Entropy and information in scenario modeling of a firm: new approaches in business economics
-
DOIhttp://dx.doi.org/10.21511/ppm.17(1).2019.18
-
Article InfoVolume 17 2019, Issue #1, pp. 202-215
- 1082 Views
-
154 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
In the present world featuring rapidly changing conditions of external environment, it is crucial for companies to be adaptive and resistant to any types of fluctuations. When creating scenarios of business portfolio development or medium-/long-term planning of firm activities, it is important to evaluate an efficiency of such scenario implementation. Depending on the degree of openness of the system-firm, one can talk about the different degrees of its adaptability and ability to develop. The degree of freedom of the system is determined by its entropy. The number of degrees of freedom determines the system’s ability to develop, evolve (in general).
Thus, it is important to investigate the influence the entropy and information to a firm – a system and create some appropriate instruments for estimation scenarios of development.
The author studies the adaptive capabilities of a firm – a system to the external environment conditions and draws a conclusion that a reasonable combination of order and chaos is required for a firm’s evolutionary development, or one should search for optimal balance between an entropy, as a degree of uncertainty (chaos), and a system awareness, as an indicator of its arrangement.
The author has proposed an index of strategic adaptability for evaluation of business portfolio development scenarios. The use of system’s information and entropy as evaluation criteria’s for the feasibility of scenarios is proposed.
The offered approach and instruments for evaluation of the firm’s asset portfolio development scenarios do not require complex calculations and are convenient enough to be used by any firm, concerned about its adaptability to the external environment conditions in practice.
- Keywords
-
JEL Classification (Paper profile tab)D80, G32, G34
-
References37
-
Tables3
-
Figures1
-
- Figure 1. Visual representation of the methodological basis of the study
-
- Table 1. Calculation of the index of strategic adaptability for PV0 = $324,753.66 and PV = $576,688.9
- Table 2. Calculation of the index of strategic adaptability for PV0 = $324,753.66 and I = $300,000.
- Table 3. Probability of implementation of the firm portfolio development scenarios
-
- Ahmad, I., & Lin, Pi-Erh. (1976). A nonparametric estimation of the entropy for absolutely continuous distributions (corresp.). Information Theory, IEEE Transactions, 22(3), 372-375.
- Amigó, J. M., Hirata, Y., & Aihara, K. (2017). On the limits of probabilistic forecasting in nonlinear time series analysis II: Differential entropy. Chaos, 27.
- Axson, D. A. J. (2010). Best Practices in Planning & Performance Management (3d ed.). N.Y.: John Wiley & Sons.
- Axson, D. A. J. (2010). The Management Mythbuster. N. Y. John Wiley & Sons.
- Blangard, K., & Veghorn, T. (1988). Миссия возможного или как стать компанией мирового класса [Missiya vozmozhnogo ili kak stat kompaniey mirovogo klassa]. Chelyabinsk: Ural LTD.
- Cover, T. M., Thomas, J. A. (2006). Elements of information theory (2nd ed.). Wiley.
- Cuartas, B. M., & Lopez-Menendez, A. J. (2013). Combining Economic Forecasts by Using a Maximum Entropy Econometric Approach. Journal of forecasting, 32(2), 124-136.
- Feofanov, K. A. (2008). О сценарном подходе к прогнозированию [O scenarnom podhode k prognozirovaniyu]. Sotsiologicheskie issledovaniya.
- Fink, A., & Schlake, O. (2000). Scenario management – an approach for strategic foresight. Competitive Intelligence Review, 11(1), 37-45.
- Gagin, V. (2001). Системный синтез “Лезвие жизни” [Sistemnyy sintez “Lezvie zhizni”]. Odessa.
- Guan, H., Dai, Z., Guan, S., & Zhao, A. (2018). A Forecasting Model Based on High-Order Fluctuation Trends and Information Entropy. Entropy, 20(9), 669.
- Hromov-Borisov, S. N. (2013). Управление сложностью. Операционная система бизнеса. [Upravlenie slozhnostyu. Operatsionnaya sistema biznesa]. M.: Izdatelskiy dom “Grebennikov”.
- Ju, B., Zhang, H., Liu, Y., Pan, D., Zheng, P., Xu, L., & Li, G. (2019). A Method for Detecting Dynamic Mutation of Complex Systems Using Improved Information Entropy. Entropy, 21(2), 115.
- Kleeman, R. (2002). Measuring dynamical prediction utility using relative entropy. American meteorological society, 59, 2057-2072.
