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Business Policy and Strategy, System Dynamics Applications to

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Encyclopedia of Complexity and Systems Science

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Definition of the Subject

System dynamics has long been applied to problems of business performance. These applications range from operational/functional performance to overall strategic performance. Beginning with its founding at MIT’s Sloan School of Management in 1957, an important focus of research, teaching, and application has been on understanding why companies and markets exhibit cycles or underperform competitors in terms of growth or profitability. The original publication in the field was Forrester’s Industrial Dynamics (Forrester 1961), which not only laid the theoretical foundations for the field but also provided an understanding of the causes of instability in supply chains. Since that initial work, research and application has been widespread. It has addressed the dynamics underlying instability in manufacturing and service organizations, the processes which encourage or inhibit growth, the dynamics of research organizations, and the causes of cost and schedule...

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Abbreviations

Business Policy and Strategy:

A firm’s business strategy defines how and where it competes and its approach to doing so. A business strategy typically specifies a firm’s goals, the products and services offered and the markets served, and the basis for competing (price, service, quality, etc.). A strategy may also define the organization structure, systems, and policies which implement the strategy. In addition, firms will have systems and policies which focus on operations and functions and are not truly “strategic” in nature. Nevertheless, these operational policies can be important in determining business performance.

Business Dynamics:

Business dynamics is the study of how the structure of a business (or a part of the business), the policies it follows, and its interactions with the outside world (customers, competitors, suppliers) determine its performance over time. Business structure consists of feedback loops surrounding the stocks and flows of resources, customers, and competitive factors that cause change over time; business policies are important components of these feedback loops. Business dynamics is a means of determining the likely performance that will result from alternative business policies and strategies.

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Authors and Affiliations

  1. Massachusetts Institute of Technology, Cambridge, MA, USA

    James M. Lyneis

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  1. James M. Lyneis
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Correspondence to James M. Lyneis .

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  1. Ramtech Ltd., Larkspur, California, USA

    Robert A. Meyers

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Lyneis, J.M. (2013). Business Policy and Strategy, System Dynamics Applications to. In: Meyers, R. (eds) Encyclopedia of Complexity and Systems Science. Springer, New York, NY. https://doi.org/10.1007/978-3-642-27737-5_45-3

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  • DOI: https://doi.org/10.1007/978-3-642-27737-5_45-3

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