SCENRIO ANALYISI
Written by Cosmas Kisela
TABLE OF CONTENTS: Introduction: 4 Scenario Analysis 5 Definition 5 Objectives 5 Benefits of Scenario Analysis 5 Scenario Construction and Analysis 6 1.0 Definition of Context 6 2.0 External Environmental Analysis 6 Political factors 6 Economic factors 7 Social factors 8 Technological factors 8 Environmental factors 9 Legal factors 9 MESO environment 9 MICRO environment 9 Threat of substitutes 10 3.0 Identification of key issues/ strategic agenda 11 4.0 Identification of key forces driving the strategic agenda 11 5.0 Identification of 5- 8 over- riding drivers 13 6.0 Root - cause analysis 13 7.0 Identification of 2 key drivers 13 8.0 Plot of two key drivers to determine possible scenario 14 Figure 1 Scenario Analysis 14 9.0 Four scenarios and description of key assumptions 14 Four Scenarios for 2018 14 Co-opetition, 15 Co-existence 15 Competition 15 Conflict 16 10. Testing of scenarios for consistency and reliability 16 Conclusion 17 Recommendation 17 Bibliography 19

Introduction:
Tanzania is endowed with some of the world's greatest natural wonders. Following major reforms in its foreign tourism policies, tourism has increased to become the nation's second leading foreign exchange earner. There are many weaknesses at national level including poor infrastructure, lack of trained staff, and legal and regulatory framework.
In this paper, a case study of Asilia Lodges and Camps Ltd, I have tried to highlight a number of scenarios analyzed and recommendations have also been drawn to try to improve the current situation in relation to the future. The focus is on hotels and camps operated in national parks and not other hotels such as those operated in township. With increasing number of players in the market, global and regional competition, economic uncertainties, tourism industry in Tanzania and all players are likely to experience stiff competition in the near future. Price competitiveness is likely to remain a key differentiating factor across a variety of dimensions.
Scenario Analysis
Definition
A scenario is a sequence of potential events and a description of a possible development leading to these events.
Objectives
The main objectives of scenario analysis in organization context are (i) To enhance strategic agility – when the specific scenario starts to unfold, the firm is ready and equipped to deal with the new circumstances (ii) To stimulate new, fresh and insightful dialogue about the future based on the possibilities identified in the different scenarios (iii) To enhance and enrich the team’ understands of the combined effect of forces and trends that will impact their future
Benefits of Scenario Analysis
Motivation: When employee and leaders envision how the future will look like and how their skills and competencies will be needed in delivering the organizational strategy, they tend to be more excited and motivated than when they are simply existing in a status quo where it is easy to be bored and demotivated.
Organizational effectiveness: Scenario analysis helps organization to see the future in advance and get prepared on how to encounter it. Plan what kind of resources will be needed. Preparation prevents poor performance.
Organizational sustainability. The business environment has become so dynamic, what worked in the past and today may not necessarily work in the future. Competition is intensifying, market trends are shifting, without proper analysis of the future and advance preparation, a business may easily fail.
Scenario Construction and Analysis
1.0 Definition of Context
The context of this study will be at organizational level. I will be studying Asilia Lodges and Camps Limited, the Company I work for. Asilia Lodges & Camps Limited started in 2004 in Arusha, Tanzania. When Asilia started the idea was to bring together the best owner-run properties and to develop new properties in the most pristine Wilderness areas in East Africa. Currently Asilia Lodges and Camps Limited run five carbon-neutral camps in Northern Tanzania. One camp; Olivers Camp, is located in Tarangire National Park and other four; Dunia Camp, Sayari Camp, Olakira Camp and Ubuntu Camp operates in Serengeti National Park. Olivers and Sayari Camp are permanent in nature while the other three are mobile camps. Plans are underway to open additional three camps in June 2013.
The time frame of the scenario will be ten (10) years from now. The outcome of study will have both practical and theoretical significance. On practical side, it will provide new insights into the futures that top executives might use to prepare themselves for the survival of their business.
2.0 External Environmental Analysis
Macro Environment analyzed using PESTEL at global level: Political factors such as, Economic factors such as, Technological factor such as online booking and online payments, websites.

