Market entry, phased rollout or abandonment? A real option approach

L.J.O. Lint, H.P.G. Pennings

Research output: Contribution to journalArticleAcademicpeer-review

33 Citations (Scopus)
3 Downloads (Pure)

Abstract

This paper proposes a model to value a phased rollout, and to determine the optimal time of a phased rollout as well as the optimal rollout area. Since a phased rollout of new products can be considered as an option on a worldwide launch, real option theory is applied to enhance decision making about entry strategy. We derive the analytical properties and illustrate the model with a case on phasing the rollout of CD-I at Philips Electronics. Under the assumptions made, we found that the value of a phased rollout strategy mainly depends on market and technology uncertainty and the expected net present value of the investment. The maximum value of phasing the rollout of CD-I was nearly 23% of the investment cost.
Original languageEnglish
Pages (from-to)125-138
JournalEuropean Journal of Operational Research
Volume124
Issue number1
DOIs
Publication statusPublished - 2000

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