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Business Optimization Based on Potential Assessment

Business – activity, the result of which is effectiveness and efficiency.

Effectiveness – achieving goals in the external environment, obtaining market, financial, social results. It is expressed in revenue, income, satisfaction of needs, material benefit and moral benefit.

Efficiency – profit, capital growth, increase in net cash flow.

Efficiency is achieved in the external environment in the direction of factors: consumer – product – market (PTR), relying on the capabilities of the internal environment.

The capabilities of the internal environment are determined by three key factors (PRT):
– Resources.
– Labor.

Efficiency is achieved through the rationality of activities in the internal environment.

To make the right decisions and implement them in the right actions, to manage activities, optimizing effectiveness and efficiency, measurements and assessment of opportunities are necessary. The parameter for such measurements can be the potential of the business.

Business potential – an assessment of the ability to generate income and profit, a tool for measuring and evaluating the effectiveness and efficiency of activities.

Efficiency potential = Number of products x Sales price

Efficiency Potential = Efficiency Potential – Cost

Coefficient of activity efficiency = Potential actual / Potential planned

The activity consists of three main stages:

1. Setting goals, developing strategies and tactics.
2. Operational decisions and actions to implement the strategy using tactics.
3. Obtaining actual results of activities.

Therefore, three dimensions of potential:

– Strategic potential – the planned result of the implementation of the strategy;
– Operational, economic potential – current, created potential for the implementation of the strategy;
– Actual potential – the practically obtained result from the implementation of the strategy, economic potential.

Strategic potential – what opportunities we plan to create and how to realize them in the long run. Assessment of desires in the external environment. It serves as the basis for the formation of economic potential, that is, the design of the internal environment.

Economic potential – what opportunities have been created at a given moment in time. Assessment of the capabilities of the internal environment for the realization of strategic potential. Serves as the basis for practical results.

Actual potential – what has been achieved by realizing the economic potential in the pursuit of strategic. Assessment of the implementation of goals in the external environment (PTR) and the capabilities of the internal environment (PRT). It serves to adjust strategic potential, changes in economic potential, to increase effectiveness and efficiency.

The application of the methodology of the potential approach to management is based on the schematization and formalization of activities.

A business scheme through a potential approach is presented in the figure:

Formalization consists in analyzing, structuring activities, establishing causal relationships, factors, indicators, indicators that determine the result and effect and presenting them in the form of formulas.

Cause – effect dependencies for formalizing a business:
– The reason is goals, the consequence is strategy.
– The reason is strategy, the consequence is processes, resources, labor.
– The reason is the processes, resources, labor, the result – the results and effectiveness.

Business structure as an activity:
– Vision and goals.
– Strategy. Tactics.
– Business processes.
– Resources.
– Labor.

Objects of business (projection):
– Consumer.
– Product.
– The market.

– The processes.
– Resources.
– Labor.
– Efficiency.
– Efficiency.

Business Content:
– Based on the vision and goals, in the areas of business objects, to develop a strategy and tactics of action.
– Identify the necessary processes and resources.
– Based on entrepreneurial abilities, through labor to carry out business processes, combining resources into products.
– Sell products, receive money (result and effect).
– Invest in business development.

Efficiency and effectiveness are determined by the quality of decisions and actions. The quality of decisions is expressed in the created opportunities to produce a result. The quality of actions is expressed in the use of opportunities (potential) – the actual result and effect.

So, business formalization is a measured representation of factor dependencies in achieving the effectiveness and efficiency of each business object, between objects of the external environment, objects of the internal environment and between environments. This allows you to more clearly and clearly understand the dependencies when making decisions and taking actions, as well as to manage interaction, eliminate bottlenecks, and achieve a synergistic effect.

The practical value of using the method of assessing potential is based on the measurement and evaluation of business opportunities and their use to:

– Measurement and assessment of business opportunities by factors of efficiency and effectiveness and in general.

– Comparison of achievements with opportunities

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