Strategic plans are focused on current and future company goals, therefore changes in the environment must be detected and monitored. Changes in the environment that impinge on the company's strategic plan are known as external triggers and triggers are paired with plans to successfully deal with them. 1. These paired actions are known as contingency plans. What qualities make a future issue a "trigger"?

2. For this discussion, consider the Environmental Scan and SWOT analysis you conducted on Netflix in Week 2. 2a. Formulate a trigger/contingency pair in the form of a three-part sentence similar to the example in the textbook. Examine it in terms of the three guidelines that good contingency plans should follow. Three part sentence guideline:

"It is effective to express a trigger/contingency pair in the form of a three-part sentence. For example:

• The external cause of the trigger: "If competitors lowered their prices, . . ."
• The quantitative trigger: "causing revenues to lag projections by 15%, . . ."
• The contingency: "then the company should increase advertising and promotions."

Stringing those three parts together?"If competitors lowered their prices, causing revenues to lag projections by 15%, then the company should increase advertising and promotions"?you will find that this simple sentence meets all criteria for creating a good trigger and contingency."

Post a summary of your selected company and risks that you perceive based on your prior Environmental Scan and SWOT analysis. State the three-sentence trigger/contingency pair and justify your choice of contingency plan using information from the week's readings and/or other scholarly or credible resources.

