Title

Evaluation of New Product Platform Development Projects Using Real Option

Abstract

Product platforming is widely touted as a successful strategy to achieve mass customization. However, due diligence should be exercised before investing in any platforming strategy since it involves huge investment. The crux of the problem lies with the financial model that is used for evaluating strategic future product platforms. Traditional tools such as the net present value do not compensate for uncertainties and risk that may occur during the development period. In this paper, we propose a real option methodology to evaluate strategic product platforms. We illustrate the working of the proposed model using an example case.

Department(s)

Engineering Management and Systems Engineering

Keywords and Phrases

Product Platform Development; Real Option; Uncertainty

Document Type

Article - Conference proceedings

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2004 Institute of Industrial Engineers (IIE), All rights reserved.

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