Entropy and information in scenario modeling of a firm: new approaches in business economics

In the present world featuring rapidly changing conditions of external environment, it is crucial for companies to be adaptive and resistant to any types of fluctuations. When creating scenarios of business portfolio development or medium-/long-term planning of firm activities, it is important to evaluate an efficiency of such scenario implementation. Depending on the degree of openness of the system-firm, one can talk about the different degrees of its adaptability and ability to develop. The degree of freedom of the system is determined by its entropy. The number of degrees of freedom determines the system’s ability to develop, evolve (in general).Thus, it is important to investigate the influence the entropy and information to a firm – a system and create some appropriate instruments for estimation scenarios of development. The author studies the adaptive capabilities of a firm – a system to the external environment conditions and draws a conclusion that a reasonable combination of order and chaos is required for a firm’s evolutionary development, or one should search for optimal balance between an entropy, as a degree of uncertainty (chaos), and a system awareness, as an indicator of its arrangement. The author has proposed an index of strategic adaptability for evaluation of business portfolio development scenarios. The use of system’s information and entropy as evaluation criteria’s for the feasibility of scenarios is proposed. The offered approach and instruments for evaluation of the firm’s asset portfolio development scenarios do not require complex calculations and are convenient enough to be used by any firm, concerned about its adaptability to the external environment conditions in practice.

Abstract licence: CC BY

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