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Simplified system dynamics: a methodology for corporate modelling

This thesis deals with the development and application of a methodology for constructing corporate planning models. The methodology is based on a framework of general systems concepts consisting of elements from the System Dynamics and Input-Output approaches to the modelling of complex systems. These concepts permit the use of explicit and efficient procedures for constructing corporate planning models, which support each of the conceptual, verbal, graphical and mathematical phases of the model abstraction process. Support for the model programming and computational phases is provided by a system of interactive computer programs, written in the ‘BASIC’ language, for a Digital PDP 11/70 timesharing computer. The technical details of these programs and their use, are contained in the Appendices. Discussion of the methodology is preceded by reviews of both management science and corporate planning, which focus on their respective development histories, future development directions, and their inter-relationship. These reviews provide a foundation for examining the role of computer-based models in corporate planning. In particular, the importance of modelling in resolving the conflicts and problems of corporate planning is established. Following appraisal of a selection of systems-based modelling methodologies, including System Dynamics, a simplified version of this methodology is presented. This version permits the construction of more open models in which priority is accorded to representation of the structured, mechanistic relationships of the system being modelled. Introduction of the matrix algebra concepts of Input-Output Analysis enables systems to be represented as vectorised networks, which in turn facilitate the construction of less aggregated models. A series of ten applications of the simplified System Dynamics methodology, involving the construction of both financial and non-financial models, is then presented. These applications, together with a comparative study using a typical ‘non-systems’ approach to the construction of a benchmark financial model, provide the basis for assessment of the methodology. This assessment is made in terms of its strengths and weaknesses, and of some recent technological advances in computing. As a systems approach to corporate modelling, the methodology is found to meet the needs of corporate planners more closely than any of the existing systems methodologies. The representation of systems as open vectorised networks facilitates model-building and the construction of more flexible, understandable models. These advantages increase markedly as the scale of models constructed with the methodology increases. The weaknesses of simplified System Dynamics are found to relate directly to the limitations of the current version of the computer software system which supports it. This software system must therefore be upgraded if these weaknesses are to be eliminated. This upgrading should proceed in a manner which takes maximum advantage of the data base management and graphics capabilities of modern time-sharing computers.
Type of thesis
The University of Waikato
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