Business Case: Strategic Analysis Framework for Supply Chain
- M. Onder Pembe
- 22 Nis 2023
- 5 dakikada okunur
Güncelleme tarihi: 28 May 2023
A business case for Strategic Analysis Framework is explained in detail with all the components below.
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ANALYSIS OF CURRENT & FUTURE STATES
Theme: COVID-19
Factor 1
Spread of COVID-19 in China
(For a Strategic Planning professional who worked at a company supplying plastic raw materials mainly from China, the recent spread of COVID-19 in China, which is the world's largest plastic producing country, would be an important factor.)
Current State
Description: Considering the "Spread of COVID-19 in China" factor, the dangerous climb in the number of COVID-19 cases may disrupt China's supply infrastructure. By the end of November 2022, the number of daily cases broke a record with 31,444 across China.
Root Cause: Increase in social contact level due to loosening "Zero COVID" policy
Countermeasure: The Chinese Government has decided to continue "Zero COVID" policy more strictly to get the spread under control. In some cities, it has been forbidden to leave the houses except for compulsory situations. Upon this decision, widespread public protests (“White Paper" protests - Protest Symbol: A blank sheet of paper") has begun across China.
Timeframe: The countermeasure has been immediately initiated and is expected to give results in one month after launch.
Success of The Countermeasure to Eliminate The Root Cause: Very high (6 points out of 7)
Leading Measures (Used to Predict What The Future State Will Look Like):
Number of Daily COVID-19 Cases
Daily Death Toll
Trust Rate in Government (%)
Future of The Current State
Two assumptions can be developed for the current state above:
1st Assumption: The Chinese Government will immediately step back in the face of public protests regarding the lockdown process, and will abandon its "Zero COVID" policy.
Likelihood: Very likely (%75-100)
2nd Assumption: 48K of daily cases will be recorded between December 2022 and mid-January 2023. Upon this, China will maintain the strict "Zero COVID" policy for 6 months in spite of the public protests.
Likelihood: Unlikely (%25-50)
Value for Leading Measure:
January 2023: 40K (Number of Daily COVID-19 Cases)
(If the number of daily cases reaches 40K by January 2023, the Chinese Government will not abandon the strict "Zero COVID" policy although public trust rate in government declines dramatically.)
Factor 2
Industrial Production Level (triggered by the factor "Spread of COVID-19 in China")
Future States
1st Assumption: China's maintenance of strict "Zero COVID" policy will lead to a contraction on the country's industrial capacity and production.
Likelihood: Unlikely (%25-50)
2nd Assumption: As China abandons the strict "Zero COVID" policy, industrial production will return to normal.
Likelihood: Very Likely (%75-100)
Theme: Energy Markets and Government Policies
Factor 1
Global Energy Prices
Current State
Description: By December 2022, Western states have decided to impose a cap price on Russia's seaborne oil as part of efforts to try to limit Moscow's ability to finance the Russia-Ukraine War.
Future State
Assumption: Russia will start floor pricing in response to the G-7 countries' cap pricing for Russian oil by the beginning of 2023.
Likelihood: Very Likely (%75-100)
Factor 2
Energy Supply Level
Future States
1st Assumption: Russian President Vladimir Putin will sign a decree reducing his country's oil production and banning the trade of Russian oil to G-7 and EU countries for the next 6 months in response to the cap pricing on crude oil.
Likelihood: Likely (%50-75)
2nd Assumption: Russia's reducing oil production and banning the trade of oil to G-7 and EU countries for the next 6 months in response to the cap pricing on crude oil will unbalance the global oil market.
Likelihood: Very Likely (%75-100)
3rd Assumption: The shortage of oil will cause a bottleneck in the raw material producers part of the supply chain in G-7 and EU countries.
Likelihood: Likely (%50-75)
Factor 3
Global Energy Prices
Current State
Description: As the energy supply could not meet the increasing energy demand after the pandemic, natural gas and coal prices in global markets showed a high increase.
