Simulation Model for Business Value Strategic Management in Digital Transformation Era

Abstract

The main purpose of the study is to develop a simulation model that reflects aggregate impact assessment of an enterprise's external and internal environmental factors on its business value. Based on external and internal enterprise environmental factors and the rate of environmental changes, enterprise management evaluates each strategic decision to manage competitive advantages. Increased business value is seen as a quantitative indicator of an effective strategy. The paper describes theoretical and practical aspects of simulation modelling. A discrete simulation model in the form of a diagrammatic model of the operators-and-relations structure was chosen as the main simulation tool. The paper also defines external and internal environmental factors that emerge at certain stages of the industry life cycle and examines the key relations between them. The interaction between variables that represent the operation of the system and changes in the external environment was depicted graphically. As a result, a simulation model for assessing the impact of external and internal environmental factors on business value was developed. It includes variables as the key components of the system and demonstrates causal relationships between them. The model can be used to upgrade the strategic decision-making process. However, at the moment the described approach cannot be fully realized due to the lack of a decent informational base on individual enterprises and industries as a whole. The findings can be used to assess the potential impact of digitalization on strategic decision-making as well as its indirect impact on business value and development costs of digital models for enterprises.