12.I'15.I'22,B:|I|2PM Print with details as to who is responsible for it, its budget and schedule, and who must keep it relevant as conditions change. Good contingencies should follow three guidelines: " Do not renege on the adopted "best" strategy. For example, suppose the company chose a market- expansion strategic bundle, but there is reason to believe it would be difficult to implement and pull off. If sales were to drop more than 10% from target projections at any time, it should not set as a contingency "Cancel the market-expansion strategy and implement a differentiation strategy." If one does that, it is in effect saying that the strategic bundle chosen was not a good choice, and its proponents will instantly lose credibility. Besides, companies cannotand should notbe in the habit of changing their strategies at the first sign of adversity Strategies typically take anywhere from two to five years to implement, and the organization must give the chosen strategy a chance to succeed by not changing it until there is absolute certainty it is not working. For any new or modified strategy being implemented that does not seem to be working it is advisable always to suspect first the execution ofthe strategy, not the strategy itself. That way the contingency should focus on operational changes that could be made to enable the strategy to succeed, not changing the strategy itself. The following are examples ofpossible operational changes: ' Change the ad campaign or the advertising agency. ' Replace the VP Marketing [or any senior manager]. Give the salespeople additional or more technical training. Do additional and specific market research. Broaden the distribution channels. Increase links to your customers and increase their switching costs. ' Seek alternative suppliers. ' Do not make something that the company is already doing the contingency. Think about it. What the company has been doing up to the time the trigger is invoked is what got the company into trouble in the first place. If sales are not meeting expectations, do not set as a contingency, "Continue advertising" or "Do more RBLD." The company is already doing those things, and, clearly, sales are still down. So think of something it can do differently that is, an adjustment to its operations or execution, one that can be implemented quickly, say in a couple of months. 0 Make the contingency a solution to the problem implied in the trigger. If inadequate profits are the problem, the contingency should be directed towards increasing profits, not sales. If market share is the problem, do not suggest lowering costs as the contingency, even if it is a matter of doing something different,- the two are unrelated. Because contingencies are in fact back-up plans, they have to be spelled out in great detail, and those responsible for developing them and carrying them out must know who they are and what they must do. Those details are added during the operational phase prior to implementation. Companies that go this extra mile of contingency planning will reap rewards in three ways. First, they will be better prepared for specific uncertainties than companies that have no triggers and contingencies, especially if they work to adjust the contingencies overtime as conditions change to keep them current and workable. Second, they will become more adept at anticipating what might go wrong and come up with better triggers and blind licorterli .uagc.edu.|'print.l'.d_|EIUS 402.14.1?sections=sec?.4Sozunient=all8=dientToken= S2haf4ced5IZI-h312-a'1 W-c'thDBBSdbdM rp= sued-'4 314 12.I'15.I'22,B:|I|2PM Print Contingency Planning Murphy's Law states, "If anything can go wrong, it will." An extension ofthis is that it always seems to happen at the worst possible time. It is a good idea to contemplate what could go potentially wrong in the future, which is termed a trigger, and what the company would do differently were that to happen, referred to as a contingency. We therefore talk about trigger-contingency pairs, typically one or two that pertain to next year the short termand one or two that could occur three years from nowthe long term. In reality, companies may have as many as 20 triggers and contingencies "active" at any time, assuming they do contingency planning. The planning horizon, however] can vary considerably according to the size ofthe company and the industry. For example, a company like Boeing views the next severalyears as "short-term," about 1015 years as "medium term," and 2030 years as "long term." Companies in the fashion business view two weeks as "short term," and a season [34 months] as "longterm." For most companies, however, the "standard" long term of five years has now shrunkto three years because ofthe rapid pace of change, especially in high-technology industries. Trigge rs Triggers should be external, specific, and quantitative. Absent these three qualifiers the company will not know when to invoke the contingencyplan. It is no use saying. for example, "prrofits decline," or "When things get tough." Decline how much? Get how tough? Even when trying to address phenomena that cannot be measured such as a competitor infiltrating your territory, or] for the Carmike movietheater case discussed in the previous chapter] "worse" movies being made in a certain year G'en mkmir try to gauge their effect on your sales. For example, ifthe [n contingency planning, companies tend tn look at the short term, medium term, and long term. The standard range for "long term" used decline, would you do something differently if your sales to he ve years, but due to the rapid pace of . . D D D 7, technology, it has been reduced to three years. fell balow target pI'OJECtIOIlS by 10 '6' 15 \"45' or 20 \"f\" In unknown phenomena were to cause your sales to this way, you will monitor something you constantly measure, and so can bring into play the contingency plan at just the right moment. Triggers also come from assumptions you make about the future that are "soft"that is, about which you lack confidence and which are externalto the company. For example, if you are engaged in strategic planning and your company is sensitive to interest rates, you might not know what is going to happen to interest rates next year. You may have tried to obtain information from various economic forecasts on l'rtlpa accident .uagc.edu.|'print.l'.d_|EIUS 402.14.1?sectione=sec?.43ozuntent=all8=dientToken= E2baf4ced5IZI-b312-a'1 W-c'f'oSDBBSdbdM no: steel-K4 114 12.I'15.I'22,B:|I|2PM Print this variable but, frustratingly, all ofthem differ in their predictions. So here is something you can do. Simply make the assumption that interest rates are not going up next year [if economic indicators make that at least plausible], and base your planning on that. However; because the assumption is "soft," create a trigger that admits the possibility that interest rates could go up: "If interest rates go up by more than X percentage points, then . . ." the contingency plan takes effect. Triggers can also emerge from the timing ofvarious imminent occurrences. For example, if new federal legislation is being created to nationalize health care, you may be unsure if this would take place next year or two to three years from now So create your plans with your best assumption in mindfor example, no health care legislation willbe enacted during the period ofthe planning horizon. However] because the assumption is "soft," create a trigger, too, that specifies, "If health care legislation were enacted within the next two years, then . e ml: 5 Stock .." the paired contingency willbe enacted. Notice that this Good contingency plans depend on three guidelines: not reuegiug on your adopted "hest happens and can therefore invoke the contingency plan. strategy" not planning for something the company is already doing, and making the contingency a solution to the problem. trigger is quantitative. You can tell exactly when it Similarly, you may want to do something differently if two competitors merge or if quota restrictions into some foreign country are imposed or lifted. For companies focused on increasing sales or market share, it is tempting and understandable to create triggers having to do with not meeting revenue objectives. To do this once is perfectly fine, but to have such a trigger every year gives the impression ofobsessive focus in one area. Management's role is directing and coordinating the many aspects of a company to work together seamlessly to create value, and indeed things could go wrong in many areas, not just in failing to make a revenue objective. Abetter approach is to make a list of all the possible things that could go wrong or where your assumptions are soft, and choose the most likely ofthem as your triggers. Try to choose a different trigger for the long term from what is chosen for the short term. A useful training exercise is to create one trigger- contingency pair based on what might cause a revenue shortfall and one an NIAT shortfall, stating one in the short term and the other in the long term, just to practice creating realistic trigger-contingency pairs. Contingencies Contingencies are precursors to contingency plans. They are a response to a particular trigger,- what a company should do differently if that trigger occurred. Later, when the strategic plan has been prepared for operational implementation, the contingency should be translated into a contingency plan complete trtipa Hoortent .uagcedui'printl'dJElUS 402.14.1?sections=sec?.43ozuntent=all8=dientToken= S2haf4ced5IZI-h312-a'1 W-cthDBBSdbdM rp= sod-'4 214 12.I'15.I'22,B:|I|2PM Print contingencies overtime. Third, they will appreciate the need to be alert to key changes in the environment and their company and, over time, create a more exible company culture. It is effective to express a triggerg'contingency pair in the form of a three-part sentence. For example: ' The external cause ofthe trigger: "If competitors lowered their prices, . . .' i The quantitative trigger: "causing revenues to lag projections by 15%, . . ." ' The contingency: "then the company should increase advertising and promotions." Stringing those three parts together"If competitors lowered their prices, causing revenues to lag projections by 15%, then the company should increase advertising and promotions"you will find that this simple sentence meets all criteria for creating a good trigger and contingency. Disc ussio 11 ne stio ns 1. If "value" implies benefits accruing for a certain level of costs, try to articulate the true value of contingency planning to a company. 2. Contingency planning is needed precisely because certain assumptions about the changing environment might be "soft" and uncertain. Yet, because of changing conditions both inside and outside the company contingency plansboth triggers and contingencies rapidly go out of date. How often should a company review its contingency planning and keep things current? 3. Triggers assume that progress toward objectives is measured constantly and that actual performance can be compared to plan performance. say every month. In your opinion, is this true of most companies? Comment specifically about NIAT performance. 4-. Typically, profits are computed quarterly at most, and are done so using accounting principles. To the extent you agree with this, should profits ever be used as a trigger? Discuss. blips Hoortent .uagcedui'printI'JJEIUS 402.14.1?sections=sec?.43ozuntent=all8=dientToken= E2haf4ced5IZI-h312-a'1 ??-c35|3553dbd28= rp= sod-'4 4:4