Scenario Planning Carried out in AMP Company Limited-Based in Australia - Case Study Example

A report on a scenario planning carried out in AMP Company limited based in Australia Name of Student: Name of Institution: Introduction A scenario planning is also referred to us as scenario analysis or scenario thinking. It is a technique used by an organization in order to make some long term goals or objectives that the organization aims to achieve. The long terms goals and objectives should be specific, measurable, achievable, and realistic and time bound (Van der Heijden, 1996). This report of the scenario planning process has been carried out in the AMP Company Limited based in Australia. This company provides financial services in Australia and has also extended to china, India, Japan, Singapore among many other countries. AMP was initially formed as Australian Mutual Provident society. It is one of the largest non-profit insurance companies and has the most shareholders living in Australia and New Zealand. The Process of Developing Scenario Report Step 1.Define the Scope The setting of the appropriate time frame and scope analysis is made which relies heavily on the markets, products, geographical areas or even the level of technologies used. The required time frame may depend on a number of factors which the AMP Company may put in place. These factors are product life cycles, technological changes, political influences such as elections, influence of competitor’s planning horizons and the rate of at which economic factors are changing. Once the significant time frame is identified, the knowledge and ideas are identified that will lead to the significant growth of the organization. The past and future behaviors should be analyzed in order for better planning and the weak points to be identified and instill the spirit of growth to the organization (Schoemaker, 1995). AMP Company limited faces a lot of issues in their business environment. These issues include the internal issues affecting the business. These can be payment of the employees, dividends to shareholders and even employee motivation so as to increase their productivity. These issues should be identified and solutions to any problem should be taken care of. This enables the scenario planning to focus on the important issues (Ringland, 2006). Step 2.Identify the Major Stakeholders Stakeholders are very important to the growth and development of any particular organization more so if engaged in making key decisions. The stakeholders are customers, the government, shareholders, competitors, suppliers and even employees whom the organization may partner with to form its major stakeholders. The stakeholders’ position need to be moving upwards in order to increase their power as stakeholders as well as increase their chances of being involved to key decision making (Schoemaker, 1995). Here the key factors that affect or influence the decision or the issue are stated. The factors that may affect the decisions made include, financial issues, company’s rigidity among other factors. This will enable the decision makers to decide on how to deal with those factors hence avoid hindrances on the decisions based on the issues that affect the company. The AMP Company’s success is influenced by the economic and technological issues. Business cycles should be studied well in order to identify when and what policies to be put in place. The adoption of the technology should be after a great assessment on the appropriateness and also its impact of the future. These main factors that will affect the decision should be stated in this step. This makes it easy for the organization to understand their future expectations. The statement of the main factors that may affect the issue should not be underscored. It should be emphasized. This in scenario planning is very crucial to bring the focused factors for easier analysis (Pascale, 1990). Step 3.Identify Basic Trends This involves the changing environment of doing business where the organization requires strategic measures to be taken in order to generate a list of emerging issues. The emerging issues are defined as a set of external factors that wholly or slightly affect the performance of the organization. These emerging issues that may affect the performance of a firm include; increased environmental regulation, improvement in technology and the reformation of judicial systems as well as stabilization of the political arena. These trends should be recorded for there to be certainty in the future progress of the organization (Schoemaker, 1995). Here, the Company’s key forces that are behind the influence of the factors on the decision issues are stated and listed. Getting to understand how these forces work is so important and makes the management to get the best way of getting the issue sorted. These forces may include, market and customer forces, technological and innovation force, the societal forces and economical and political forces. These forces may be analyzed well by the decision makers to identify the forces that influence the factors that are only relevant to the AMP Company in question. If it is the market and customer forces demanding on a service that need to apply certain technology to offer, the Company will have to adopt the technology in order to improve on provision of the