Based on the picture below, explain each briefly like you are teaching this to your students or give a summary explanation about how scenario planning works.

1. Key focal issue
2. Driving forces
3. Critical uncertainties
4. Scenario Framework
5. Scenarios
6. Narratives
7. Implications
8. Early Warning Signals

Also,

1. strengths
2. limitations
3. role of management accountant

corrections as needed earlier than if they had no on rankings. Focusing on two could miss other early warning signals. critical potential forces. There will be differing opinions about the implications of uncertainties, Strengths: Instead of assuming there is one best sometimes motivated by individuals' incentives answer to a strategic question, scenario planning and personal biases. Further, there is usually more considers different possibilities for different futures. than just one key focal issue. The analysis can It considers multiple uncertainties simultaneously. also be difficult to do well. It generally requires a Unlike simulation modeling, it requires subjective number of participants from different areas of the thinking as well as quantitative analysis. It is company and can take a long time to complete especially helpful when: uncertainty is high, there the exercise. have been costly surprises in the past, current Role of the management accountant: As with strategic thinking is weak, and there seem to be other strategic planning tools, management few opportunities to pursue. Further, identifying accountants can lead or facilitate the process. early warning signals is a good practice no matter More specifically, they help identify key focal which strategic planning tool is used. issues, driving forces, and early warning indicators. Limitations: Scenario planning is based on just They can also represent different stakeholders' two critical uncertainties that are chosen based views and assess the logic of the narratives. .4 SCENARIO FRAMEWORK is a 2x2 matrix made up of the two critical uncertainties with high vs. low spectrums. The two axes create four different scenarios to be addressed, such as high regulatory environment/low brand image and low regulatory environment/low brand image. SCENARIOS are based on the four quadrants and represent plausible visions of the potential future. There are no "right" or "wrong" scenarios. Instead, they are viable outcomes meant to force participants to think about factors that could change the future of the company. 6 NARRATIVES are written descriptions or stories about each scenario. They should be logical, consistent with the scenario, and be persuasive to stretch people's thinking. Each narrative should also link the scenario back to the present time and how the world got there. The narrative basically tells the story as if it had already happened. IMPLICATIONS are ways to deal with each of the scenarios. Participants go back to the key focal issue to identify the company's strengths, weaknesses, and options to address gaps in capabilities for the different scenarios. 8 EARLY WARNING SIGNALS are leading indicators suggesting which scenario(s) is (are) most likely. Good early warning indicators help companies assess their readiness and make courseHOW IT WORKS: Scenario planning includes bringing together several components: KEY FOCAL ISSUE, such as a big decision to be made or a significant uncertainty to deal with. An example might be Tesla trying to decide if It should build a production facility in China or how to address the growing threat of Chinese EVs. 2 DRIVING FORCES are themes and trends that seem likely to impact the key focal issue. Research is conducted to identify driving forces, including interviews with key stakeholders and even outside-the-box thinkers who are not part of the issue at hand. STEEP and Porter's Five Forces analyses can be helpful here. Examples include consumers' increasing consciousness of environmental issues, Intense competition to develop nonlithium batteries, and growing geopolitical instability in various regions. Driving forces are further divided into those that are predetermined (1.e., inevitable, such as demographic shifts) and uncertain (everything else). 3 CRITICAL UNCERTAINTIES are those uncertainties ranked most likely to significantly impact the key focal issue. The two highest-ranked become the critical uncertainties. An example would be regulatory environment (high vs. low) and brand image (high vs. low)