Political factors
Political factors refers to what degree the government is involved in the economy. They define the legal and regulatory framework within which organizations must operate (Pearce II & Robinson 2011, 84). They include areas such as tax programs, labor law, Pollution & environmental law, tariffs, pricing policies. Political factors also include goods and services provided by the government such as education, health and infrastructure of the nation. According to the Travel and Tourism Report 2013, Tanzania ranks 109 out of 140 countries in terms on tourism competitiveness, the factors that are letting down the country include poor ground and air infrastructure which require significant upgrade, Poor Human Resource base especially health of workforce (even the most brilliant business strategy is doomed to failure if there are no dedicated team players to implement it), declining safety and security in the country, tourism infrastructures such as available hotel rooms are not competitive, high costs and long time required to start a business in the country is another political issue of concern (Blanke et al 2013, 26).
At regional level, the competition is growing, for example during opening of 11th Parliament in Kenya, newly elected president Uhuru Kenyatta indicated that Kenyan government is planning to boost tourist numbers to three million each year by 2017 (Ringa 2013). Ringa alsoobserved that South Africa and Egypt attracted 11.5million and more than 8m international tourists respectively last year, compared to Kenya’s 1.23 million, while Tanzania had 1.077 million. The difference maker is considered to be heavy investment in marketing, good infrastructures which save tourists hours travelling, peace and tranquility, address menace and harassments to tourist.
Economic factors
Economic factors concern the nature and direction of the economy in which the organization operates. They include economic growth both globally and locally, interest rates, exchange rates and inflation rates which impacts how business operates and make decisions. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. Interest rates affect the cost of capital for business investment and expansion, when interest rates increases funds needed for capital expansion become more costly or unavailable making it hard for business to expand and achieve economies of scale and gain competitive advantage (David 2009, 106). The lending rates in Tanzania now range between 10%-15% per annum for secured corporate loans and the inflation rate is currently below 10% from 19% last year which escalated the transport cost and cost of general goods which in turn affect prices of rates charged to tourist. Economic growth significantly affects the amount of money the society at large earning and development indicates the amount of money invested in development activities. Tourism industry performs very well during economic upturn and performs poorly during economic downturn for example during the global economic crisis in 2007-2008, many tourism clients cancelled their bookings; sales went down, competition for few client went high, companies were forced to retrench people. It is difficult to predict when another recession will hit the world. Although some economies have significantly recovered from the effect of the crisis, volatility has remained a key risk to further financial and economical development (Blanke et al 2013, 43). Price competitiveness is likely to remain a key differentiator across a variety of dimensions. On the macro level, exchange rate fluctuations will continue to be a major and unpredictable factor that influences travel behaviors.

Social factors
Social factors include the cultural aspects (beliefs, values, attitudes, opinion and lifestyle) , health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety of persons in the farm’s external environment. Social forces are dynamics and as they changes so too does the demand of services such as leisure activities(Pearce II & Robinson 2011, 82).Social factors have a major impact upon virtually all products, services, markets, and customers(David 2009, 108).
Technological factors
Technological factors include ecological and environmental aspects, such as R&D activities, automation of processes for example ATM cards accepting Visa cards help tourist to draw money electronically instead of queuing, use of credit card machines has proved to be convenient to most tourists. The internet has improved communication between clients and business, tourism can place or change booking globally on the internet, e-ticketing and speed of communication has been improved significantly. ICT infrastructures is one of the index used to rank Travel and Tourism competitiveness of countries globally of which Tanzania ranks 125 out of 140 countries survey in 2013 (Blanke et al 2013, 32). With Implementation of fiber optics in Tanzania, hope the ICT infrastructures and speed will improve significantly. Asilia must be aware of technological changes that might influence tourism industry. Technological changes can affect costs, speed and quality of services, and lead to innovation new products or improvement in existing product or services or marketing techniques such as face-book and twitter (Pearce II & Robinson 2011, 86).
Environmental factors
Environmental factors include such factors as weather, climate, and climate change, which may especially affect industries such as tourism. Loss of habitat and biodiversity, extinction of important flora and fauna is occurring at a rapid rate (Pearce II & Robinson 2011, 87). Protecting the country’s rich fauna remains challenging in Tanzania, as demonstrated by the low ranking (110th) for the percentage of threatened species in the country (Blanke et al 2013, 26). This will adversely affect tourism attraction in the country. Furthermore, there is a growing awareness to climate change is affecting how companies operate and the products they offer.
Legal factors
Legal factors include such items as discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products. Treaties with foreign nations, effectiveness of the legal system in the country is low. Tax harmonization in EA, Tanzania is planning to impose hotel levy of 2% on revenue net of VAT which is imposed in Kenya, this move has not considered other factors such as VAT rate of 18% in Tanzania compared to that of 16% in Kenya. These are the issues that will continue to make Tanzania as an expensive tourism destination.
MESO environment
At MESO level - market factors considered include booking rates (prices), market and advertisement, government policies, supply of amenities to hotels in the parks. Most of these have been covered in the preceding section of PESTEL analysis.
MICRO environment
Micro Environment is analyzed using the Porter’s Five Forces Analysis.
Threat of substitutes
Threat of substitutes is now increased by customers being keen to shop from many service providers especially through advanced technological facilities such as Internet and websites. Asilia has a brand image of being powerful and luxurious. Asilia is positioned in the exclusive tented properties, the only substitute existing is hotel lodges which can host a large number of clients compared to a tent and hence easy to achieve economies of scale, this poses a serious challenge to tended properties. According to trip advisor (a travel website that assists customers in gathering travel information, posting reviews and opinions of travel-related content and engaging in interactive travel forums), Asilia properties Ubuntu camp, Olakira Camp, Dunia Camp and Sayari Camp ranks number 1, 3, 4 and 6 respectively out of 52 specialty lodging in Serengeti National Park. Olivers Camp rank number 1 out of 18 specialty lodging in Tarangire National Park.