needs for the customers. This will make them to remain competitive now and in the future. If it is the societal forces, the analysis done by the decision makers should bring out clearly defined on the societal forces that affect these factors ( Schwartz, 1991). Step 4.Identify Key Uncertainties It should be noted that there are many uncertainties that affect the performance of any given organization. These uncertainties may also be caused by economic factors, social factors, the prevailing political environment, levels of technology, legal factors as well as industrial related factors. All these uncertainties pose a challenge to any organization in predicting future outcomes related to those uncertainties. The levels of inflation as well as considerations of full employment should also be used as way of identifying any other forms of uncertainties. In this step the most important factors are separated from the least important (Barney, 2011). The AMP Company’s decision makers should analyze and come up with real environmental factors that affect their activities now and in the future. If it is technological change, for them to remain competitive they have to embrace the technology. Technology comes with its cost such that the company should be ready to bear the cost of adopting the new technology to keep them competitive. If the issue is with the political stability, the organization should understand the possible impact on the business performance in the future. If the decision makers anticipate the politics to be stable in the future it will make its decision to that unforeseeable future. The economic environment is as well an important factor (Lindgren and Hans, 2003). Step 5.Construct Initial Scenario Themes This is the most important step in the process of scenario analysis and planning. This step requires the construction of the scenario. The construction of a scenario is done once the different trends and uncertainties are identified and analyzed. This step involves the identification of all the negatives and positives under which both are placed under different alternatives. The scenario that seemed negative may later prove to be of innovation and hidden opportunity. There is also need to identify themes that strategically relevant and which can make it possible to organize the possible outcomes and trends around them (Hubbard and Beamish, 2011). . In this step the degree of certainty and importance is used to rank the factors and forces that influence a decision. The importance of ranking is to determine the viability of a decision. The market and customer forces, societal forces, technological and innovation forces, economic forces and political forces should be ranked. These ranking is done according to the importance, weight and possibility of its influence in the future performance of AMP Company. Ranking by the decision makers should be done critically to avoid making of poor or wrong decision. Importance of ranking is for the process of prioritizing the factors and forces according to their rank. The factors and forces also should be ranked according to the uncertainty. Uncertainty here means the applicability in this organization set up according to the given scenario. If the technological force and legal factors ranks at the top, the organization should have to deal with them first in order to secure its future progress and perpetual existing in spite of the competitive space it operates in (Ringland, 1998). Step 6.Check for Consistency and Plausibility Each decision on the scenarios is tested and evaluated to determine the degree of risk that offers in each scenario. It will be found that the decision offers high risk in some situations and less risk in the others. A scenario may not be complete since it may be having internal inconsistencies or lack a compelling story line. The scenario should undergo through various tests for internal consistency which are the outcome combinations, dealing with the new trends and the reactions of the major stakeholders. The trends should be compatible with the given time frame and if not the unfit trends should be removed. It is clear that full employment does not go with zero inflation therefore there is need to combine those scenarios with uncertainties that go together. The scenarios that are more stable should be checked especially those involving governments and national organizations (Schoemaker, 1995). It will be found that the decision offers high risk in some situations and less risk in the others. These two different scenarios of risky and less risky situation should be listed separated. Any uneducated guess of the riskiness of the situation should not be considered. The evaluation is an elaborate process that involves using a lot of factors to test each of the decisions based on the degree of the riskiness in the future. This is if the decision accepts it as a long term decision on the strategies ensuring that the business lives in the perpetual future. The evaluation should not be done with some professional negligence. Great care has to be taken to ensure that after evaluation the decision arrived at will be viable and has qualities that a desirable for a very workable plan of action in AMP Company and in a given time period. The decision that the decision makers accepts should have passed all the criterions. This includes