The Importance Of Scenario Planning In The Automotive Industry

According to Chermack (2011), scenario planning is a tool used for unpredictable assumptions so that the changes can be made in how decision makers see the environment. Scenario planning is the “what if” tool used for changing and improving the quality of people’s perception (Chermack, 2011). The auto industry is an industry that is facing intense competition with each other. Scenario planning is greatly used and is vital in the automotive industry because it is able to provide a number of possible future scenarios. The automotive industry needs to have a strategy in place of how it survives and succeed in either a recession or recall situation. The scenario planning would help the industry respond in the best way possible, avoid the problem

It is very crucial that managers have the outmost knowledge of the external factors because it will help reduce or eliminate of threats and help gain beneficial opportunities for the firm. The ability to know external environmental factors can also help managers know exactly where needs more attention in the firm’s venture. There are six firm’s macroenvironmental factors that are vital and should be of knowledge to managers and firms which are: political, economic, legal, sociocultural, technological, ecological and legal (PESTEL) (Rothaermal, 2017). The political external factors includes government bodies, economic factors includes the growth rates, interest rates, levels of employment, price stability and currency exchange rates, sociocultural factors are made up of society’s norms, culture and values, technological factors are the knowledge of application in order to create or improve products, ecological factors includes global warming, the natural environment and sustainable economic growth and legal factor involves the laws and regulation (Rothaermal, 2017). All of these six factors previously mentioned can either pose a threat or advantage for the

New companies entering the market may be affected by the threat of entry. Consumers are always to get the best deal and save, there when a firm decides to drop their prices to attract consumers and have an advantage it may in return over the profit of the industry. Rothaermal (2017), points out that when new business ventures off they become the competition that may cause a threat to established businesses because established business need to decrease pricing to be competitive causing a decrease in the business profit growth. The power of supplies can cause a threat to the cost of the firm’s production cost which affects the quality of product. There is the potential for a lower profit for the industry when the power of suppliers is present. The power of buyers has the potential to control the certain aspects in the industry which can help provide better quality in product and lower cost. The power of buyers can help the industry be profitable. The force of substitutes deals with the products and services that being provided by the industry to target customers from a different industry. When this happens, it causes both industries to compete against each in order to be competitive and keep their initial consumers. The fifth and last force is the rivalry among existing