PHILIPPINE CHRISTIAN UNIVERSITY

1648 Taft Avenue corner Pedro Gil St., Manila

MASTER IN BUSINESS ADMINISTRATION

STRATEGIC MANAGEMENT 2

“ASSUMPTIONS”

IN-CAMPUS MBA PROGRAM

SUBMITTED BY:

KATRIZIA CERIZE L. FAUNI

SUBMITTED TO:

PROF. LAGUNDA
Assumptions

McConkey defines assumptions as the “best present estimates of the impact of major
external factors, over which the manager has little if any control, but which may exert
a significant impact on performance or the ability to achieve desired results.”16
Strategists are faced with countless variables and imponderables that can be neither
controlled nor predicted with 100 percent accuracy. Wild guesses should never be made in
formulating strategies, but reasonable assumptions based on available information must
always be made. By identifying future occurrences that could have a major effect on the firm
and by making reasonable assumptions about those factors, strategists can carry the
strategic management process forward.

Assumptions are needed only for future trends and events that are most likely to have a
significant effect on the company’s business. Based on the best information at the time,
assumptions serve as checkpoints on the validity of strategies. If future occurrences deviate
significantly from assumptions, strategists know that corrective actions may be needed.
Without reasonable assumptions, the strategy formulation process could not proceed
effectively. Firms that have the best information generally make the most accurate
assumptions, which can lead to major competitive advantages.

Assumptions are needed only for future trends and events that are most likely to have a
significant effect on the company’s business. It is also needed to be able to reach a
conclusion, to support the conclusion and to strengthen the conclusion.

Assumptions are tools for planning and they are those factors that are considered true, real,
or certain for the purpose of creating a shared understanding of the plan.

Assumptions needs to be:

• Needs to be solid

• Defensible

• Must have best information

• Must Validate the information

• Explain and give examples of why your assumptions are probably true

• Well researched
Examples of Strategic Assumptions

Strategic assumptions are those critical factors that, if invalid, would cause termination or
significant changes to the initiative. For contrast, compare them to estimating assumptions
are those factors that are the basis of assumptions for cost, time duration, or resource
commitments.

Here are four examples of strategic assumptions:

• We assume that the market will respond favorably to our new product, and we will
steal 10% market share from our competitors.

• We assume that the organization will not be acquired by another organization during
the next 12 months.

• We assume that the development engineers can solve the compatibility and
integration issues.

• We assume that there will be no new significant legislation or regulation of our

industry in the next 12 months.

What makes them strategic?  It is that if they are invalid, there would be good reason to
cancel the initiative or redirect it in a major way in order to achieve the pre-determined
definition of success.

Preparing a set of Strategic Assumptions

• The identification and discussion of the key issues are not intended to generate right
or wrong “answers;” rather, they represent choices and shared points-of-view about
what the team believes will happen. Together, they form a set of approximately 12-15
strategic assumptions upon which management intends to build its strategic plan and
business.

• There is no universal set of strategic assumptions that must absolutely be generated

and covered in every organization’s strategic plan. There are, however, generic
areas where strategic assumptions generally must be made and which stakeholders
should realistically expect management to disclose:
Resources: Fred David, Strategic Management: Concepts and Cases, 13th Edition

https://leadingstrategicinitiatives.com/2012/04/26/how-to-identify-strategic-assumptions/

https://iveybusinessjournal.com/publication/strategic-assumptions-the-essential-and-missing-element-of-your-
strategic-plan/