Samenvatting boek
Geïntegreerde bedrijfseconomie
Chapter 6
Strategic flexibility = choosing among different strategic options, ability but not the
obligation to invest in a particular strategy (valuable under conditions of uncertainty)
Real option = ability but not obligation to invest in a real tangible asset (resource) that can
have an impact on a firm's production
Type of flexibility
Option to defer: invest in a strategy on a later moment (leasing instead of buying)
Option to grow: grow an investment in the future, should this be valuable (building a
plant where capacity can be increased at low cost)
Option to contract: ability to get smaller and reduce investment in a strategy
(temporary employees)
Option to shut down and restart: restart a business (distribution to a firm with more
distributors)
Option to abandon: abandon a particular strategy (general-purpose machinery)
Option to expand: expand beyond current boundaries (necessary R&D for other
products)
NPV-method does not work in uncertainty, because
Cash flow projections are unreliable
Riskiness of cash flows cannot be reliably anticipated
Strategic choices are made over time and not all at once
Attribute of real option Effect on value of real option
Exercise price (X) The lower the exercise price, the greater the value of a
real option
Cash flows generated (S) The higher the cash flows generated by exercising real
option, the greater the value of the real option
Time to maturity (T) The longer the time to maturity, the greater the value of
the real option
Risk-free interest rate (rf) The higher the risk-free rate, the greater the value of the
real option
Uncertainty about future The greater the uncertainty about free cash flows, the
cash flows (sigma2) greater the value of the real option
Steps in valuing a real option
1. Recognize the real option
2. Describe the real option using financial parameters
, 3. Establish a benchmark
4. Calculate option value metrics
5. Estimate value of option from Black-Scholes option pricing table
6. Compare full present value with option value
NPVq = S/PV(X)
Cumulative volatility = sigma wortel T
Chapter 7
Collusion = when firms in an industry or market cooperate to reduce competition
Not competing in the same geographic market
Not doing research in the same area
Reducing production below competitive level
Collusion in 2 forms
Explicit collusion: firms in an industry directly negiotate agreements on how to
reduce competition
Tacit collusion: firms cooperate in reducing competition, but no face-to-face
negotiations
Reducing threats (SCP framework)
New competitors: increasing entry barriers (technological standards, needed
economies of scale, product differentiation, increased cost of entry)
Existing competitors (lower cost and higher prices without undercutting)
Substitute products
Supplier leverage
Buyer influence
Ways of cheating in collusive agreements
Bertrand: lowering prices below cooperative price
Cournot: adjusting quantity of output and let market forces determine prices
(adjusting profit-maximizing quantity until both equal)
Edgeworth: following Bertrand, introduced capacity constraints (price can change
faster than output)
Stackelberg: following Cournot, introduced accurate anticipitation of how other firms
will respond to its output decisions
Tough signal = a signal that they will respond aggressively to cheating
Soft signal = a signal they will not respond aggressively to cheating
Conscious parallelism = consciously making price and output decisions to reduce competition
Strategic logic Strategic implementation Strategic label
Focus on price
Investing in tough leads Not invest in tough to avoid Puppy-dog ploy
Geïntegreerde bedrijfseconomie
Chapter 6
Strategic flexibility = choosing among different strategic options, ability but not the
obligation to invest in a particular strategy (valuable under conditions of uncertainty)
Real option = ability but not obligation to invest in a real tangible asset (resource) that can
have an impact on a firm's production
Type of flexibility
Option to defer: invest in a strategy on a later moment (leasing instead of buying)
Option to grow: grow an investment in the future, should this be valuable (building a
plant where capacity can be increased at low cost)
Option to contract: ability to get smaller and reduce investment in a strategy
(temporary employees)
Option to shut down and restart: restart a business (distribution to a firm with more
distributors)
Option to abandon: abandon a particular strategy (general-purpose machinery)
Option to expand: expand beyond current boundaries (necessary R&D for other
products)
NPV-method does not work in uncertainty, because
Cash flow projections are unreliable
Riskiness of cash flows cannot be reliably anticipated
Strategic choices are made over time and not all at once
Attribute of real option Effect on value of real option
Exercise price (X) The lower the exercise price, the greater the value of a
real option
Cash flows generated (S) The higher the cash flows generated by exercising real
option, the greater the value of the real option
Time to maturity (T) The longer the time to maturity, the greater the value of
the real option
Risk-free interest rate (rf) The higher the risk-free rate, the greater the value of the
real option
Uncertainty about future The greater the uncertainty about free cash flows, the
cash flows (sigma2) greater the value of the real option
Steps in valuing a real option
1. Recognize the real option
2. Describe the real option using financial parameters
, 3. Establish a benchmark
4. Calculate option value metrics
5. Estimate value of option from Black-Scholes option pricing table
6. Compare full present value with option value
NPVq = S/PV(X)
Cumulative volatility = sigma wortel T
Chapter 7
Collusion = when firms in an industry or market cooperate to reduce competition
Not competing in the same geographic market
Not doing research in the same area
Reducing production below competitive level
Collusion in 2 forms
Explicit collusion: firms in an industry directly negiotate agreements on how to
reduce competition
Tacit collusion: firms cooperate in reducing competition, but no face-to-face
negotiations
Reducing threats (SCP framework)
New competitors: increasing entry barriers (technological standards, needed
economies of scale, product differentiation, increased cost of entry)
Existing competitors (lower cost and higher prices without undercutting)
Substitute products
Supplier leverage
Buyer influence
Ways of cheating in collusive agreements
Bertrand: lowering prices below cooperative price
Cournot: adjusting quantity of output and let market forces determine prices
(adjusting profit-maximizing quantity until both equal)
Edgeworth: following Bertrand, introduced capacity constraints (price can change
faster than output)
Stackelberg: following Cournot, introduced accurate anticipitation of how other firms
will respond to its output decisions
Tough signal = a signal that they will respond aggressively to cheating
Soft signal = a signal they will not respond aggressively to cheating
Conscious parallelism = consciously making price and output decisions to reduce competition
Strategic logic Strategic implementation Strategic label
Focus on price
Investing in tough leads Not invest in tough to avoid Puppy-dog ploy
