The role of scenario planning in exploring the environment in view of the limitations of PEST and its derivatives

Adapting to change in the contextual environment is one of the key challenges for managers as they try to ensure the survival and longevity of their organization. Yet, both the literature and the textbooks on the subject area of the contextual environment lack unequivocal conceptual and practical guidance for managers interested in this area of management practice. In this paper, we evaluate the seminal studies on understanding the environment, as well as the leading North American and European strategy textbooks, to determine the contemporary appropriateness of the approaches advocated for analyzing the contextual environment and the implications these have for the managers of an organization. We discuss the limitations of these approaches and posit an alternative framework - scenario planning - to help improve the process of analyzing and understanding the environment and to help in adapting to change in the environment. We illustrate the advantages of scenario planning over other approaches using a case example.