Market Entry, Phased Rollout or Abandonment?
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.
|Keywords||finance, market entry, product standarazation, real options|
|Persistent URL||dx.doi.org/10.1016/S0377-2217(99)00121-6, hdl.handle.net/1765/12083|
|Series||ERIM Top-Core Articles|
|Journal||European Journal of Operational Research|
Pennings, H.P.G, & Lint, O. (2000). Market Entry, Phased Rollout or Abandonment?. European Journal of Operational Research, 124(1), 125–138. doi:10.1016/S0377-2217(99)00121-6