the check on the riskiness, cost and the possibility on future viability. The degree of the viability of the decision should rank best among the other possible decisions (Ringland, 2006). Step 7.Develop Learning Scenarios This scenario involves the construction of simple and reliable scenarios and testing them for consistency. Previous scenarios provide future boundaries which in many instances may be implausible, irrelevant and inconsistent. The trends by definition are known to appear in all scenarios but sometimes they can be given more weight or attention in different scenarios. Naming the different scenarios is a tool that is very important in this stage. This is the stage where learning scenarios are tools for research and study but not used for decision making (Hamel, et al, 1996). This process enables the decision makers of the AMP limited company to check on the viability of it if used in the management to plan for future objectives. In this step the connection between the scenarios are evaluated. The benefits and cost also of each case scenario is also established. This will enable AMP Company to plan on the appropriate case scenario to adopt (Lindgren and Hans, 2003). Step 8.Identify Research Needs This is the stage where further research is needed in order to have a better understanding of uncertainties and trends. Focus should be placed on the learning scenarios identified in the previous stage which should act as the guidelines. Different organizations need to know more about the outside world in order for them to be able to have access to new technologies and innovations. Technology and innovations that may not be present may be considered in the near future (Hubbard and Beamish, 2011). The AMP Company should study at the business cycles, project on the rate of inflation and other macroeconomic factors that influence a business set up. The social environment is not an issue to be underestimated. The organization should also study the impact of the society on the organization and also the influence of the organization on the society in the future. Environmental issues come in since that business is established in a certain environment. The decision makers should look at both the benefits and cost of the business in the environment. The legal aspect is a mandate and the organization exists because of it. The organization ought to operate within the laws, regulation, rules and provisions in which it was established. After the organization has studied the environmental issues it will pick only the important ones (Schwartz, 1991). Step 9.Develop Quantitative Models After undertaking further research, reexamination of the internal inconsistencies of the scenarios should be done. Assessment is carried out to ascertain whether various interactions should be formalized through quantitative model. Formal models are used in key sectors to avoid situations of straying into implausible scenarios. These models quantify possible consequences of any scenario whether in terms of price behaviors, growth rates or even in market shares (Schoemaker, 1995). This scenario helps the AMP Company to know the possibilities of what the future of the organization holds. It also makes the management to be aware of the possible happenings of the organization’s operation. The listing of the indicators also gives a clue to the possible future trends in the scenarios. This step completes the process of scenario planning (Hamel, et al. 1996). Step 10.Evolve toward Decision Scenarios The scenarios already identified in the previous stages are eventually used to test the strategies and develop new ideas. The steps should be repeated in order to conceptualize and address any major issue that may be facing the organization. One should also consider whether these are the scenarios one may encourage other organizations to use in instilling creativity and help them appreciate better the risks that may be involved (Barney, 2011). AMP offers general financial services and also provides advice on planning issues, superannuation, retirement savings, risk insurance and even on banking services. AMP has over A$128 billion in assets which are managed by the AMP Group and in the year 2009, the net income was A$739 million. The Company has over 10000 employees who serve over 3.8 million clients all over the world and has lucratively targeted Australian and New Zealand citizens (Schoemaker, 1995). Part A The Key Uncertainties U1 Will the AMP Company be able to compete with other companies similar to it? U2 How will the AMP Company deal with market constraints such as entry barriers? U3 Will there be a combination of skilled labor in case of a merger? U4 Is the Company competent enough to provide better services to its customers? U5 Are the Company’s policies on premiums and benefits fulfilled? U6 Will the Company’s total assets and net benefits change as a result of a possible merger? U7 Will the stakeholders remain faithful to the Company after diversification? Part B: The Correlation Matrix U1 U2 U3 U4 U5 U6 U7 U1 X + + 0 + + 0 U2 X X 0 0 + + + U3 X X X _ _ + 0 U4 X X X X 0 0 0 U5 X X X X X _ + U6 X X X X X X _ Scenarios for the AMP Company Total Globalization The AMP Company has plans to merge with other insurance companies in other countries so as to increase the number of clients that they serve globally. Improvements