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Theory of Constraints and its Usage to Evaluate the Governmental Support for Business

Author(s): Remigijus Čiegis | Edmundas Jasinskas

Journal: Engineering Economics
ISSN 1392-2785

Volume: 4;
Start page: 57;
Date: 2006;
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Keywords: theory of Constraints (TOC) | governmental trade support

The affirmations of the theory of Constraints (TOC) have a wide usage in the evaluation of different aspects of management. The evaluation of economic processes of the country was not a key to the representatives of this theory. The scientific and practical novelty of this article lies in that the governmental trade support was evaluated with the application of the TOC.The article gives the domains analyzed by the representatives of the TOC. This theory is well employed to tackle the aspects of strategy development, project management, marketing, finance, quality management, production timing and other sides of company’s administration.The main affirmations of the Theory of Constraints are also revealed here. They are extended and related to the evaluation aspects of the governmental trade support. With the application of the chain allegory of the Theory of Constraints it was settled that the support would gaineffectiveness only if it increased the permeability in the weakest chain of the industry.Despite the fact that such kind of support is substantiated one must consider possible issues that may result in failure to increase permeability in the weakest chain (in the Bottleneck). This article gives the analysis of the issues that induce danger when allotting the support not to increase the permeability of the industry:• The support will not increase the permeability once it is dedicated to the other branch ratherthan the Bottleneck.• The governmental trade support can turn to a problem itself. It can cause constraint if the government gives the support to individual companies that run the Bottleneck business of the branch. The companies having gained no support can encounter restricted permeability of themselves.• Increased income of the Bottleneck business of the branch not necessarily can stay with the Bottleneck as the support gained can be repartitioned among the stronger chain participants.• Increased income of the Bottleneck business of the branch not necessarily can be used to enlarge the permeability. They can present additional source of income that will not be invested anywhere.Evaluating trade support with the aid of the TOC affirmations it was found that one of the favorable forms of the governmental trade support can be scientific researchessponsored by the government.
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