Final answer:
In the process of creating a system model of merged companies, the functional flow diagram is typically created in the Architectural step.
Step-by-step explanation:
When a company is exploring the possibility of a merger with another company and wants to create a system model of the merged companies, the step in the model development process where a functional flow diagram is typically created is the Architectural step. This step involves assigning the functional elements of the merged companies to their physical building blocks. The functional flow diagram helps visualize the flow of activities, inputs, and outputs within the merged companies. It illustrates how different parts of the organizations interact and work together to achieve desired outcomes.