Describe the four modes of scanning.
1. Formal search - obtain information on the relevance of specific issues and input this information into the planning and decision-making processes
2. Conditional viewing - track pre-selected information from particular sources
3. Informal search - actively look for information through unfocused and unstructured efforts
4. Undirected viewing - scan many diverse sources of information with no specific informational needs in mind
What are the components of a PESTEL analysis?
- Political events
- Economic developments
- Social trends
- Technological innovations
- Environmental issues
- Legal issues
State the components of Porter’s five-forces model.
1. The threat of new entrants
2. The bargaining power of buyers
3. The bargaining power of suppliers
4. The threat of substitute products or services
5. The intensity of competition in the industry
What are the four components of a SWOT analysis?
1. Strengths (Positive + Internal)
2. Weaknesses (Negative + Internal)
3. Opportunities (Positive + External)
4. Threats (Negative + External)
Describe the importance of the row total and column total for influence matrix
The row total indicates:
- How the risk factors affect all of the other risk factors
- Captures the importance of the specific risk factor and its relative ranking
The column total indicates:
- How much each risk factor is influenced by all of the other risk factors
- Called the passive score
Describe the five major steps to arrange scenario planning.
1. Identify the key environmental risk factors
2. Elaborate some of the major themes since they may characterize alternative developments in future competitive market conditions
3. Elaborate on the major themes outlined previously and describe a few environmental scenarios that arise as the consequence of different
assumptions about the risk factors and the underpinning themes that are relevant for the corporate strategy
4. Evaluate the consequences of the key strategic risk factors within the themes that shape the alternative scenarios in view of essential strategic concerns
5. Formulate new strategic alternatives, if required, and evaluate them given the different scenarios
State the benefits of scenario analysis
- Encourages managers and other employees to think through the diverse pieces of the puzzle. Allows managers to organize these fragments into a cohesive pattern in the future business environment
- Allows managers to discuss the implications on the effectiveness of current strategies while evaluating alternative strategic options
- Can help make blind spots visible and uncover areas where further knowledge and insight are needed
- Helps managers evaluate the robustness of strategic alternatives when operating in an uncertain future business context
- Provides executive decision-makers a way to think about the need for corporate response capabilities if they face unexpected events
- Company strategists get to focus on how central external environmental factors can frame competitive conditions
- Can apply structured thinking around possible future business scenarios
Describe the shortcomings of scenario analysis
- Difficult to estimate many of the strategic risks due to insufficient data
- The models backing the quantification of scenarios are built on rather restrictive assumptions
- Fat-tails or regime shifts may not be adequately modeled (or may not be modeled at all)
- There is a strong tendency for people to focus on numbers at the expense of more important qualitative aspects
- Can lull corporate executives and regulators alike into a false sense of security
Describe the difficulties in designing foolproof contingency plans.
- The environment is outside the view of corporate management and therefore cannot be planned for
- Management can be lulled by the illusion of having robust contingency plans in place
- Contingency planning can make things worse if it leads to tunnel vision and ignorance
Plans should not restrict responses only to actions built into an existing repertoire
Describe selection and learning.
- Selection relies on conducting multiple parallel trails, understanding that many
- Speed and low cost are emphasized at the expense of learning
- Relies on a cyclical, experiential, and sequential learning process
- Trial and error learning
Describe when selection may be preferred over learning.
- The degree of complexity and unknowability of the terrain is high
- The cost of learning is relatively high
- Time is of paramount importance to ensure at least one early success
Describe when learning may be preferred over selection.
- Low complexity projects with a low cost of learning
- Long-time horizon projects with larger budgets
Describe high reliability organizations (HROs).
- HROs comprise a particular group of organizations that have the common characteristic that even minor mistakes might result in a fatal outcome
- These organizations have specific practices in place to prevent these problems, while retaining sufficient flexibility to deal with unexpected situations
What is the main advantage of establishing a common risk vocabulary?
The main advantage of establishing a common language is that it ensures a more consistent way of looking upon and analyzing risks across the organization