Software support of managerial decision making based on system approach

Abstract

The companies' management have to deal with all that. And, once again, a question arises what approach should be taken when solving the newly emerged problems? It turns out that the current managers' problem-solving method should be based on a system approach as well as on prediction. The dynamics and indefiniteness of business environment makes a corporate management use methods based on the system approach to the business, or understanding the business as a living organism and, at the same time, take into account the growing importance of knowledge, creative human potential, and new management methods as system dynamics and other competition tools of a company of the 21st century. The objective of this paper is creation model of Corporate Strategic Management decision-making in the conditions of food industry, on a market of a refrigeration company. Production of ice creams depends on the weather conditions during the year. The manufactured goods are of seasonal nature. As a result of great competition on the market, prices are very low and manufacturers' margins are squeezed by strong supermarket chains. Only the brand names of products and manufacturers are protected. Product differentiation is low. Product development is primarily based on copying of the most attractive product of the competition. Recipes and manufacturing processes developed by the research departments of world-wide companies are copied by all competitors. Advertising and promotion play an important role in winning customers. Companies try to launch something new every season. Preparation for each season takes place from May of the previous year. The goal of model is to understand how the price and the sold quantity influence the sales growth rate, market share, and profit of the refrigeration company over a period of 24 months, with seasonal fluctuations in the demanded quantity on the market. One member of author's team has practical experience from production and business at food company. For performance measurement we use Business Performance Index, i.e. a summary indicator showing the business performance; it aggregates data of three partial indicators which determine the achieved economic results of a company, i.e. the sales growth rate, market share, and profit. The following balance has been established for individual partial indicators: sales growth rate (45%), market share (35%), and profit (20%). The model of Corporate Strategic Management used the Vensim software. Vensim is a software program for creating management modules and simulators based on the principles of modeling of dynamic systems. System dynamics is a scientific discipline which studies systems, their development and behavior over time. The possible use of the knowledge of system dynamics is based on the understanding of system behavior and structures, assessment of effects of individual alternatives, and testing of strategies. The feedback structure of the system allows recording the diagram of surfaces and flows. It uses graphic systems to describe the structure of the system. The principle is to define the surface (accumulation of changes within instant of time), artificial variables (definition by using algebraic expressions), constants (a variable became a value), a flow (changes the surface over time) and linkages among individual elements. In this paper, we tried to apply the learned knowledge from the area of system dynamics and creation of virtual companies to the ice cream market and to show its specific aspects, such as the seasonality of production, changes in customers' preferences, as well as typical problems the production, sales, and marketing managers have to deal with.