Hanna Tarasova
Kiev National University of Technology and Design, Ukraine
E-mail: tarasova.ganna@gmail.com
Sergey Zaharov
Metinvest PromServis, Ukraine
E-mail: sergey.v.zakharov@metinvestholding.com
Mykhaylo Vereskun
Priazovsky State Technical University, Ukraine
E-mail: vereskun.m.v@ukr.net
Valeriia Kolosok
Priazovsky State Technical University, Ukraine
E-mail: kolosok.v.m@gmail.com
Submission: 10/08/2018
Accept: 11/28/2018
ABSTRACT
It is
established that under anticipatory management of industrial enterprises it is
expedient to prevent the development of anticrisis
strategies for counteracting the most probable crises for an industrial
enterprise. At the same time, the main question is to determine when it is
necessary to intensify these preventive anticrisis
development strategies. To solve this problem, a scientific and methodical
approach has been developed to intensify anticrisis
strategies for the development of an industrial enterprise on the basis of weak
signals, based on the use of a model for estimating the proximity of an
industrial enterprise to a crisis state, and which provides for the preventive
adaptation of an industrial enterprise to abrupt changes in the environment or
changes in the development trajectory enterprises. It makes possible to assess
the stability of the trajectory of development of the industrial enterprise at
a specific time, and, accordingly, to carry out anticipatory management of the
development of the industrial enterprise.
Keywords: development, crisis management
strategies, industrial enterprise
1. INTRODUCTION
When developing the strategy of anticipatory
management, the development of an industrial enterprise, one of the most
effective approaches to responding to crisis phenomena is the use of preventive
or passive adaptation, that is, the activation of existing development
strategies, which at one time was developed to overcome typical crises. Such an
adaptation suggests that in forming a general strategy for the development of
an enterprise, account should be taken of the possibility of occurrence of the
most typical and probable crises, and planned methods for their overcoming
(HROZNYI, et. al, 2018).
Among the main difficulties that arise in this case,
one should note the need to identify the crisis in a timely manner. It has been
established that the most promising approach for timely detection of crises in
an unstable economic environment is the use of methods of economic dynamics,
namely analysis of weak signals. The analysis of weak signals is an integral
part of the anticipatory management of the enterprise, which can reveal early
signs of changing the trajectory of the environment or the enterprise itself.
The purpose of the paper is to timely identify
crises in an unstable economic environment, taking into account the analysis of
methods for calculating and assessing weak signals indicating that the crisis
is approaching. The paper offers a comparison of plans for the development of
industrial enterprises with typical crises; identifying crisis markers, for
which it is necessary to evaluate weak signals, assess the potential and forces
of the expected crisis from the point of view of the development of an
industrial enterprise; justification of the decision of the management to
strengthen the anti-crisis strategy for managing the development of the industrial
enterprise. The analysis will be conducted for the Ukrainian industrial
company.
The following sections of the
paper will present definitions of typical crisis phenomena through formalized
and structured methods for calculating and assessing weak signals, as well as a
model for assessing the proximity of an industrial enterprise to a crisis
situation, which is then evaluated for the Ukrainian industrial company.
2. LITERATURE REVIEW
Crisis management is the process by which an organization
deals with a disruptive and unexpected event that threatens to harm the
organization or its stakeholders (BUNDY et. al, 2017).
Crisis management techniques include a series of further
steps, ie the reaction of an industrial enterprise to prevent, mitigate or
overcome various types of crisis.
Approaches to effective crisis management are based on the
following aspects:
·
adequate
perception of the crisis.
·
the
classification of the indicators of the crisis
life cycle scenarios and the
corresponding response mechanisms.
·
communication
processes for responding to
the development of emergency management scenarios (GROH, 2014).
Research shows that organizational contributory factors
affect the tendency of executives to adopt an effective "crisis as
opportunity" development (JAMES, 2008).
Among the studies of crisis states,
an early warning based on weak signals is particularly highlighted in the
management of the development of industrial enterprises.
Тhe system has to face the dilemma of warning signals
(CEVOLINI, 2016).
The system must be able to detect symptoms and weak signals
outside and in the company and sent to a competent employee who will carry out
an analysis of the cause of this state and confirm or deny negative development
that might lead to a crisis situation (ZUZAK,
2001, 2017).