Two assumptions can be developed for the current state above:
Future of The Current State
1st Assumption on Future State: Due to the continuation of the Russia-Ukraine war, the imbalance in the global natural gas and coal markets will deepen until the end of 2023.
Likelihood: Likely (%50-75)
2nd Assumption on Future State: The disruption in global coal supply will end by Q3 2023.
Likelihood: Very Unlikely (%0-25)
Factor 4
Environmental Trends
Current State
Description: At the UN General Assembly meeting in 2020, Chinese President Xi Jinping declared his country's commitment to keep global warming at 1.5 degree Celsius level.
Future of The Current State
Two assumptions can be developed for the current state above:
1st Assumption on Future State: China will not digress its commitment to limit global warming to 1.5 degree Celsius until 2026.
Likelihood: Very Unlikely (%0-25)
2nd Assumption on Future State: China will end its commitment by Q3 because of economic growth targets.
Likelihood: Very Likely (%75-100)
Factor 5
Energy Supply Level
Current State
Description: China, which is the world's largest energy consumer and provides more than 60% of its electricity production from coal, has imposed energy restrictions in industrial zones and ports in the period covering 2021 and 2022 due to the inadequacy of coal supply and record-breaking prices.
Leading Measures (Used to Predict What The Future State Will Look Like): GDP Growth of China (%)
Future of The Current State
1st Assumption: Disruption in the global coal market will continue until the end of Q1 2024. China will continue to maintain its energy restrictions, adhering to its commitment to limit global warming to 1.5 degrees Celsius.
Likelihood: Unlikely (%25-50)
2nd Assumption: The disruption in global coal supply will end by Q3. China's coal-based electricity production in 2023 will accelerate by removing energy restrictions.
Likelihood: Very Likely (%75-100)
Base: Despite China's commitment to limit global warming to 1.5 degrees Celsius, the government will remove energy restrictions that suppress growth, keeping in mind its economic growth targets. Aside from shutting down coal-fired power plants, China has begun building new thermal power plants in more than 60 locations across the country. This gives important clues about China's policies in the near future.
Value for Leading Measure:
Q2 2023: %3.5 (GDP Growth of China)
(When China's GDP falls below 3.5% by Q2 2023, China will accelerate its electricity production.)
Theme: Sustainability
Factor 1
Environmental Trends
Current State
Description: In the last 6 years, awareness and sensitivity of the international community towards ecological sustainability has been increasing significantly. As a result of this increase, global brands have tended to bio-based packaging rather than plastic-based.
Future of The Current State
Assumption: In the next 3 years, global bio packaging industry will grow at a CAGR of 15,8%.
Likelihood: Likely (%50-75)
Factor 2
Industrial Production Level
Future State
Depending on the tendency of global brands towards bio-based packaging, some pioneer global produders have released bio based alternatives to hard plastic and ABS.
Assumption: The growth rate of Bio-based alternatives industry will exceed the growth rate of the conventional market by 2027.
Likelihood: Likely (%50-75)
IMPACT ANALYSIS
After analysis of current and future states, current and future impacts of the findings on the organization are determined.
Factor 1
Industrial Production Level
Future State
Assumption: Industrial production in China will return to normal. As Russia bans the trade of Russian oil to the G-7 and EU countries, the shortage of oil will cause a bottleneck in the raw material producers part of the supply chain.
As a supplier country, China will have an advantage rather than G-7 and EU countries
Likelihood: Very Likely (%75-100)
Factor 2
Material Trends
Future State
Assumption: As brands tend to bio-based packaging rather than plastic-based ones in the next 3 years, the growth rate of the bio alternatives market will exceed the conventional market's. Since the production of bio-based materials becomes widespread among plastic producers, the price of the products will decrease.
Thus our company will get an advantage in low-price supplying of bio-based materials..
Likelihood: Very Likely (%75-100)