Real Options Valuation for Technology, Technical Note

Real Options Valuation for Technology, Technical Note Description

Technology projects are inherently risky; research shows that large IT projects succeed as originally planned only 28 percent of the time. Building flexibility, or real options, into a project can help manage this risk. Furthermore, the management flexibility of options has value, as the downside risk is reduced and the upside is increased. The case is based upon real options analysis for an enterprise data warehouse (EDW) and analytic customer relationship management (CRM) program at a major U.S. firm. The firm has been disguised as Global Airlines for confidentiality reasons. The data mart consolidation or EDW marginally meets the hurdle rate for the firm as analyzed using a traditional net present value (NPV) analysis. However, different tactical deployment strategies help mitigate the risk of the project by building options into the project, and the traditional NPV is expanded by the real option value. Students analyze the different deployment strategies using a binomial model compound option Excel macro, and calculate the volatility using Monte Carlo analysis in Excel. A step-by-step tutorial is provided to teach students how to accomplish the real options analysis for a simplified project, and this tutorial is easily generalized by students to the case scenario. In addition to the tactical options, the case also has the strategic growth option of analytic CRM. Students must therefore analyze both the tactical and strategic growth options and make a management recommendation on funding the project and also recommend an optimal deployment strategy to manage the project risk.

Case Description Real Options Valuation for Technology, Technical Note

Strategic Managment Tools Used in Case Study Analysis of Real Options Valuation for Technology, Technical Note

STEP 1. Problem Identification in Real Options Valuation for Technology, Technical Note case study

STEP 2. External Environment Analysis - PESTEL / PEST / STEP Analysis of Real Options Valuation for Technology, Technical Note case study

STEP 3. Industry Specific / Porter Five Forces Analysis of Real Options Valuation for Technology, Technical Note case study

STEP 4. Evaluating Alternatives / SWOT Analysis of Real Options Valuation for Technology, Technical Note case study

STEP 5. Porter Value Chain Analysis / VRIO / VRIN Analysis Real Options Valuation for Technology, Technical Note case study

STEP 6. Recommendations Real Options Valuation for Technology, Technical Note case study

STEP 7. Basis of Recommendations for Real Options Valuation for Technology, Technical Note case study

Case Analysis of Real Options Valuation for Technology, Technical Note

Real Options Valuation for Technology, Technical Note is a Harvard Business (HBR) Case Study on Technology & Operations , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Real Options Valuation for Technology, Technical Note is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Real Options Valuation for Technology, Technical Note case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Real Options Valuation for Technology, Technical Note will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Real Options Valuation for Technology, Technical Note case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Technology & Operations, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Real Options Valuation for Technology, Technical Note, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Real Options Valuation for Technology, Technical Note case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Technology & Operations Solutions

In the Texas Business School, Real Options Valuation for Technology, Technical Note case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Real Options Valuation for Technology, Technical Note

Step 1 – Problem Identification of Real Options Valuation for Technology, Technical Note - Harvard Business School Case Study

The first step to solve HBR Real Options Valuation for Technology, Technical Note case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Options Deployment is facing right now. Even though the problem statement is essentially – “Technology & Operations” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Options Deployment, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Real Options Valuation for Technology, Technical Note.

The external environment analysis of Real Options Valuation for Technology, Technical Note will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Real Options Valuation for Technology, Technical Note case study. PESTEL analysis of " Real Options Valuation for Technology, Technical Note" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Real Options Valuation for Technology, Technical Note macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Real Options Valuation for Technology, Technical Note

To do comprehensive PESTEL analysis of case study – Real Options Valuation for Technology, Technical Note , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Real Options Valuation for Technology, Technical Note

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Policy Making Impact on Real Options Valuation for Technology, Technical Note

Government policies have significant impact on the business environment of any country. The firm in “ Real Options Valuation for Technology, Technical Note ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Options Deployment is operating, firms are required to store customer data within the premises of the country. Options Deployment needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Real Options Valuation for Technology, Technical Note has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Options Deployment in case study Real Options Valuation for Technology, Technical Note" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Options Deployment in case study “ Real Options Valuation for Technology, Technical Note ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Options Deployment in case study “ Real Options Valuation for Technology, Technical Note ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Taxation & Regulation Impact on Real Options Valuation for Technology, Technical Note

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Real Options Valuation for Technology, Technical Note ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Options Deployment can compete against other competitors.

Government Scheme & Subsidies Impact on Real Options Valuation for Technology, Technical Note

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Real Options Valuation for Technology, Technical Note case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System & Stability, and its Impact on Real Options Valuation for Technology, Technical Note

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Options Deployment needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Real Options Valuation for Technology, Technical Note

Social Factors that Impact Real Options Valuation for Technology, Technical Note

Technological Factors that Impact Real Options Valuation for Technology, Technical Note

Environmental Factors that Impact Real Options Valuation for Technology, Technical Note

Legal Factors that Impact Real Options Valuation for Technology, Technical Note

Step 3 – Industry Specific Analysis

What is Porter Five Forces Analysis

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Real Options Valuation for Technology, Technical Note case study. PESTEL analysis of " Real Options Valuation for Technology, Technical Note" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

Step 4 – SWOT Analysis / Internal Environment Analysis

Step 5 – Porter Value Chain / VRIO / VRIN Analysis

Step 6 – Evaluating Alternatives & Recommendations

Step 7 – Basis for Recommendations

References :: Real Options Valuation for Technology, Technical Note case study solution