Classification of weak signals of
an industrial enterprise, which are distributed by types of enterprise
activities: production, scientific and technical preparation of production,
financial and economic, marketing, logistics, social and personnel and foreign-economic.
However, instruments for quantitative measurement of these signals and for
their formal analysis have not been proposed (MELNYK; ADAMOV, 2009).
Main problem of early warning systems
using weak signals is the impossibility of their use in practice because they
do not distinguish weak signals from background noise as well as the absence of
descriptions of characteristic features weak signals (RUBANOV, 2013). He proposes to use a control system
from three levels to solve this problem, which consists of the preliminary,
current and final control. But it does not pay sufficient attention to the
mathematical justification of the approaches to isolating noise from signals
and what particular features are the weak signals typical of an industrial enterprise.
Also, the problem of the diagnosis of weak signals is
devoted to the study of Kuzmin and Adamov (2013), who offer to diagnose weak signals,
taking into account the type of enterprise. It detects signals that have a
potential impact on the company, determines the level of entropy of these
signals, constructs a tree of consequences for the enterprise for each signal,
evaluates the opportunities and threats for the enterprise using the Monte
Carlo method and formulates conclusions about the quantitative effect on the
results of the operation of the enterprise. Despite the promise of this
approach, it should be noted that beyond the scope of the study remains the
question of responding to the company's potential threats, as evidenced by the
weak signals that were diagnosed.
Mechanism of management of economic
safety of the enterprise by means of weak signals, analyzed the peculiarities
of weak signals of machine-building enterprises, which testify to economic
crises. To isolate weak signals from noise (SHANKRET; KARAIM, 2015)
was proposed to use internal standards on the level of economic security in the
context of the main functional components and the information base of
experience. But it does not describe exactly which formalized methods for
calculating signal and noise criteria should be used.
In contrast to the previous
approach, proposed a formalized approach to detecting a weak signal, which
assumes that it is necessary to calculate the integrated indicators of the
influence of external factors on the enterprise and to find the difference
between the planned and actual values of these integrated indicators (ZMOTS,
2012; SHIRYAEV, 2016).
If this difference is greater than
the established limit, then a weak signal is considered to be detected. But it
should be noted that the proposed approach to the analysis of weak signals does
not take into account the trajectories of the environment and the enterprise
itself. Because of this, the weak signal may not have a significant impact on
the emergence of crises, because according to the theory of economic dynamics,
weak signals are important when the economic system is near to the point of
bifurcation.
Dyaduk
(2015) suggests identifying threats to the enterprise based on the weak signals
coming from the environment in the following areas: consumers, resource
support, affiliated and supporting industries, the competitive environment,
government structures, and occasional phenomena. But it should be noted that
most of the proposed signals are traditional and are widely used in the
management of the enterprise. For example, it is a negative dynamics of
commodity turnover, falling stock of own shares, rising prices, and so on.
Negative values of these signals indicate the existing problems and the
already existing crisis, and not the possibility of other trajectories at the
point of bifurcation of the economic system.
The modeling of the production
planning control system for weak signals, the main factor of which is the
analysis of regulatory balances in the warehouse, was introduced by Petrova, Kovalevskaya and Musienko (2011). This makes it possible to detect
inconsistency of planned and actual indicators and timely adjust the production
program. The main disadvantage of this approach is to ignore the need to detect
weak signals of the environment, which is often the source of the crisis, as
well as the inability of the proposed model to be used at the strategic level
in developing a strategy for the development of an industrial enterprise.
On the whole, it can be concluded
that traditional approaches to the identification of typical crisis phenomena
are mainly focused on comparing planned and actual indicators or, at all, with
no formalized and structured methods for calculating and assessing weak signals
indicating that the crisis is approaching. Therefore, in an anticipatory
management of the development of an industrial enterprise, there is a need to
develop approaches that would address such tasks:
·
comparison of plans for the development of industrial
enterprises with typical crises;
·
identify the markers of the crisis, for which it is
necessary to evaluate the weak signals
·
assessment of the potential and strength of the
expected crisis in terms of the development of an industrial enterprise;
·
the substantiation of the managerial decision to
intensify the anticrisis strategy for managing the
development of the industrial enterprise.
