CHAPTER 19
Broader Applications of Dynamic Models

The purpose of this chapter is to indicate how aspects of the industrial enterprise beyond the functions treated in Part III can be represented in dynamic models. Examples are drawn from thesis and staff research at M.I.T. A model of an automobile market has related design decisions to market penetration. A model of product growth represents a transient dynamic situation that continuously changes in character, as distinguished from the models of Part III, which are "steady-state dynamic" systems in which any five- or ten-year period is similar in general character to any other period. Studies on commodity markets show unexpected ways in which price stability may be improved. The process of military research and development management is being formulated into a system involving characteristics of the product, the development organization, the military contracting office, and the government budget cycle. Long-range-planning models can be used to integrate present facts and assumptions to see the ways they might interact in the future.

THE two models presented in Part III treat very restricted aspects of the total industrial picture. Capital equipment, one of the six flow systems in Section 6.2, was not used. Money flow has appeared in the model of Chapters 17 and 18 but only in an incidental, reporting capacity. Of the major functional subdivisions of management we have given some attention to production and distribution, have barely touched the market area, and have entirely omitted research, capital investment, long-range corporate planning, and many others.

These omissions do not occur because they represent areas of less importance or because they are less amenable to study by dynamic model methods, or because excursions are lacking into these somewhat more elusive aspects of corporate life. Rather, the more advanced models fall beyond the work to be undertaken in this volume, and the ones that have been developed have not been explored and revised to the point where they yet justify formal presentation in their entirety. However. in associated work done to date in other models of industrial activity, many interesting points have arisen and tentative conclusions formulated. This chapter will try to round out the description of the models given in Part III by discussing the high lights arising from studies of other industrial situations that have followed the methods outlined in this book.


19.1 Market Dynamics

There seems to be a common inclination to assume that the mechanisms of the market are obscure, that psychological factors predominate to the exclusion of tangible factors, and that there is little possibility of useful modeling of the market interactions. I hold the opposite view. To be sure, many of the market charac-

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