System Dynamics | Explanation

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Table of ContentsINTRODUCTION......................................................................................................................2TASK 1-System dynamics.........................................................................................................2TASK 2-Identification of variables and formulation of constraints..........................................2TASK 3-Simple analytical model..............................................................................................3TASK 4- Analysis and solving the simple analytical model.....................................................4TASK 5- Critical evaluation of simple analytical model...........................................................4TASK 6- Construct the revised analytical model & solution....................................................4TASK 7- Critical evaluation of revised analytical model..........................................................5TASK 8- Constructing simulation model..................................................................................5TASK 9-Critical evaluation of simulation model......................................................................6TASK 10- CONCLUSION........................................................................................................6REFERENCES...........................................................................................................................6APPENDIX................................................................................................................................8Appendix: 1............................................................................................................................8Appendix 2.............................................................................................................................8Appendix 3.............................................................................................................................8
INTRODUCTIONThe Gorgeous Food Company Ltd is an existing private limited company with limited sharecapital which was incorporated on 30thMay 2008. It operates in retailindustry by offering food products in specialized stores and also is a non-specialized wholesaler for the food & beverages & tobacco items. It is afood and beverage supplier organization that is specializes in the 6 maincategories of foods that are confectionery, bakery, beverages, grocery,World Foods and Crisp &Snacks. Its product portfolio consists of uniqueitems that are not easily available in the supermarkets (The FoodGorgeous Company,n.d). It provides the best quality, flavour,provenance food made up of sustainable sourced ingredients so as toperfectly satisfy their client’s requirement. Honesty, integrity and quality services have created animpressive image in the market and strengthen its position in UK, more importantly, for independentdelis, food halls and farm shops. In order to attract more audiences, it had recently launched a newproduct, “Truffle Mustard”. The target of the firm is to grab a minimum market size of 60% but due tovolatile & uncertain market conditions, sales manager is not sure that what length of period, thecompany will take to reach the target. Thus, this is the main issue faced by the firm which will beresolved by applying suitable simulation & systematic dynamic modellingfor anticipating theprobable market demand for the Truffle Mustard.Although, the marketing manager of the firm is continuously putting great efforts for the purpose ofthe sound promotion of the new product and thereby maximizes the yield, still, they have no ideaabout the potential sales of the Truffle Mustard; as a result, they are facing market challenges. Forinstance, the number of potential buyers, conversion into actual consumer, probability that a buyer willnot use the item because their purchasing preference is not affected by the word of mouth publicityand many others are the unknown elements which cause several difficulties for the marketer of thebusiness unit (Stevens and et.al., 2015). Hence, to address the root problem, the report will construct asystematic dynamic modelling and simulation model for examining the possible market dynamics thatwill affect its success. Under the systematic dynamic modelling, stock flow diagram will clearlypresent the system functioning and aware various interlinked components. Besides this, causal loopdiagram (CLD) gives a clear picture of the constituent’s elements along with the interrelationship.However, on the other side, simulation will be modelled for identifying the possible buyers, actualadopters, imitators, innovators and others.TASK 1-System dynamicsThe analytical models are providing mathematical equations and flow charts which are eitherdeterministic or stochastic .System dynamic is a mathematical modelling technique which helps inexamining complex system, structure and issues. Alternatively, it can be defined as a part of systemtheory to develop sound understanding of the dynamic behaviour of the complicated system throughclearly presenting the links, interlocking and relationship among multiple of components. It wasinitially developed in order to facilitate business managers to enhance their understanding of thecomplex system & regular operational processes ((Barczak and Kahn, 2012). Now-a-days, themodelling is used by all the private and publicly held enterprises for policy formulation. The systemreinforces the flow of stock & the significance of consistent via constructing a stock flow diagramwhich is a quantitative model. However, on the other hand, CLDis qualitative representation whichclearly visualizes interrelationship among various components that is the part of new product sales in2
the market. In this, Nodes are variables whilst edges present relations or connections between differentelements (Stevens, Lewis and Johnson, 2015).TASK 2-Identification of variables and formulation of constraintsThe procedure of systematic dynamic modelling (SDM) begins with the step of identifying variables& constraints as well. It helps in clear, rigorous and transparent presentation. It helps to determine thatwhich elements can vary and affects the total sales of Truffle Mustard (consumer conversion rate etc.)and the constraints market size). The key target of the firm is to maximize the actual buyers so as togenerate maximum yield and enjoy impressive & phenomenal growth in the market.For the current issue of introducing new product, Truffle Mustard in the market, market size is aconstraint also called auxiliary variable, however, other are the variables i.e. consumer conversionrate, actual buyers, WOM publicity that will encourage others individual too to buy the offering andothers. In the stock & flow diagram, product purchase is presented in the middle that influences theconversion of potential customers into actual adopters. However, the arrows present relation pointingat influenced element (Bennett and et.al., 2010). On the other hand, CLD model demonstratespresented a clear picture to show linkage. Positive feedback loops tends to iterate the system awayfrom the equilibrium point which indicates instability whilst negative loops intends to dampen or holdsystem in equilibrium state with high stability. The simple causal loop diagram helps to determineunnecessary variables and other additional variables that are required to be added in Systematicdynamic modelling.TASK 3-Simple analytical modelStock Flow diagram: In the illustration, stock presents the accumulation & depletion over time whilstflow indicates the rate of conversion in the stock. Referring the below designed stock & flow diagramof new product introduction project indicates that a portion of the market size will be potential buyerof Truffle Mustard depicted on the left hand side, in the middle product purchase indicates flow meansconversion rate, in which, individual actually buy the item and become an actual adopter representedon the right hand side (Ernst and et.al., 2011). Thus, in this way, maximizing the conversion ratesboost the actual number of consumers and benefits The Gorgeous Food Company with high sales &yield or vice-versa.Truffle MustardTruffle MustardTruffle MustardMarket sizeCausal loop analytical model:The designed CLD for the introduction of Truffle Mustardreveals the clear structure through which firm can determine the user behaviour over a certain periodof time. In this, there are two loops can be seen. It clearly showcases qualitative interrelationship invarious components or constituents (Cui, Lui and Guo, 2012).3PotentialconsumersActualAdoptersProductpurchasePotential buyersof Truffle MustardAdoption rateActual adoptersof Truffle Mustard-+
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