Entry barriers at the centre, buyers may reduce entry barriers or encourage substitutes by their search for better value. Entrants may choose to enter via offering substitutes and once again suppliers might seek to leap frog existing competitors via the route of substitutes. Players in the tended properties continue to increase hence competition within industry is also increasing

Competitive rivalry is also a function of the following (i) Commitment to the market (ii) The number of players (iii) their strategy and disposition (iv) their similarity to or difference from one another. The number of competitors refers here to the sheer quantity of players in the market. The more similar they are, the more likely that competition will be head-on. Also, the more deeply committed they are, the more severe the rivalry will be. As noted above increase in number of players in the industry increase competition in the tourism industry.

Bargaining power of suppliers. Is affected by the following micro forces (i) unique knowledge - if the suppliers have some unique capability this will obviously enhance their power (ii) size and number - where there are a very small number of very large suppliers this will obviously increase their power. (iii) Forward integration - the supplier’s capacity to integrate forward in the industry chain will improve their competitive power. (iv) Availability of resource - where resources are scarce and preferably permanently, this again will help promote supplier power. Asilia has good supply chain management system and had long relationship with suppliers who are visited by senior Management several times a year to cement the relationship. The bargaining power of suppliers is low in the tourism industry as the switching cost is very low.

Bargaining power of buyers: Bargaining power of the buyers is increased by competitive rivalry, the availability of substitutes, low entry barriers and low supplier power. Asilia and its competitors in the tourism industry are faced by high bargaining power of buyers because consumers coming from all over the world can decide the service according to the price range and buy the services accordingly. Also with other issues such as industry attractiveness in other countries, availability of quality infrastructure among others, the tourists have the last say.

Competition in an industry goes well beyond the established players (rivalry among current competitors), other competitive forces such as potential entrants, threat of substitution, bargaining power of buyers and bargaining power of suppliers may be more or less prominent depending on the particular circumstances. Competition in this broader sense can be termed extended rivalry (Porter 1988, 6).
3.0 Identification of key issues/ strategic agenda
From the external environment analysis above, the key agenda that are coming up are competition due to increased number of players in the tourism industry and competitive prices. Competition and prices are the two main issues that will keep executive management awake at night.
4.0 Identification of key forces driving the strategic agenda
From the PESTEL analysis and the five forces analysis, the key drivers of competition are:
Prices: Price of goods and services is affected by a number of factors such as fuel prices which in turn affect transportation costs and prices for most commodities; purchasing power of consumers, Inflation where there is too much supply of money in the market which increases the cost of goods and services.
Political stability: With the current political unrest in Africa and Tanzania in general. This will negatively affect the safety and security of tourist and hence the number of tourist may go down. Terrorism activities have started to emerge in Tanzania which will significantly affect the safety and security score in the world market.
Market demand: Demand is the will and ability of consumers of goods or services to purchase a particular service or product.
Income and Employment: Income and employment links back to economic development, during economic upturn, employment opportunities are many, people are able to be employed and earn income which increases their purchasing power, and people from different parts of the world can afford a luxury safari in Tanzania. The tourism sector has benefitted from the continuing globalization process; travel has been increasing in mature markets and, particularly, has been driven by the rising purchasing power of the growing middle class in many developing economies. (Blanke et al 2013, xv)
Number of players in the market. The number of player is the tourism industry is likely to increase due to its attractiveness at national and international level thus increasing competition.

