An Integration of Real Options and Utility Theory For Evaluation and Strategic Decision-Making in Oil Development and Production Projects

2005 ◽  
Author(s):  
Gabriel A.C. Lima ◽  
Saul B. Suslick
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Utility Theory ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Oil Development

A Real Options-Based Framework for Strategic Decision-Making in Hostile, Turbulent and Ultra-Volatile Environments

2016 ◽  
Vol 841 ◽  
pp. 323-329
Author(s):  
Mircea Boscoianu ◽  
Laura Bacali ◽  
Elena Corina Boscoianu ◽  
Dragos Popa ◽  
Aura Codreanu
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Net Present Value ◽  
Force Balance ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Strategic Decisions ◽  
Discounted Cash Flow ◽  
Resource Dynamics ◽  
Tactical Decisions

The resources required by modern military action are essential in establishing a favorable force balance and thus become a critical landmark in strategic decision making. The imbalance in resources is of utmost importance and needs to be analyzed in full relation with the current dynamic and volatile environment. Decisions made based on such resource dynamics are rapid, intuitive and can be easily transferred into practical approaches provided that the complexity of the processes characteristic of combat environments is fully taken into account. Moreover, the dynamic management of portfolios needs to also include options. Additionally, strategic decisions must be harmonized with operational and tactical decisions while integrating all available means by which to employ resources and meeting the deadline set by the features of real time situations. Traditional approaches like discounted cash flow/ net present value (DCF/ NPV) cannot provide the flexibility required by the changes in combat environment. Unlike the financial options focused on bonds, stocks, financial rates, military real options (MRO) evaluate military resources and bonds and are thus advantageous under uncertain and ultra-volatile conditions. Thus, strategic decision makers need to not only deter against losses, but to also understand how to preserve the opportunity to act in turbulent times.

Strategy as Options Games

2015 ◽  
Author(s):  
Han Smit ◽  
Thras Moraitis
Keyword(s):  
Game Theory ◽  
Decision Making ◽  
Real Options ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Growth Opportunities ◽  
Conceptual Approach ◽  
Market Conditions ◽  
Acquisition Strategy ◽  
Major Pharmaceutical Company

This chapter develops a framework for assessing the value generated by both the option-like and competitive characteristics of an acquisition strategy. The conceptual approach is based on real options and principles from game theory. It illustrates the approach with an example of how real options and games thinking were used in strategic decision making at a major pharmaceutical company. The method treats an acquisition strategy as a package of corporate real options actively managed by the firm in a context of competitive responses or changing market conditions. This framework can help management answer several questions that are important for a successful acquisition strategy: How valuable are the growth opportunities created by the acquisition? How can we best sequence the acquisition options in the strategy? When is it appropriate to grow organically, and when are strategic acquisitions the preferred route? How is the industry likely to respond, and how will that affect the value of our acquisitions and future targets? The subsequent sections present a series of frameworks to address these questions.

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