A Goal-Programming Methodology for Strategic Financial Decision-Making

Abstract

This thesis tackles organisational viability problems, encountered in the usage of linear programming-based financial planning models for strategic decision-making. In particular, the research uses systems concepts and empirical evidence from previous studies to develop and theoretically justify the hypotheses that: - organisational viability can be enhanced significantly in that state in which the organisation effectively balances its structural composition with its capability for environmental capital mobility; - the unsystematic cost of capital component is, in reality, the social discount rate, while the systematic camponent comprises the business, financial and security-marketability risks; - satisficing logico-mathematical models are the most suitable for effective organisational strategic financial planning. A planning concept is developed, termed ‘viability planning', defined as planning to maintain an adaptive, efficient and effective structural composition. This concept is elaborated as a decision-making modelling methodology, using (in an ‘Interaction Tableau') a set of organisational characteristics whose inherent synergy has to be maximised as a prerequisite for sustaining organisational viability. A decision-analysis model in a non-preemptive goal-programming framework is proposed to obtain the optimal synergy-scenarios, that should subsequently be considered in a preemptive model framework for ranking, weighting and satisficing. A logical extension of the theoretical framework of sensitivity analysis is proposed for satisficing, deriving trade-off weights either by analysing the relationship between deviational variables in satisfying specified goal-constraints, or by optimising total trade-off value between the different non-daninated solutions obtainable from the multiple desirable objectives. Finally, using a program developed on a Harris-800 computer, various aspects of the viability planning concept are experimentally tested in a case study of a holding company. It is concluded that organisational viability modelling problems could be minimised by incorporating the capitalised-cost structure in a multi-criteria decision-making framework, the primary considerations being optimality of synergy and appropriate balancing of the preference and trade-off weights (both of which are confounded in current model-applications).