in the communication sector and the use of high technology will speed up the penetration of the Company to many other countries accompanied by a sharp increase of customers due to their better services. The AMP Company is able to offer its services all over the world and its customer base relies heavily on proper relations with customers in the countries it operates in. There are plans by the Company’s management to fund health projects in the countries it operates in since it is a non-profit making company and it only deals with the offering of insurance services to its clients (Ringland, 1998). Mergers Localization and globalization flourish together as the key goal is to bring in a lot of customers and give them the best insurance services. The Company may find it difficult to access customers in certain regions due to existence of a similar company. The Company has so far made several acquisitions and mergers in Australia and New Zealand and plans to continue with the process in order to increase its customer base. It is also these strategic plans that the Company is aiming to create more jobs to attend to the already high number of customers. Being a large Company, there are high possibilities that it will not strain to invest in a new market. In case of a merger, employees remain intact and receive training on the skills needed in the new field. The merger deals are finalized through agreements made on the assets and space to be acquired (Pascale, 1990). Diversification Large companies are usually crippled by their enormous size, their way of management and ownership as well as the influence of stakeholders. The Company has already generated a work plan for the next five years and it has ensured that the management is given to qualified and experienced personnel. The incorporation of the right policies regarding work credibility is given a higher priority. The stakeholders play a key role in ensuring the Company is ran in the right manner and ensure that key implementations are put in place. The need for diversification is involves every aspect of the Company’s way of performance to change -in a manner that will impress the clients as a whole. The AMP Company has embraced the latest levels of technology and plans to remain high-tech even in the long run period. Currently the Company’s most advertization is carried out online since most people have access to the internet. AMP Company has been sensitive to all advertising processes and the management has ensured that it is done competitively in line with its wide range of services. The goal of diversification is to ensure that each and every client is served in the best way possible and that information on premiums paid is put under proper records (Van der Heijden, 1996). Conclusion In conclusion, the process of the scenario planning is very important in the AMP company limited strategic planning and management. The process helps the organization not to concentrate only on the current situation but also project on the future possible business scenarios. The factors that influence decisions have to be clearly stated in this report. The driving forces of the factors should also be stated. The way in which they influence is also very important and as to be discussed on by the decision makers. Scenario planning or scenario analysis comes to a conclusive end when two or three scenarios are selected and the indicators provided on each scenario. Recommendation In this particular report of the scenario planning process, many researchers and strategic planners recommend that every organization should do its own scenario planning. This is if that organization wants to survive into the perpetual future. An organization like AMP Company should understand the factors that affect their decisions. The driving forces also should be identified in order to carry out the scenario planning process successful. What the future holds for the organization should be very important as the present situation in the organization. The organization should always make the long term goals for the organization by adopting the process of scenario planning. References List Barney, J. (2011). Gaining and Sustaining Competitive Advantage, 4th edition. Pearson Chermack, Thomas J., Susan A. Lynham, and Wendy E. A. Ruona. (2001): "A Review of Scenario Planning Literature." Futures Research Quarterly 7 2 7-32. Hamel, G. and Prahalad, C. K. (1996). Competing for the future. Boston: Harvard Business School Press. . Hubbard, G and Beamish, P. (2011). Strategic management- thinking, analysis, action. 4th Edition, Pearson. Lindgren, Mats, and Hans Bandhold (2003). Scenario Planning: The Link between Future and Strategy. New York: Palgrave McMillan Pascale, R. (1990). Managing on the edge: How successful companies use conflict to stay ahead. London: Penguin. Ringland, G (2006). Scenario Planning: Managing for the Future, New Jersey: Wiley Ringland, Gil, (1998). Scenario Planning: Managing for the Future. Wiley & Sons. Schoemaker, Paul J.H. “Scenario Planning: A Tool for Strategic Thinking,” Sloan Management Review. Winter: 1995, pp. 25-40. Schwartz, Peter. (1991) . The Art of the Long View: Planning for the Future in an Uncertain World New York: Currency Doubleday. Van der Heijden, Kees. , (1996). Scenarios: The Art of Strategic Conversation. Wiley & Sons Read More