3. METODOLOGY
The proposed sequence, the main measures to intensify
the anticrisis strategies for the development of an
industrial enterprise on the basis of weak signals and the results of their
implementation is shown in Figure 1.
Figure 1: Management of activation of anticrisis strategies of industrial enterprise
development
on the basis of weak signals
Source: own research
From the point of view of
intensification of anticrisis strategies for the
development of an industrial enterprise, possible crises can be classified
according to the type of jump, sources of origin and consequences.
The economic crisis is always out
of range, in which the company feels comfortable. This output can be slow or
fast. With a slow exit beyond the range of effective functioning, the change in
key performance indicators of the enterprise is gradually and deterioration can
be provided by the usual methods of forecasting. A quick exit from the range of
effective operation of an industrial enterprise is either an immediate change
in the key indicators of the enterprise to large or even dual development paths
(bifurcation), when it is difficult to establish in advance what kind of
trajectory will be chosen by the economic system.
By sources it is suggested to
distinguish between internal and external crises. Internal crises are due to
life cycles of the industrial enterprise, as well as internal management
crises, such as personnel force majeure. External crises are the consequences
of changes in the economic environment of an industrial enterprise, such as:
·
change of legislative restrictions, for example,
currency regulation, tax rates, obtaining permits for business activity, etc.;
·
moving equilibrium in world markets or local markets
of a country where an industrial company is a party (markets refer to both
commodity and financial markets and the labor market);
·
change in the stage of the life cycle of the industry
to which the industrial enterprise belongs.
Among the consequences of crisis
phenomena from the point of view of the industrial enterprise, the following
are the main ones:
·
decrease
in the quantity of sold products;
·
decrease
in the price of sold products;
·
increase
in production costs;
·
increase
in other expenses.
After forming a hierarchy of typical crisis situations that
can affect an industrial enterprise, it is possible to determine which weak
signals indicate that these crisis situations are approaching, and which
typical anticrisis strategies for the development of an industrial enterprise
should be intensified in order to overcome the consequences of the crisis in a
timely manner. Typical anticrisis strategies for the development of an
industrial enterprise are as follows (ANALOI; KARAMI, 2012; PEARCE; ROBINSON, 2013; THOMPSON; STRICKLAND,
2013):
·
strengthening
of market positions due to
the development of the marketing network, advertising, the absorption of competitors,
etc;
·
the
capture of new markets for products manufactured by an industrial enterprise;
·
improvement
of products manufactured by an industrial enterprise (change of technologies,
development of new products, modernization of production capacities,
etc);
·
integrated
development strategy through reverse vertical integration,
which involves the acquisition of existing ones
or the creation
of their own companies to
provide raw materials, services;
Integrated development strategy through frontal vertical
integration, which involves the purchase of existing ones or the creation of
their own companies for work with consumers (transport companies, service
centers, trading networks, etc);
·
implementation
of centered diversification (development of production of
new products without changing technologies and markets);
·
implementation
of horizontal diversification
(development of production of new products using new technologies in the old markets);
·
the
implementation of conglomerate diversification (access to new markets
through the development of production of new products, which is not connected
with the old one);
·
redeeming
the crisis by reducing the
structural units that are not essential
for generating profits;
·
repaid
the crisis by reducing costs
by reducing non-core expenditures, deteriorating quality, cutting premiums and wages.
4. THE MAIN PROVISIONS
Consequently, the main task of
anticipatory management with preventive adaptation is the timely detection of
the crisis. You need to assess how close the indicators are characterizing the
industrial enterprise to the points of bifurcation or points at which rapid
changes are possible. For this purpose, it is assumed that the trajectory of
indicators of the development of an industrial enterprise, which are also
markers of a crisis state, can be described by functions of several arguments.
Several indicators can be set for a Ukrainian industrial company, the rapid
deterioration of which is considered a marker of a crisis state:
·
net
profit;
·
sales
volume;
·
market
share;
·
profitability.
In general, the dependence of the marker of the crisis
state on other indicators has the form:
|
(1) |
where – the value of the k-th marker of the crisis
state at the time t;
– a function that reflects the relationship
between the k-th marker of the crisis state and the indicators of the external
and internal environment;
– the value of the indicators of the external
and internal environment at the time t;
–
the number of internal and external environment indicators for the k-th
marker.
