Evaluation of New Product Platform Development Projects Using Real Option
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.
P. Shil and V. Allada, "Evaluation of New Product Platform Development Projects Using Real Option," IIE Annual Conference and Exhibition, 2004, Institute of Industrial Engineers (IIE), Jan 2004.
Engineering Management and Systems Engineering
Keywords and Phrases
Product Platform Development; Real Option; Uncertainty
Article - Conference proceedings
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