Recession: During recession people tend to change their preferences to affordable services and may not spend on luxury services such as tourism safaris at all. When this happen the tourism industry is highly affected, for example during the global economic crisis in 2007/2008 season, many tourism clients cancelled their bookings; sales went down, competition went high, companies were forced to retrench people. It is difficult to predict when another recession will hit the world.

Competent Human Resource. Every organization need to possess certain human resources and competences required to endure competition and thrive locally and globally. Tourism is a global industry with more than 80% of client coming from abroad. Without competent and dedicated team players to implement strategy, even the most brilliant business strategy is doomed to fail.
Fuel prices in the world Market. Fuel increases cost for almost everything else. Transport costs become higher and some guest may cancel their bookings due to expensive flight costs from their homeland to Tanzania.

5.0 Identification of 5- 8 over- riding drivers
The overriding drivers indentified are as follows (i) Prices (ii) Number of competitors in the market (iii) Government laws and regulations (iv) Global economy (v) Infrastructures (vi) Customer behavior (vii) Security and Safety (viii) Competent Human resources

6.0 Root - cause analysis
Root cause analysis has been undertaken using a fish bone diagram presented below.
Global economy
Number of players

●

Security & Safety

Prices

7.0 Identification of 2 key drivers
From the above analysis the 2 key drivers have been identified and these are (i) number of players in the market and (ii) price of services (accommodation and travel rates).

8.0 Plot of two key drivers to determine possible scenario
Figure 1 Scenario Analysis
D1 Prices

Student Construct
D2
Number of
Players
High

Student Construct
Low

Student Construct

Conflict * Players are many in the industry * Fight toe to toe for any and all customers * Compete on prices, thus prices are low * Product bonuses are offered * Short term profitability * High quality of services | Competition * Players are many in the industry * Compete head to head for customers * Competitors avoid price wars * Competitors want to ensure long term profitability * High quality of services | Co-opetition * Competitors cooperate * Form alliances and joint ventures * Economies of scales is achieved * Assumed that players are few and prices are low but also can be high. | Co-existence * Players are few in the industry * Few profitable businesses * Avoid price war * Strategic position of one competitor respected by others |

9.0 Four scenarios and description of key assumptions

Four Scenarios for 2018
Paul Simister proposed the five C’s models for levels of completion namely Collusion, Co-opetition, Co-existence, Competition and conflict (Simister 2011). Since the focus of this study is competition, only four C’s from the above list have been selected for scenario analysis namely Co-opetition, Co-existence, Competition and Conflict.
Co-opetition,
Assumptions: Co-opetition refers to a situation where competitors cooperate and work together in alliances and joint ventures but not in ways that distort the prices customers pay. Good example is motor industry working together in developing new engines which benefit participants from sharing research and development costs and provide economies of scale and experience in the manufacturing stage. In tourism industry this can be compared to when competitors work together in developing complementary properties to realize economies of scale. For example a tourism company with few rooms in an isolated location in Serengeti National park cannot attract airline players compared to when many properties are in close proximity like Kogatende where TANAPA constructed an air strip and many tourists are attracted because of transport convenience.

Co-existence
Assumptions: Competitors recognize each other’s position in the market and don’t try to compete aggressively to avoid price wars; there is no formal agreement between competitors. Once one competitor establishes ownership of a strategic position in the market, other competitors will respect that. The basic idea is that it is better to have a few highly profitable businesses than many that struggle to break even. The challenge this level of competition is facing is the increased level of unemployment in the country and lack of creativity and innovation. Tanzania is one of the countries where once one open a particular business, you find after a short while many people are in the same business struggling to get something out of the market.
Competition
Assumptions: Competition is considered to be the normal situation in the business environment where businesses compete head to head for customers, every competitor behave sensibly recognizing that a price war is bad for the long term profits in the entire industry.

Conflict
Assumptions: In conflict it is assumed that competitors fight toe to toe and slug it out for any and all customers in the industry with a combination of offensive strategies and defensive strategies.
The main objective to make short term profits to hurting the competition and potentially either permanent weakening them or even driving them out of business. The main weapon is price, however other technique such as mass marketing campaign, product bonuses, high quality of services are always employed. While customers benefits from low prices, predatory pricing is deemed anti-competitive and can be illegal.