To assess the risk of a crisis state, it is necessary to
determine whether the schedule of the function have significant jumps with minor variations
of arguments. To do this, you need to calculate the partial derivative
functions that reflect how the marker changes at a point, provided that the
increment of the argument goes to zero. If the private derivative at the point
exceeds the limit, then the system is under threat of a crisis, because the
slightest change in the argument can lead to a significant change in the marker
of the crisis state. An appropriate model is proposed for assessing the degree
of threat of an outbreak of a crisis for an industrial enterprise:
To assess the risk of a crisis
state, it is necessary to determine whether the function can have
significant jumps with minor variations in the arguments. You need to calculate
the partial derivative functions that reflect how the marker changes at a
point, provided that the increment of the argument goes to zero. If the private
derivative at the point exceeds the limit, then the system is under threat of a
crisis, because the slightest change in the argument can lead to a significant
change in the marker of the crisis state. An appropriate model is proposed for
assessing the degree of threat of an outbreak of a crisis for an industrial
enterprise:
|
(2) (3) (4) |
where – private derivative k-th marker of a crisis state by
variable ;
– private differential function for variable ;
– infinitely small increment of the variable ;
– the result of the assessment of the threat
of crisis by the indicator ;
– mathematical expectation of change
k-th a marker of a crisis state in crisis-free conditions
of the functioning of an industrial enterprise;
– mean square deviation k-th a
marker of a crisis state in crisis-free conditions of the functioning of an
industrial enterprise;
– the value of a private derivative k-th
marker of a crisis state by variable at the point ;
– the final result of the threat assessment
for the k-th marker;
–
the number of internal and external environment indicators for the k-th
marker.
The final result of the assessment
of the crisis of the threat for the k-th marker is in
the range from zero to one, where zero corresponds to the absence of the
possibility of a crisis at the point at the time , and the unit is the most likely, at which the least
deterioration of any of the indicators having an effect on marker, can lead to
a crisis state.
The indicated model for estimating the proximity of an
industrial enterprise to a crisis state is based on the assumption that, in
normal operation, the growth rates of an industrial enterprise have a normal
distribution, so they are subject to the rule of three sigmas (LEBEDEVA, 2007;
SHIRYAEV, 2016).
The output growth of a marker of a crisis state beyond the
range of three sigma (three mean square deviations) indicates that at the time
of the time being investigated, the onset of a crisis may occur. If the history
of the operation of the industrial enterprise does not have a sufficient
lifetime to calculate the mathematical expectation and the mean square
deviation, or the growth of the state of the markers has a distribution
different from the normal, an expert assessment of the maximum permissible deviation
based on generally accepted norms or conclusions can be used as a criterion ,
taking into account the features of a particular industrial enterprise. Then
the assessment of the threat of the crisis by the indicator is carried out according to the formula:
|
(5) |
where – the result of an assessment of the crisis
threat for the indicator ;
– expert assessment or norm of the maximum
allowable deviation of the indicator in crisis-free conditions, the functioning of
an industrial enterprise;
– the value of the private derivative of the
k-th marker of the crisis state by the variable at the point .
The moment of time for which the investigation of the probability
of a crisis can be as present, if the probability of a crisis is calculated for
the current time, and in the future. In the latter case, the values of the
external and internal environment for the calculation of private derivatives
are predictable.
The specific dependencies of markers on external and
internal indicators are determined by the characteristics of an industrial
enterprise. Moreover, it is important to emphasize that these dependencies are
not necessarily direct calculation formulas. In the aspect of forecasting the
crisis state of an industrial enterprise, it is important to analyze such
trajectories as an enterprise, in which minor changes in factors can lead to
significant changes in the results of the enterprise. indicators Thus, for example,
at a certain level of tax burden there is a general decline in sales due to a
decline in economic activity, in addition, this indicator has a direct impact
on net profit. The main relationship between the indicators of the external and
internal environment and the marker indicators, which was chosen as the basis
for building a system for assessing the probability of a crisis, is shown in Table 1.
