Guest article from Marco Ribeiro
Corporations everywhere today face the huge challenge of surviving and growing in an extremely competitive environment. Markets are shaped and reshaped due to constant innovation, customer demands and fierce competition. All these forces demand that corporations continuously reinvent themselves trying to maintain competitive advantages that differentiate them from the competition.
Strategic planning in such an environment is a difficult challenge that corporations must overcome successfully. Corporate strategic planning deals with such complex issues as:
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* Understanding the market and its future trends – understand suppliers, competition, their competitive advantages and market positioning. Know the future trends that will shape the market.
* Future resource allocation – how the corporation’s resources should be organized in order to maintain an efficient operation.
* Scope of operations -in which businesses should the corporation operate, which ones should be dropped out
* Diversification of the corporation’s business – should the corporation focus its operations in a small and related set of businesses or should it look to diversify to heterogeneous businesses
* Future structure of the company – draw the boundaries of the corporation and determine how these boundaries will affect relationships with suppliers and customers
The strategy defined will address all these issues in detail and determine the future direction of the corporation.
Can we use simulation to support the strategic planning process?
Yes, we can. As Thomas Davenport and Jeanne Harris describe in their book: Competing on Analytics: The new Science of Winning, we will see an increasing demand and use of analytical technologies supporting corporation’s decision-making processes.
Simulation can play an important role by helping managers create models of their markets and processes and “toy” with them in order to get a deeper understanding. We can also use simulation to support such efforts as portfolio analysis and management, helping managers determine how to most effectively manage and configure their product life cycle. We can build models of processes and determine the most efficient configuration. Simulation is a valuable tool to test scenarios and make better business decisions.
Marco Ribeiro
LinkedIn Profile
Tags: budget, management, planning, simulation, strategic planning
Even simulation depends on assumptions (unfortunately, almost every tool depends on assumptions), it is helpful for “what-if, if-then” scenarios.
Also, healthier decisions can be made after being aware of the “ranges” of the scenarios.
Great post! I’ve been very interested in corporate strategic planning for a long time. I didn’t know that stimulation can be used to support the strategic planning process.
Excellent article. The key word used in the article is simulation can support the strategic planning process. When I first started reading this article, I thought that using simulation was a bit of strech, however, you are exacty right. Simulation can be used to support the planning process, especially when it comes to staffing and product development. By not having simulation, one could have to guess on resource needs when trying to determine whether or not to launch a product. The more information we have, the more educated decisions we can make and simulation provides that information.
Great point! With the help of simulation, it is much easier for companies to make strategic planning. It is flexible to model the complicated things, and simulation allows uncertainty and variety in modeling.
What will happen under certain situations, are always useful information for companies to forecast market, like demand of customers, and resource needed. In the future, more and more companies will wake up to the importance of simulation and make use of it.
I am taking the course Engineering Management. Strategic Planning is: To establish a mission, goals, objectives and strategies for where an organization wants to go in the future
Strategic Planning determines where an organization is going and how it is going to get there; it takes into account the Strategic Issues and lays a framework for the future.
considering the probable chain of cause and effect consequences over time of an actual planned decision.
May be in the future, simulation will be a requirement of a successful strategic manager.
It is great article. I never knew before we can use simulation to help us to plan corporation strategic. For example, when we launch one product, there are a lot of factors to consider or planinng. From article, the writer said that we can use simulation , so it might be easy to plan our process or control cost. I also agree with Fay that we can use it to forecast market or demand.
First, as I learned in Engineering Management class, a company should have project flows to keep it competitive in this rapid changing market. That’s what Marco said:Diversification of the corporation’s business. A company should include this mission in their strategic management, because focus on one field or one type of project is easy to fail because the market change so fast, competition is very tensive and etc.
Second, simulation is definitely a good way to help managers and leaders to make a decision. It’s very persuative and intuitive.
Actually,some other courses I learned also provide a useful way to support the strategic management. Such like Operation Research and Decision Making. That reminds me what IE’s role in an organization, is it a technical consultant, or a technical support, or a engineer manager? I guess we can do all of them, because the primary goal and strength of IEs is we know how to make things better.
I totally agree that simulation plays an important role in supporting the srategic process of comapneis. This is because simulation shows the hidden costs, helps on determining resources allocation, scheduling and many other critical factors that strongly contribute on the success of strategic management