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How can we leverage what-if analysis in Excel for strategic scenario planning?


This article provides a detailed response to: How can we leverage what-if analysis in Excel for strategic scenario planning? For a comprehensive understanding of Scenario Planning, we also include relevant case studies for further reading and links to Scenario Planning best practice resources.

TLDR What-If Analysis in Excel aids Strategic Planning by modeling various scenarios, enabling informed decision-making and risk mitigation.

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Before we begin, let's review some important management concepts, as they related to this question.

What does What-If Analysis mean?
What does Strategic Scenario Planning mean?
What does Data Integrity mean?
What does Stakeholder Engagement mean?


Strategic scenario planning is a critical component of an organization's toolkit for navigating the complexities of today’s volatile market environment. Leveraging What-If Analysis in Excel can significantly enhance this process, providing executives with the insights needed to make informed decisions. Excel, with its robust set of tools for What-If Analysis, including Data Tables, Scenario Manager, and Goal Seek, offers a powerful platform for simulating different business scenarios and their outcomes. This approach allows leaders to anticipate potential challenges and opportunities, optimizing strategic planning and risk management efforts.

At the heart of What-If Analysis in Excel is the ability to model and manipulate data to forecast various scenarios based on changing variables. For instance, an organization might use a What-If Analysis to evaluate the impact of a 10% increase in sales volume on its overall revenue, or to understand how varying cost structures could affect its bottom line. This method provides a dynamic framework for strategic planning, enabling organizations to explore multiple strategies and their potential outcomes before committing resources. By applying this framework, organizations can develop a more resilient strategy that is capable of adapting to unexpected changes in the market.

Utilizing What-If Analysis in Excel requires a structured approach. Start by defining clear objectives and the key variables that could impact those objectives. Next, develop a comprehensive Excel model that incorporates these variables. This model serves as the template for your What-If Analysis, allowing you to systematically explore different scenarios by adjusting the variables. The insights garnered from this analysis can inform strategic decisions, helping organizations to navigate uncertainty with greater confidence.

Implementing What-If Analysis in Strategic Planning

Implementing What-If Analysis in strategic planning involves several key steps. First, identify the specific scenarios you wish to analyze. This could range from market expansion, product launches, to cost reduction strategies. Once the scenarios are defined, gather and input the relevant data into your Excel template. It's crucial to ensure that this data is accurate and comprehensive, as the quality of your analysis depends on the quality of your data.

Next, apply Excel's What-If Analysis tools to your model. For example, use the Scenario Manager to create different scenarios by varying your assumptions about key variables. Data Tables can be used to see how changes in one or two variables affect the outcomes of your model. Goal Seek, on the other hand, allows you to work backward by setting a desired outcome and determining what values of a variable are needed to achieve that outcome. Through these tools, executives can visualize the potential impacts of various strategic choices, making it easier to identify the most promising strategies.

It's also important to involve key stakeholders in the What-If Analysis process. This collaborative approach ensures that the analysis takes into account diverse perspectives and expertise, leading to more robust and comprehensive strategic planning. By engaging different departments and functions, organizations can ensure that the strategies developed are not only viable but also aligned with the overall organizational goals.

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Real-World Applications of What-If Analysis

Real-world examples of What-If Analysis in action underscore its value in strategic planning. For instance, a retail chain might use What-If Analysis to assess the impact of different pricing strategies on its market share and profitability. By modeling various pricing scenarios, the company can identify the optimal pricing strategy that maximizes profits without sacrificing market share. Similarly, a manufacturing company might use What-If Analysis to evaluate the financial implications of shifting its production to a different country, taking into account factors such as labor costs, transportation expenses, and tariffs.

In the consulting world, firms like McKinsey and Bain leverage What-If Analysis to help their clients navigate complex strategic decisions. These firms use sophisticated models built in Excel to analyze the potential outcomes of different strategic moves, providing clients with actionable insights and recommendations. This not only helps organizations to make more informed decisions but also to anticipate and mitigate risks associated with those decisions.