10. Testing of scenarios for consistency and reliability
The global economy faced downturn since the financial crisis that hit the world in 2007-2008. Although some economies have significantly recovered from the effect of the crisis, volatility has remained a key risk to further financial and economical development. Political instability is also growing in the world hot zone and environmental disasters tend to grow more severe in their short-term impacts. (Blanke et al 2013, 43).
Michael porters forces such as new entrant to the business, bargaining power of customers will also continues to reshape the future of tourism industry. Consumers are developing more flexible buying decisions.

At regional level, Kenya is likely to continue to attract more DFI which will boost tourism infrastructures, ground and air infrastructures and hence attract more tourists which may pose a challenge to the number of tourist coming to Tanzania.
At the same time, new demands are unfolding in developing regions such as the BRIC countries (Brazil, Russia, India, and China) and beyond, changing the profile of the international traveler. All these changes will have significant impacts on tourism destinations in the world and Tanzania will not be left out.
Conclusion
From the above facts, Tanzania will continue to face challenges in attracting good number of tourists compared to neighboring countries like Kenya and Rwanda. Asilia Lodges and Camps Limited as a player in the industry will continue to face stiff competition and the industry will be most likely under conflict where players are many and are competing on prices among other factors such as quality of services.
The figure below is a graphical representation of the envisaged outcomes of the four scenarios. It has been assumed that the probability of Co-opetition is 10%, Co-existence 20%, Competition 70% and Conflict 90%.

Recommendation
In a world that is ever more volatile and an environment that is ever changing, new capabilities in tourism management and sector development are vital if an economy is to become more resilient against disruptive events and to prepare for long-term stability. The government should inculcate a positive attitude toward tourists and toward the value of tourism in the country, significant emphasis should be put on the sector’s development and the budget should be increased to ensure effective destination marketing and branding campaigns, collecting relevant sector data on a timely basis, continued efforts to protect the natural environment would reinforce the country’s strong Travel and Tourism competitiveness.

Asilia as a player should adopt defensive strategies that will help the organization to protect what they have. Merger and acquisition to realize economies of scale, taking market share from an inferior competitor should also be considered and in case of some of the property start becoming unprofitable, Asilia should consider selling or closing them. Another factor that is coming up is conference/event tourism which is currently under-exploited in East Africa which can be addressed by building modern international conference facilities.

Bibliography

Pearce J.A and Robinson R.B (2011). Strategic Management. Formulation, Implementation and
Control. McGraw Hill. Twelfth Edition.

David F.R (2009). Strategic Management. Concepts and Cases. Prentice Hall. Twelfth Edition

Grundy, T. (2006) Rethinking and reinventing Michael Porter’s five forces model. John Wiley & Sons, Ltd.

Jennifer Blanke and Thea Chiesa, editors. The Travel & Tourism Competitiveness Report 2013, Reducing Barriers to Economic Growth and Job Creation

Ringa, M. (2013) Target of 9m tourists can be achieved. Daily Nation Issue # 17552, Thursday, April 18, 2013.

Porter M.E (1988). Competitive Strategy. Techniques for Analyzing Industries and Competitors. The Free Press.
Simister. P. (2011). Business Competition. The Five C’s Model for Levels of Competition. www.differentiateyourbusiness.co.uk/business-competion. Accessed on 13 April 2013.
Reese, C (2004). Scenario Analysis – Challenges and Opportunities. www.ifk-cfs.de/fileadmin/downloads/Reese.pdf. Accessed on 30 April 2013.

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[ 2 ]. Reese, C (2004). Scenario Analysis – Challenges and Opportunities.
[ 3 ]. Ringa, M. (2013) Target of 9m tourists can be achieved. Daily Nation Issue # 17552, Thursday, April 18, 2013.
[ 4 ]. Annual budget presentation for ministry of tourism in parliamentary session on Tuesday 30 April 2013 by Tourism Minister Mr. Khamis Kagashek.
[ 5 ]. Simister. P. (2011). Business Competition. The Five C’s Model for Levels of Competition. www.differentiateyourbusiness.co.uk/business-competion. Accessed on 13 April 2013.
[ 6 ]. Jennifer Blanke and Thea Chiesa, editors. The Travel & TourismCompetitivenessReport 2013, Reducing Barriers to Economic Growth and Job Creation. Page 43