Simulation of Discovering Market Opportunities Using AI Methods

Abstract

Due to the strong turbulence that exists in the business environment, the view is sometimes articulated that the time horizon of decisions is no longer a hallmark of strategic management. Opposing views argue that a turbulent environment changes the trajectory of reaching future objectives determined by strategic decisions. Such trajectories require the company to be agile, which is manifested by seizing opportunities. Opportunities arise because the environment is volatile. An example of market opportunity is the unsatisfied demand for products. Buyers are driven by different motives when choosing between products that are alternative to them. From the producer's point of view, the purchase is therefore random. As a consequence, the alignment of the offered product portfolio with the actual purchasing decisions of customers is undetermined. In this article, we address the problem of determining the product portfolio structure expected by customers, i.e. one that is consistent with their future purchasing decisions. We hypothesise that this problem can be represented by a model of flows between alternative resources. Problems of this type are solved using Markov Chain Monte Carlo (MCMC) methods. In order to discover the expected demand (opportunity), we simulated the flow model we developed using the Metropolis-Hastings algorithm, which is a special case of the MCMC method used in AI. Due to operating on numerical data, such simulations fall under quantitative research. In the article, we present a model of customer flows between alternative products and then the simulation result, which is the expected value of these flows (stationary point). We convert this value into the structure of the product portfolio using a model of customer purchasing decisions that we have developed. The obtained results confirm the effectiveness of our method and have significant practical value, especially for SMEs. It also enables the assessment of the company's product strategy based on real sales data. The application of our methodology is limited to discovering opportunities in situations where purchasing decisions are influenced by variable environmental factors, causing irregular purchases by individual customers. It is useful, for example, in discovering opportunities in markets such as Household Articles, Furniture, Vehicles, Equipment Repairs, Construction, and many others.