FIVE FORCES: a knowledge based simulation of strategic planning

Abstract

An investigation is given on the application of knowledge-based reasoning to the task of strategic corporate planning. An implemented computer program, FIVE-FORCES, is described which models the five major forces affecting corporate strategy: customers, suppliers, new entrants, substitute products, and competitors. In addition, the effects of industry structure and the socioeconomic environment are examined. The knowledge engineering methodology employed in FIVE-FORCES is discussed and illustrated with specific examples. It is argued that the knowledge represented in the FIVE-FORCES expert system is more directly analogous to real-world situations than that encoded in traditional rule-based paradigms. As a result, the behavior of the system is more natural and perspicuous. More importantly, the underlying model can be tested and validated against a board of experts or test suite of situations. FIVE-FORCES is claimed to be a general knowledge engineering shell which can be used as a simulation tool to evaluate corporate-level strategic analysis in a myriad of industries and businesses.<>