SCENARIO PLANNING AND DECISION ANALYSIS; Looking at the trends and drivers of

change within the Food industry within Europe.

Introduction

This case study was made to illustrate illustrates possible key trends and drivers of
change in the food industry in Europe and to give a broader view of what possible
challenges the industry might face in the near future. The issue highlighted in the case
study is how well the European food industry would perform in regards to different
factors such as changes in the state the economy, changing population demographics as
well as technological advances. It aims to question how the European food industry will
react or survive under such changing conditions, with three different possible scenarios
- all which paint vastly different picture on what the future of the food industry may look
like in the following years. These scenario have different and complex implication for
the food industry as a whole, thus we shall look at the E.U as our client (especially with
close regards to those decision makers in the CAP [Common Agriculture Policy]).

Scenarios

The case study has outlined three possible scenarios which could take place in the
future; which are: Rock Your Body, Stayin Alive &We are the world.

In the first scenario Rock your Body the economy is doing well and there is a real
emphasis on product development targeting specific consumers segments which are
based on demographics s such as age, fitness levels and overall biological profiles.

The second scenario, Stayin Alive, is more pessimistic, with European economy doing
less well in relation to the rest of the world (especially in relation to emerging market
economies) - Price seems to be the decision maker when consumers making choices
about buying food, which is due to the declining household budget, and an unpromising
European political environment.

The final scenario We are the world the economy is doing relatively well but media
pressures are focusing on the ecological problems which are being caused by food
producers. Thus Sustainability plays major role; with consumers placing large
importance over the quality of their food, and prefer to buy food from trusted
institutions with stricter quality control measures.

There were many trends which were able to be identified from a PESTLE analysis;
however we shall only concentrate on a few main ones: Trends included changing
demographics such as aging/healthier populations, another was changing technological
advances and availability of these technologies (especially in relation to emerging
economies) which played a major role in terms of competition faced by European food
industry. Other major factors also identified was legislation change in terms of global
trading, as well as consumer preferences on food items such as preferring more
differentiated speciality or organic/sustainable food products.
Therefore given these scenarios the CAP (Common Agriculture Policy) makers at the
E.U could design and implement different strategies to tackle new issues and threats
and o overall increase their effectiveness of their operations.

Their objectives include increasing employment rates, satisfying having high utilisation
rates, and making sure there is long term sustainable growth and profitability.

1) Focus on IncreasinG employment (Service customization)

2) focus on Increeasing the utilisation and optimisation through the use of
increased technology(Technology)
3) focus on growth Increase makrethare and thus profitability of the industry as a
whole.

In order to achieve these objectives I believe there could be 3 possible strategies used:

Request for state grant on or tax credit for businesses .

As the environment the European food industry operates in is rapidly changing facing
rising costs and increased competition from emerging markets there is a dire need for
industry as a whole to remain competitive. One way in which they could achieve this is
by requesting the E.U and its respective member governments to offer increased state
grants or tax credit to European food manufacters. By doing this it would help overcome
one of the main problems faced by food producers (especially SMEs) which is to have
the ability to expand their business and operations on a larger scale; which is mainly
restricred by having insufficient funds.

Increase Investmest into R&D into New Techology / Infastrucrure for better Utilsaion
of resources.

It is vital that European food industry to comepete effectively in the global market, thus it
needs to ensure that all the equipment and technology used allows for optimal untilsation for
all their operaion in comparsion to other competitoprs. By increasing investment into newer
and thus more efficient technologies; it allows for higher levels of utlisation and better
optimization of resources so it allows to reduce variable costs asscociated with production,
and thus allow a lower price of each unit of product produced, enjoy better economoies of
scale and and serve larger maket demands enabling a higher level of competitovness for
eurpoean food produersw.

Increase funding for Apprentices and Vocational Courses to help combat Labour-market
Immobility
 The E.U with the help of governments could advise their respective member governments to
actively create and promote vocational courses at schools and colleges especially those in
the field of food manufacturing and technology. Another way in which this strategy could be
achieved is by advicing governements to work closely with businesses in help create and
promote more apprentiships especially within the food industry. By implementing these
steps it would help givernements to reduce labour market immobility; especially those in
relation to occupational labour market immobility. This stategy would over the course of a
few years be able to suuply the food industry with specialist skilled workforce which is fit for
employment within Europe and thus stop buisnsses relocating their R&D operations abroad.

In order to find the optimal stategy given these objectives, a scenario planning
methodology will be used using the SMART heuristic. The first step is to create
scenarios which have already been presented in the case study. The second step is to
formulate while the third step is to come up with alterative strategies (As given above).
In stage 4 we are asked to check the feasibility of these stratigies; doing background
rserach it is safe to say that the E.U and thus its respective member states have
adequate resoruces such as funds, logistics and resources to carry out and implement 3
proposed alternative strategies.