Table 1: Dependence between markers and
external and internal forecast indicators
Typical predictive indicators
that affect markers |
Indicators whose change is a
marker of a crisis state |
Level of tax burden |
Net profit, sales volume |
Technological state of production |
Profitability, market share |
Uniqueness of production |
Market share, sales volume |
Gross expenditures |
Net profit |
Gross revenues |
Net profit |
The level of
competition in the market |
Market share,
net profit, sales volume |
Relations with external contractors |
Net profit, sales volume |
Development of related industries |
Sales volume |
Comparative product quality |
Market share,
net profit, sales volume |
Development of a
marketing network |
Market share |
Comparative price of products |
Market share, sales volume |
The amount of
fixed costs |
Net profit, profitability |
Volume of variable costs |
Profitability |
Operating income |
Profitability |
Other income |
Profitability |
Damage percentage |
Market share, profitability |
Staff qualification |
Market share, profitability |
Source: own research
Depending on the characteristics of the industrial
enterprise, additional marker indices or indicators of the external or internal
environment can be added. In addition to the usual dependence of marker
indicators on indicators of the external or internal environment, the company
can also be analyzed as a dynamic economic system. This approach is appropriate
in the case of inertia in marker indices, when the token value also depends on
its value at a previous time point. A dynamic system can be described using
differential or differential equations (ARNOLD; APHRAIMOVICH; ILYASHENKO; SHILNIKOV, 1986; ARNOLD, 2016; TSARKOV, 2007). In general, the differential equation for
describing the marker of the crisis of an industrial enterprise has the form:
|
(6) |
where – the value of the k-th marker of the crisis
state at time t;
– a function that reflects the relationship
between the k-th marker of the crisis state and the indicators of the external
and internal environment;
– value of indices of external and internal
environment at time t;
–
the number of internal and external environment indicators for the k-th
marker.
For dynamic economic systems, S-shaped types of
dependencies are typical. Therefore, it is proposed as a general form for the
analysis of processes of an industrial enterprise that can lead to a crisis, to
use the differential equation of Ferghilst (ARNOLD, 2016; TSARKOV, 2007):
|
(7) |
where – the derivative of the k-th marker of the
crisis state for a variable t;
– the rate of change of the k-th marker of a
crisis state;
– the value of the k-th marker of the crisis
state at the time t-1;
– the maximum possible value of the k-th
marker of the crisis state.
Equation (7) can be used for indicators that have a
tendency to self-development, when the influence of external factors is
minimal. For example, for an industrial company that is a monopolist and
entered the market with a revolutionary new product, such an equation may
describe sales if information about this product is carried out by the method
of network marketing, from user to user. In this case, the maximum possible
value this is the total number of consumers.
Equation (7) can also be used not only for markers, but also for studying the
points of bifurcation of environmental factors, such as the market capacity for
consumer goods.
5. CONCLUSIONS
It is established that in the conditions of a modern
economy, which is characterized by regular crises, an industrial enterprise for
development needs to have pre-designed crisis-management strategies for timely
response to typical crises. The main problem here is the need to identify the
crisis in a timely manner. The most promising approach for timely detection of
crises in an unstable economic environment is the analysis of weak signals.
It is concluded that traditional approaches to the
identification of typical crisis phenomena are mainly devoted to comparing
planned and actual indicators or do not have formalized and structured methods
for calculating and assessing weak signals indicating that the crisis is
approaching. Therefore, in an anticipatory management of the development
of an industrial enterprise, there is a need to develop approaches that would
ensure: comparison of plans for the development of industrial enterprises with
typical crises; identifying the markers of the crisis, for which it is
necessary to evaluate the weak signals, assess the potential and strength of
the expected crisis in terms of the development of the industrial enterprise;
the substantiation of the managerial decision to intensify the anticrisis
strategy for managing the development of the industrial enterprise.
It is proposed to consider the economic crisis situation as
a way out of the range in which the enterprise feels comfortable. With a slow
exit beyond the range of effective functioning, the change in key performance
indicators of the enterprise is gradually and deterioration can be provided by
the usual methods of forecasting. A quick exit from the range of effective
operation of an industrial enterprise is either an immediate change in the key
indicators of the enterprise to large or even dual development paths
(bifurcation), when it is difficult to establish in advance what kind of
trajectory will be chosen by the economic system.
The model of estimation of the proximity of the industrial
enterprise to the crisis situation through the evaluation of weak signals is
developed, which makes it possible to assess the stability of the trajectory of
development of the industrial enterprise at a specific time, and, accordingly,
to carry out anticipatory management of the development of
the industrial enterprise. The simulation results confirmed the performance of
the model, as well as its adequacy.
