bottlenecks, optimize logistics, and reduce costs.
• Production planning: Simulation scenarios can be used to model different production scenarios and their impact on costs, delivery times, and inventory levels. This can help managers to identify potential bottlenecks, optimize logistics, and reduce costs.
• Human resources management: Simulation scenarios can be used to model different organizational scenarios and their impact on the workforce. This can help managers to identify potential issues related to employee engagement, retention, and productivity, and take steps to address them.
• Risk management: Simulation scenarios can be used to model different risk scenarios and their impact on the organization. This can help managers to identify potential risks and take steps to mitigate them.
• Strategic planning: Simulation scenarios can be used to model different strategic scenarios and their impact on the organization. This can help managers to identify potential opportunities and challenges, and make more informed decisions about the direction of the organization.

Overall, simulation scenarios can help managers to better understand the potential outcomes of different decisions and actions, and make more informed decisions that align with the organization's goals and objectives.

Stages of preparation

Process of development of simulation scenarios consists of 7 stages:

1. Specify environmental factors affecting the company and their intensity (expressed using units of measurement, and places of occurrence).
2. Specify the descriptors of certain factors for the evaluation of main problem.
3. Determination of the likelihood of the occurrence of descriptors from the previous stage.
4. In this step model are checked through the calculation of a matrix of likelihood values.
5. Scenarios are developed together with their descriptive part based on the model created in previous stage.
6. At this stage it is possible to obtain variants of scenarios based on critical cases (scenarios with small probability, but serious consequences for the company).
7. Summary of earlier stages is prepared, and managers make decision to choose the optimal strategy, which has slightest threat and gives a good chance of success.

References

• Postma, T. J., & Liebl, F. (2005). How to improve scenario analysis as a strategic management tool?. Technological Forecasting and Social Change, 72(2), 161-173.