- Lindgren, M., & Bandhold, H. (2009). Сценарное планирование. Связь между будущим и стратегией [Stsenarnoe planirovanie. Svyaz mezhdu budushchim i strategiey]. M.: ZAO “OlimpBiznes”.
- Mazzuchi, T., Soofi, E., & Soyer, R. (2008). Bayes estimate and inference for entropy and information index of fit. Econometric Reviews, 27(4-6), 428-456.
- Mehdi, S. (2015). Essays on Survey and Model Based Economic Forecasts (Theses and Dissertations. Paper 927).
- Neudachin, V. V. (2011). Реализация стратегии компании. Финансовый анализ и моделирование [Realizatsiya strategii kompanii. Finansovyy analiz i modelirovanie]. M: Izdatelskiy dom “DELO”.
- Nikiforova, V. A. (2009). Сценарный подход к разработке среднесрочной стратегии развития металлургии Украины [Stsenarnyy podkhod k razrabotke srednesrochnoy strategii razvitiya metallurgii Ukrainy]. Ekonomika promyshlennosti, 5, 37-43.
- Nikolis, G., & Prigozhin, I. (2003). Познание сложного. Введение [Poznanie slozhnogo. Vvedenie]. M.: Editorial.
- Omarov, Sh. A. O. (2011). Особенности использования сценарного подхода при формировании стратегии развития компании [Osobennosti ispolzovaniya stsenarnogo podkhoda pri formirovanii strategii razvitiya kompanii]. Problemy ekonomiki, 4, 139-142.
- Pardee, W. (1996). To satisfy & delight your customer: how to manage for customer value. N.Y.: Dorset house.
- Peters, E. (2000). Хаос и порядок на рынках капитала. Новый аналитический взгляд на циклы, цены и изменчивость рынка [Khaos i poryadok na rynkakh kapitala. Novyy analiticheskiy vzglyad na tsikly, tseny i izmenchivost rynka]. M.: Mir.
- Prigozhin, I., & Stengers, I. (2001). Порядок из хаоса. Новый диалог человека с природой [Poryadok iz khaosa. Novyy dialog cheloveka s prirodoy] (Izd. 4-e, stereotipnoe). M.: Editorial URSS.
- Ringland, D. (2008). Сценарное планирование для разработки бизнес-стратегии [Stsenarnoe planirovanie dlya razrabotki biznes-strategii]. M.: OOO “I.D. Vil’yams”.
- Robert, M. (2006). Новое стратегическое мышление. Просто о сложном [Novoe strategicheskoe myshlenie. Prosto o slozhnom]. M.: Pokolenie.
- Roxburgh, C. (2009, November). The Use and Abuse of Scenarios. McKinsey Insights.
- Salo, A., Keisler, J., & Morton, A. (2011). An invitation to portfolio decision analysis. In A. Salo, J. Keisler & A. Morton (Eds.), Portfolio decision analysis, 162, 3-27.
- Sbardella, A., Pugliese, E., Zaccaria, A., & Scaramozzino, P. (2018). The Role of Complex Analysis in Modelling Economic Growth. Entropy, 20, 883.
- Schwartz, P. (1996). The art of the Long View: Planning for the Future in an Uncertain World. N.Y.: Doubleday.
- Sutherland, D., & Canwell, D. (2005). Стратегический менеджмент. Ключевые понятия [Strategicheskiy menedzhment. Klyuchevye ponyatiya]. Dnepropetrovsk: Balans Biznes Buks.
- Ventcel’, E. S. (1999). Теория вероятностей [Teoriya veroyatnostey]. M.: Vysshaya shkola.
- Vilkkumaa, E., Liesiö, J., Salo, A., & LLmola-Sheppard, L. (2018). Scenario-based portfolio model for building robust and proactive strategies. European journal of operational research, 266(1), 205-220.
- Volovikov, B. P., & Rebrova, N. P. (2013). Формирование портфеля проектов промышленного предприятия на основе сценарного планирования [Formirovanie portfelya proektov promyshlennogo predpriyatiya na osnove stsenarnogo planirovaniya]. Vestnik Omskogo universiteta. Seriya “Ekonomika”, 3, 178-184.
- Wilkinson, А., & Kupers, R. (2013, May). Living in the Futures. Harvard Business Review.
- Wind, Y. J., & Mahajan, V. (1981). Designing Product and business portfolios. HBR.
- Yaldin, I. V. (2011). Когнитивное моделирование в прогнозировании сценариев стратегии устойчивого развития интегрированной структуры бизнеса [Kognitivnoe modelirovanie v prognozirovanii stsenariev strategii ustoychivogo razvitiya integrirovannoy struktury biznesa]. Problemy ekonomiki, 4, 142-150.