At the same time, it is worthwhile to start a discussion on
mechanisms of preventive counteraction to the primary symptoms of crisis
conditions of industrial enterprises under uncertainty. Important is the fact
that the trajectory of the development of an industrial enterprise should
remain in the controlled range of deviations.
REFERENCES
Analoi, F.; Karami, A. (2012) Strategic Management of
Small and Medium Enterprises, Moscow: UNITI, 400.
Arnold, V. I. (2016) Theory of catastrophes, M.: Lenand, 134.
Arnold, V. I.; Aphraimovich, V. S.; Ilyashenko, Yu. S. (1986) Theory of bifurcations, M.: VINITI,
218.
Bundy, J.; Pfarrer, M. D.; Short, C. E.; Coombs, W. T.
(2017). Crises and crisis management: Integration, interpretation, and research
development. Journal of Management, n. 43, p. 1661-1692.
Cevolini, A. (2016) The Strongness of Weak Signals: Self-reference and Paradox in
Anticipatory Systems. European Journal of Futures Research, v. 4, n. 4, p. 1-13.
Dyadyuk, M. A. (2015)
Management of weak signals in the system of adaptive management of trade
enterprises. Economic strategy and prospects of development of the sphere of
trade and services, n. 2, p.
74-83.
Groh, M. (2014)
Strategic Management in Times of Crisis. American Journal of Economics and
Business Administration, v. 6, n. 2, p. 49-57.
Hroznyi, I.; Kuzmak, O.; Kuzmak, O.;
Rusinova O. (2018) Modeling management of diversification of
foreign economic interactions. Problems and Perspectives in Management. v.
16, n. 1, p. 155-165. http://dx.doi.org/10.21511/ppm.16(1).2018.15
James, E.; James, E. H. (2008) Toward an Understanding of
Executives See Crisis as Opportunity, The Journal of Applied Behavioral
Science, v. 44, n. 1, p. 94-115.
Kuzmin, O. E.; Adamov, M. E. (2013) Method
of perspective diagnostics of weak signals of potential phenomena by types of
enterprise activity. Business Inform, n. 2, p. 69-74
Lebedeva, T. V. (2007) Statistical
methods of forecasting in economics, Orenburg: OGU, 174.
Melnyk, O. G.; Adamov, M. E.
(2013) Anticipatory management of
enterprises on the basis of weak signals. Current problems of the economy,
n. 1, p. 32-41.
Petrova, R. V.; Kovalevskaya, A. V.; Musienko V. O. (2011)
Economical and mathematical model of control of production planning by weak
signals. Bulletin of social and economic research, v. 41, n. 2, p. 89-93.
Pearce, D.; Robinson, R. (2013) Strategic Management; per. from english
E. Milyutin, St. Petersburg, Peter, 560.
Rubanov, M. M. (2013) An early warning system for threats with weak
signals. Bulletin of the Khmelnitsky National University, Economic sciences, v. 3, n. 2,
p. 257-261.
Shankret, A. M.; Karaim, M. M. (2015) Mechanism of management of
economic safety of machine-building enterprise on the basis of weak signals. Scientific
notes Ukrainian Academy of Printing,
Economic Sciences, n. 1,
p. 7-11.
Thompson, A. A.; Strickland, A. D.
(2013) Strategic Management: Concepts and Situations for Analysis, M.:
Williams, 928.
Tsarkov, V. A. (2007) Dynamic
models of the economy. Theory and
practice of economic dynamics, M.: Economics, p. 212.
Zmots, О. I. (2014)
Adaptive management of the enterprise on the basis of weak signals. Current
problems of the economy, n. 11, p. 462-468.
Zmots, O. I. (2012)
Peculiarities of Strategic Management of Enterprises Using Weak Signals. Technology
audit and production reserves,
v. 4, n. 1, p. 41-42.
Zuzak, R. (2001) Company
Early Warning System Conception. Agricultural Economics, v. 47, n. 10,
p. 455-458.
Zuzak, R. (2017) Early
warning systems for strategic and crisis management. Access date: http://knowledgeconference.upol.cz/downloads/2017-Knowledge_for_Market_Use_Proceedings.pdf,
459-463.