Management Glossary

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scenario analysis

A form of strategic planning that considers a variety of alternative situations (scenarios) that may happen in the future. The analysis of the scenarios considers the threats and opportunities that the scenarios might carry with them along with the outcome for the company should the scenario occur. If the outcome of one scenario would be better than all other scenarios, the company should attempt to steer the organization toward that scenario if possible.

The company should also use the identification of opportunities and threats to initiate actions that will take advantage of the opportunities and minimize the threats where possible. Because external factors such as consumer tastes, competitive activity, government regulations and natural disasters will, to some extent, determine which scenario occurs, the organization cannot accurately shape the scenario that unfolds, the organization should develop action plans for those potential scenarios that pose the greatest threats.

Contributed by: Managerwise Staff

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