Ultimately, What-If Analysis in Excel is an indispensable tool for strategic scenario planning. It provides a framework for organizations to explore the potential outcomes of various strategies, enabling them to make decisions that are both informed and strategic. By incorporating What-If Analysis into their strategic planning processes, organizations can enhance their agility and resilience, positioning themselves for success in an increasingly uncertain business environment.

Best Practices in Scenario Planning

Here are best practices relevant to Scenario Planning from the Flevy Marketplace. View all our Scenario Planning materials here.

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Explore all of our best practices in: Scenario Planning

Scenario Planning Case Studies

For a practical understanding of Scenario Planning, take a look at these case studies.

Scenario Analysis for Ecommerce Market Expansion

Scenario: The organization in question is an established ecommerce platform specializing in lifestyle products, which is contemplating expansion into new international markets.

Read Full Case Study

Scenario Planning for a Professional Services Firm in Healthcare

Scenario: A mid-sized professional services firm specializing in healthcare consultancy is struggling to adapt to the rapidly changing regulatory landscape and market dynamics.

Read Full Case Study

Scenario Analysis for Mid-Size Mining Firm in Resource-Rich Region

Scenario: A mid-size mining company in a resource-rich region is facing volatility in commodity prices and regulatory changes, impacting its profitability and long-term strategic planning.

Read Full Case Study

Scenario Planning for Global Semiconductor Expansion

Scenario: The company is a semiconductor manufacturer facing uncertainty in global markets due to rapid technological advancements and geopolitical tensions.

Read Full Case Study

Scenario Analysis for Electronics Retail Expansion

Scenario: The organization is a mid-sized electronics retailer in North America, preparing for expansion into new markets.

Read Full Case Study

Scenario Planning Initiative for Electronics Firm in High-Tech Sector

Scenario: An electronics company specializing in consumer devices is facing increased volatility in its market due to rapid technological advancements and shifting consumer preferences.

Read Full Case Study

Explore all Flevy Management Case Studies

Related Questions

Here are our additional questions you may be interested in.

How is artificial intelligence influencing Scenario Planning processes and outcomes?
AI is transforming Scenario Planning by enhancing Predictive Capabilities, improving Decision-Making Quality, and facilitating Agile and Adaptive Planning for strategic foresight. [Read full explanation]
How can organizations measure the success and impact of Scenario Analysis on their strategic outcomes?
Organizations can measure the success of Scenario Analysis by establishing clear metrics aligned with strategic goals, implementing a feedback loop, and benchmarking against industry standards to enhance decision-making and strategic adaptability. [Read full explanation]
How can Scenario Analysis be integrated with other strategic planning tools to enhance decision-making?
Integrate Scenario Analysis with SWOT, PESTLE, Balanced Scorecards, and Risk Management to enhance Strategic Planning, ensuring robust, adaptable strategies for future business landscapes. [Read full explanation]
What are the common pitfalls in Scenario Analysis that can lead to misleading outcomes, and how can they be avoided?
Common pitfalls in Scenario Analysis include overlooking external factors, underestimating interconnected risks, and failing to act on insights, which can be mitigated through comprehensive environmental scanning, employing a systems thinking approach, and integrating scenario outcomes into Strategic Planning and decision-making processes. [Read full explanation]
How is artificial intelligence changing the landscape of Scenario Analysis in strategic planning?
AI is transforming Scenario Analysis in Strategic Planning by improving predictive accuracy, efficiency, reducing human bias, and enabling dynamic, real-time updates to strategies, making data-driven decision-making essential for success. [Read full explanation]
What impact does the increasing importance of sustainability have on Scenario Planning?
The increasing importance of sustainability is transforming Scenario Planning by integrating ESG factors, driving innovation, Risk Management, and competitive advantage through comprehensive strategic approaches. [Read full explanation]

Source: Executive Q&A: Scenario Planning Questions, Flevy Management Insights, 2024


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