What is a scenario analysis? What are the basic steps involved in conducting a scenario analysis?

Scenario analysis is an "if ...and if ...and if ...and if ...[all at the same time],then ..." tool in which multiple forces ("drivers" of future conditions)are simultaneously combined to create rich "possible futures" or scenarios.In scenario analysis,several drivers,such as interest rates,regulations,and competitive intensity,are combined to create descriptions of complex possible "futures"which may not come true,but could.Scenario analysis can be reduced to a few basic steps:
1.Define the scope of the analysis;
2.Identify the drivers of future strategic contexts;
3.Select specific levels,changes,or events within
each driver to frame the future;
4.Combine those drivers and levels/changes/events
to develop comprehensive scenarios;
5.Select three or four scenarios for analysis;
6.Analyze and plan for each selected scenario; and
7.Integrate results to identify near- and long-term
directions,actions,and investments and
to appraise strategic alternatives.