1. Contingency Planning (“What if?” analysis)
This is preparing for internal and external environment changes. These can result in opportunities as well as threats. Unlike other plans, contingency plans are based on probabilities rather than solid data.
WHAT SHOULD FIRMS PLAN FOR?
The aim is to identify possible situations that may prevent a firm from achieving its objectives. A firm will look at the S.L.E.P.T. environment.
A manager looks at the probability of an issue arising and the impact it would have. This enables them to prioritise contingency plans.
WHO SHOULD USE CONTINGENCY PLANNING?
If a firm has a framework to deal with change it should be better prepared to cope and it should be able to recover faster from sudden shocks. Formal contingency plans are more useful when:
Firms are unused to sudden shocks
Line managers have less experience
The external environment is volatile
Firms are in dynamic markets.
Quote: ‘It is not the strongest of the species who survive, not the most intelligent… it is the most adaptable to change.’ Charles Darwin ( )