Exam 6: Flexibility and Real Options

A firm building a manufacturing plant that employs only general-purpose machinery is an example of the option to ________.

When technical uncertainty is high and market uncertainty is low,Rita McGrath and Ian MacMillan suggest a ________ option.

What are strategic options?

Real assets are ________ resources that can have an impact on a firm's production.

To see if valuing an investment as a real option creates any extra value for a firm,it is necessary to establish a ________.

A scouting option is used when market uncertainty is high and technical uncertainty is low.

A decision making setting is said to be ________ when the outcomes of that decision are not known with certainty,and the possible outcomes associated with that decision,and their probability,are also not known before a decision is made.

What are real options?

Amberger Products competes in consumer electronics where there is a high level of market and technological uncertainty.To address these challenges,Amberger Products does not commit itself to a particular product design or features early on; instead,it is geared to quickly and inexpensively assess if it has succeeded or failed with a design or feature,learn from its past,regroup and try again quickly.The option that Amberger Products uses is called a ________ option.

The Black-Scholes model is used for valuing ________ options.

The concepts of flexibility and real options are closely related to the importance of history and ________ described as potential sources of sustained competitive advantage.

Miranda Fashions competes in the fast-changing world of fickle teenage apparel tastes.To manage this uncertainty,Miranda Fashions typically puts out several new apparel offerings in small quantities to get customer reaction and once customer preferences are clear,it invests heavily to go all out.The option that Miranda Fashions uses is called a ________ option.

The greater the uncertainty the uncertainty about future ________,the greater is the value of a real option.

Seymour Semiconductors is a major global player in the semiconductor and microchip industry. In the space that they compete in, there is tremendous technological uncertainty as disruptive innovations seemingly come out of nowhere to upend well-entrenched incumbents. These disruptions are often fast and are increasingly by companies that do not compete head-to-head with Seymour Semiconductors. In addition, market tastes for the end products that feature Seymour Semiconductors' components also change rapidly. The company was hurt financially when the market shifted away from personal computers (that accounted for a significant portion of Seymour Semiconductors' revenues), first to tablets, and then to other mobile devices. The company's new CEO, Lisa Monroe, has decided that the company's basic approach to strategy should change. Toward this, she has mandated that, at any point in time, Seymour Semiconductors should be able to choose from several different strategic options instead of a fixed and planned course of action that the company has pursued since it beginning. One of her mandates called for the company's future manufacturing plants to be built with the ability to add capacity at low cost. In addition, she wants to lay off 1,000 of the company's employees and hire contract and temporary workers in their stead. Finally, Monroe wants the company to use the real options approach to manage the combination of technological and market uncertainties. -Lisa Monroe's mandate that called for the company's future manufacturing plants to be built with the ability to add capacity at low cost gives Seymour Semiconductors the option to ________.

Seymour Semiconductors is a major global player in the semiconductor and microchip industry. In the space that they compete in, there is tremendous technological uncertainty as disruptive innovations seemingly come out of nowhere to upend well-entrenched incumbents. These disruptions are often fast and are increasingly by companies that do not compete head-to-head with Seymour Semiconductors. In addition, market tastes for the end products that feature Seymour Semiconductors' components also change rapidly. The company was hurt financially when the market shifted away from personal computers (that accounted for a significant portion of Seymour Semiconductors' revenues), first to tablets, and then to other mobile devices. The company's new CEO, Lisa Monroe, has decided that the company's basic approach to strategy should change. Toward this, she has mandated that, at any point in time, Seymour Semiconductors should be able to choose from several different strategic options instead of a fixed and planned course of action that the company has pursued since it beginning. One of her mandates called for the company's future manufacturing plants to be built with the ability to add capacity at low cost. In addition, she wants to lay off 1,000 of the company's employees and hire contract and temporary workers in their stead. Finally, Monroe wants the company to use the real options approach to manage the combination of technological and market uncertainties. -Lisa Monroe's decision that called for Seymour Semiconductors to be able to choose from several strategic options instead of a fixed and planned course of action is called ________.

Under conditions of high certainty,flexibility is often valuable because it creates real options for firms.

The lower the cash flows generated by exercising a real option,the greater is the value of that real option.

What is the difference between risk and uncertainty?

Which of the following is NOT a type of option to combat technological and market uncertainty according to Rita McGrath and Ian MacMillan?

What are positioning options? How are they different from scouting options?