SD 556: Strategic Modeling and Business Dynamics

The performance of firms and industries over time rarely unfolds in the way management teams expect or intend. The purpose of strategic modeling and business dynamics is to investigate dynamic complexity by better understanding how the parts of an enterprise operate, fit together and interact. By modeling and simulating the relationships among the parts we can anticipate potential problems, avoid strategic pitfalls and take steps to improve performance. We study a variety of business applications covering topics such as cyclicality in manufacturing, market growth and capital investment. The models are deliberately small and concise so their structure and formulations can be presented in full and used to illustrate principles of model conceptualization, equation formulation and simulation analysis. We also review some larger models that arose from real-world applications including airlines, the oil industry, the chemicals industry and fast moving consumer goods. Students work with selected business policy problems based on generic structures discussed in the lessons.