The Purpose of Business Simulation
It is essential to figure out for what purpose managers and leaders of companies may implement a process of business simulations. To begin with, business simulation is a mechanism that is implemented to test and analyze current companies’ decisions and those that have not yet been adopted. Therefore, one may claim that a process simulation includes the analysis of how business is built through imitation. In order to avoid additional costs, it is vital to understand how business decisions may be implemented in the real world before they are built through simulation.
A business simulation process may be highly expensive; for instance, in case if managers would like to assess some new operational systems to see whether it is worth adopting. Thus, the board should deeply understand how the potential system will be implemented in the company, its strengths and weaknesses, how much money it will cost, etc. Therefore, a process of business simulation is a mathematical imitation of the real world.
SWOT analysis is one of the main tools to evaluate the business process before the start of the simulation. According to Helms and Nixon (2010), SWOT analysis stands for the defining Strengths, Weaknesses, Opportunities, and Threats of the company’s decision. Therefore, it is widely used to assess the process by leaders and managers. Moreover, this technique allows specialists to evaluate the plan both from internal and external points of view. Concerning the details of this SWOT analysis, one may identify such strengths of the firm as the experience of its employees, their knowledge, certifications, good reputation, and others. On the contrary, weaknesses may include the lack of experience and knowledge, insufficient financial support, geographical location, and others. It should also be highlighted that strengths and weaknesses are internal aspects of the business, as they focus on its resources, such as workers. Regarding external aspects, opportunities may include: strategic alliances with other firms and companies of similar or complementary industries, partnerships with them, product, market demand allowing rapid business growth, technological innovations, and others. Finally, threats can be seen in governmental restrictions, impact on the environment, high competition rate, inflation, and others.
The SWOT analysis allows managers to evaluate the business process and approve some changes to alter the current model, according to which the company is operating. Caldwell et al. (2010, p. 498) highlight that leadership is represented by the process of affecting followers in order to “achieve organizational objectives through change”. Therefore, one may claim that leaders have a direct obligation to encourage managers to reconsider the effectiveness of operational models and implement simulation to evaluate the potential change.
However, to change the business model in the most efficient way, a company should perform according to the code of corporate ethics. As it is claimed by Payne and Landry (2006), a code of business ethics consists of basic rules created to strengthen the moral status of the company and its workers. According to Pilot (2014), many firms lack social responsibility and sustainability practices, which should be changed to achieve constant development and perform alterations in the operational systems. In other words, while developing potential changes in a company and preparing for a process simulation, leaders and managers should put the firm’s image at the top of priorities: it should be socially responsible and perform according to ethical and moral codes of conduct.
Caldwell, C., Hayes, L. A. and Long, D. T. (2010) ‘Leadership, trustworthiness, and ethical stewardship’, Journal of Business Ethics, 96(4), pp. 497-512.
Helms, M. M. and Nixon, J. (2010) ‘Exploring SWOT analysis – where are we now?’, Journal of Strategy and Management, 3(3), pp. 215-251.
Payne, D. and Landry, B. J. L. (2006) ‘A uniform code of ethics: Business and it professional ethics’, Communications of the ACM, 49(11), pp. 81-84.
Pilot, M. J. (2014) Driving sustainability to business success: The DS factor–management system integration and automation. John Wiley & Sons.