strategic investment real options and games jul 2004

[...]... 428 Chapter 10 Overview and Implications 429 10.1 Introduction 429 10.1.1 Linking Corporate Finance and Strategic Planning 429 10.1.2 An Expanded Valuation Framework to Capture Flexibility and Strategic Value 431 10.2 Implications of the Strategic Options and Games Framework 439 10.2.1 Timing Games for Simple Commercial Options 440 10.2.2 Investment Games Involving Strategic Options 442 10.3 Empirical... “Five Forces” Industry and Competitive Analysis 41 The Boston Consulting Group’s (BCG) Growth-Profitability Matrix 71 Exercising Options in Option-Value Space 75 The Real- Options Growth (ROG) Matrix 77 The Growth Matrix 82 R & D Investment in the Real- Options Growth (ROG) Matrix 84 A Shared Option in the Real- Options Growth (ROG) Matrix 88 Polaroid versus Kodak’s Shared Options in Real- Options Growth Matrix... The Strategic Reaction Effect (when Demand Develops Favorably) under Contrarian Quantity Competition 274 Table 6.4 Second-Stage Equilibrium State Project Values and Strategic Effects for Different Market Structures and States of Demand for the Base Case and Proprietary R & D Investment Case 275 Table 6.5 Breakdown of Value Components for the Strategic R & D Investment versus the Base Case When the Investment. .. perspective on strategic investment, drawing on and synthesizing new valuation methods from finance, such as real options, and basic concepts from industrial organization and game theory This book on new approaches to strategic valuation aims at both a professional and an academic audience We synthesize cutting-edge ideas on strategic valuation, which are communicated in accessible language and illustrated... The book discusses strategic valuation examples from various industries, such as R & D investment in high-tech industries, joint research ventures, product introductions in consumer electronics, infrastructure and public investment (e.g., airport expansion), and examples from oil exploration investment Our treatment of strategic investment goes far beyond use of standard real- options analysis; we... later in the commercialization stage can erode the value of strategic investments for the pioneer Besides the proprietary or shared nature of the investment, the competitor’s expected reaction to counter or reinforce the pioneer’s strategic investment action can also affect the value and desirability of the strategic investment The options and games approach in this book provides a novel framework that... corporate finance and strategic planning Discounted cash flow (DCF), real- options theory, game theory, and strategic planning are brought together in a comprehensive framework capable of incorporating management’s flexibility to respond to market opportunities and competitive moves or threats in an uncertain and evolving environment We view an expanded or strategic NPV as the sum of standard NPV plus flexibility... “Corporate Real Options, ” reviews the basic concepts and valuation principles of real options within a framework that views investment opportunities as collections of corporate options on real assets Examples include valuing a license or patent giving a firm an option to invest in commercial production of a new product, valuing R & D and other growth opportunities as multistage growth options, and analyzing... concession with options to shut down and reopen Chapter 4, xxx Introduction Figure I.1 Impact of Corporate Strategic Planning on the Market Value of the Firm Ch 1 Ch 2 Market Value (Expanded NPV) Value Drivers Strategic Planning Valuation Methodology Strategic Value Strategic Position Competitive Strategy Game Theory/ I.O Econ Adaptive Capability Strategic Planning of Growth Options Real Options Valuation... at capturing the strategic value from establishing, enhancing, or defending a strategic position vis-à-vis competitors based on game theory analysis and industrial organization economics Games and Strategic Decisions,” provides an overview of basic principles of game theory and industrial organization/strategy that are essential for our understanding of strategic decisions Strategic investment decisions . h0" alt="" Strategic Investment