REA Ontology-Based Simulation Models for Enterprise Strategic Planning

Abstract

ABSTRACT: In this paper we propose REA ontology-based simulation models to facilitate firms' strategic planning processes. Managers often must assess complex business environments, changing competitive forces, and uncertain futures, and then make significant resource allocation decisions. Traditional quantitative planning and budgeting techniques often fail to consider nonlinear relationships, discontinuities, and uncertainty. Qualitative techniques can lack rigor and perpetuate biases. Using simulation modeling technology could specifically address those concerns, but there are few if any general simulation models of integrated business processes to support strategic planning processes. Basing simulation models for enterprise planning on the REA framework, an established enterprise domain ontology, would facilitate reuse of and learning from these models in a variety of business contexts. An ontology-based planning model would allow managers to assess the consequences of alternative resource allocation decisions and determine appropriate performance indicators. To illustrate the concepts, we provide an example of how that model could be used to facilitate management planning.