In stage 5, we must rank the strategies from best to worst in regards to the different
objectives. We find these rankings in the charts appendix 1. Under the first objective to
have low costs, we ranked the service customization strategy in the Into the sunset
scenario as 1 because this combination would provide the lowest cost. Service
customization would require less capital investment than the other two strategies.
Ranked in last place at number 9 is the technology strategy in stormy weather. This is
because technology would be the most expensive strategy of the three to implement,
and in the stormy weather scenario, budgets have been cut in many areas. Though they
are trying to maintain spending in health and education, in this scenario it would not be a
good decision to spend money on improving technology when there are so many other
issues. Service customization is then ranked for 2 and 3, followed by the R&D strategy
for rankings 4 and 5. This is because there is a good level of climate change awareness
as well as the availability of government funds to support this in the core scenario and
the positive scenario, unlike in the negative scenario. Yet we must keep in mind that
R&D in making their practices more green will require high levels of capital investment.

In the second objective to satisfy consumer demand, the technology strategy in the into
the sunset scenario is ranked as number 1, because of the high level of technological
advancement and the high level of trust and confidence in technology, as well as the
small digital divide. This is unlike in the other scenarios, where technology is not as
advanced or trusted and the digital divide is much larger. However, this same strategy
was ranked last as number 9 in stormy weather because of the low level of public trust
and the fear of giving away personal information, which is stalling the development of
public services enabled by innovative technology. Like in the first objective, ranks 2, 3, 4,
5, and 6 are all under either scenario 1 or 2, therefore making stormy weather the least
appropriate scenario for any of the strategies to be applied to in order to satisfy demand.

Lastly, in the third objective, which is about working conditions, we once again have
technology ranked as 1, but in this case we have ranked both steady as she goes and
into the sunset as number 1. This is because in either case, where there is an
increased level of demand for health services, incorporating better technology into the
everyday running of a hospital or medical practice would help keep things organized and
be easier for workers to use, rather than messy paperwork. The second and third ranks
are the R&D strategy in scenarios 2 and 1, respectively. Stormy weather is ranked in
the middle for all three strategies, and service customization is ranked the lowest
because this could require longer working hours in order to be implemented, which
would degrade working conditions.

In appendix 2, we have turned these rankings into performance scores that are out of
100, 100 being the highest and 0 being the lowest. Strategies that have a score of 0
should be eliminated as they will not bring the organisation to success and are of no use
to consider. We then must calculate swing rates, as seen in appendix 3. These swing
rates allow us to then calculate the aggregate scores for each strategy under each
scenario. For example, we can look at the service customization strategy and its affect
on the core scenario Steady as she goes. We do this for each strategy and scenario,
giving us an aggregate score for each. We can then plot these aggregate scores into a
matrix (Appendix 5), which provides us a basis for analysing which strategies will be
most effective.

We therefore find that the best strategy to use would be service customization because it
has high aggregate scores in all three scenarios, as we see in Appendix 5. This strategy
would be the most robust. The technology strategy is only suitable for the first two
scenarios (it has a score of 10.5 in stormy weather) and the R&D strategy has generally
low scores across the three scenarios.

However, the final step is to conduct a sensitivity analysis. We can observe this in
appendix 6. If we change the swing rates, making working conditions of more
importance than satisfying demand, we see that service customization is still the most
appropriate strategy for the NHS to put in place because the aggregate scores under
each scenario are all relatively high and evenly distributed. Though technology and R&D
have higher scores in the first two scenarios, their scores are much lower in stormy
weather, and are thus not the most robust choice. We must keep in mind that we can
conduct many different sensitivity analyses situations other than the one just outlined.
Stage 5a: For each objective: Rank all the strategy/ scenario combinations in terms
of performance (for each objective)

Government grant strategy under Price Minimization scenario should lead to the
maximum market share.

Government grant strategy under customer segmentation scenario should lead to the
best competitiveness.

Government grant strategy under customer segmentation scenario should lead to the
best competitiveness.

Stage 5b: Stage 5b: For each objective, now allocate scores

Stage 6: Eliminate unacceptable Strategies

The suitability of each

strategy is evaluated
against each scenario.
If there is a clear lack
of fit against any specific scenario, then a new strategy should be proposed. In this case
there is no lack of fit against any specific scenario.
Stage 7: Rank the objectives in terms of swing; then attach weights to each objective and normalise

Long-term profits are always ranked the most significant influencer compared to
competitiveness and market share. Because it is the easiest and most accurate indicator
towards the performance of a company on the attractiveness of its market.
Competitiveness and market share is the supporting result of profits.

Stage 8: For each strategy / scenario combination, calculate a weighted aggregate

score (product of weights and attribute scores)
Stage 9: Assess and compare the performance of all the strategies

The table below collects together the aggregate scores for all the 9 combinations.

After the application of the scenario planning methodology, we can observe that
Government grant on price minimization scenario is the robustest strategy in all the
three scenarios. It works the best to meet our 3 objectives, which takes into account the
political, economic, social, technological, environmental and legal factors, as well as the
uncertainty of event occurance. In comparision, Status quo and Nationalization
strategies have lower scores on some of scenarios. Personally, I prefer the government
grant strategy. The reason is that, in a real life, price of good is always the key dominator
when consumers making purchasing decisions. From an economic point of view, the
lower the price, the high the demand is, as consumers have more buying power and
disposable income to buy more unit of good, especially in food and beverage sector
where goods are necessity.