Evaluation of trade and production policy in Iranian SME (a system dynamics model)

Abstract

It is undeniable that SMEs face many management-related problems. These problems are often deeply rooted in the strategic decision making by managers. One of these decisions is associated with the production section. Many of these companies provide production infrastructure at high costs; however, they are unsuccessful in acquiring their market share. In these circumstances, providing a solution to the decision-making problem of managers in these companies can prevent the loss of capital. In this research, the system dynamics approach is used to test the hypothesis of a company's participation in the production field after securing a success in business activities of the market. In the present study, the SME performance model, proposed by Schmid's, is considered as the base model. After analyzing its construction steps according to managers' viewpoints, the model has been developed based on the conditions in Iran. Then, the research scenario is presented as follows. If an entrepreneur, before entering the production sector, tries to establish a customer network by conducting business activities, the organization's chance for success will increase. By defining a variable called "production switch" and adding it as a function of a loyal customer network, the model has been tested. After simulating the model for a 5-year period, it is concluded that the rate of return on investment of an organization that has conducted the commercial activities at the outset of production is four times higher than that at the outset of production without the commercial activity.

Measuring the performance of SMEs during the pandemic situation using system dynamic

“…In the first perspective, most of the previous studies have been carried out to assess the impact of COVID-19 on SMEs using descriptive statistics (Abu Hatab et al, 2021;Bartik et al, 2020;Humphries et al, 2020;Lu et al, 2020;Lutfi et al, 2020;Ratnasingam et al, 2020;Shafi et al, 2020;Dai et al, 2021) and using multi-attribute value theory (MAVT) (Susanty et al, 2022). In the second perspective, previous studies have been carried out to identify variable linkage in dynamic systems that explain the growth of SMEs (Farouk and Saleh, 2011), modeled the supply chain on a SMEs apparel company (Lidia et al, 2012), supported the sustainable growth number of SMEs in Indonesia (Subroto, 2012), analyzed the business performance (Bianchi et al, 2013;Sek, 2015), increased the value re-creation (Herman, 2016), evaluated the trade and production policy (Haghighi-Rad et al, 2019), modeled the simulation for a manager of SMEs dealing crisis dynamics (Vojtko et al, 2019), increased market share (Sidola et al, 2012;Suryani et al, 2022) and increased the innovation (Clement et al, 2022). It seems that this study will enrich the previous study on the impact of the pandemic on SMEs and the dynamic system modeling on SMEs.…”

System Dynamics Approach in Supporting The Achievement of The Sustainable Development on MSMEs: A Collection of Case Studies

“…Many of these companies provide production infrastructure at a high cost; however, they were unable to gain their share of the market, and eventually, they suffered losses. Related to these problems, [21] developed a model using the Schmid model as a basic model and a system dynamics approach aimed at evaluating existing policies to prevent capital loss. The developed model investigates whether customer networks in businesses without prior production have a role in increasing the return on investment (ROI).…”