Application of physical science analysis to strategic management monitoring and control systems

Abstract

This article illustrates the potential for using mathematical reasoning and analogy from physical sciences to conceptualise and explore the effect of dynamic external forces on the response of a company. An example of a generalised second-order linear differential model is applied to study the dynamic response of a company or industry to an exogenous shock. In most systems, significantly over-damped or under-damped response characteristics are expected. However, strategic management monitoring and control systems can scan for external shocks in order to apply dynamic adaptive controls to optimise the company's response. Mathematical tools are used to predict conditions under which an efficient response to external shocks is expected. It is shown that active strategic management can provide superior response characteristics. Additional complementary mathematical modelling approaches are outlined to show how the model may be expanded to address inter-firm linkages, supply chain dynamics, and the propagation of shocks through an industry.