Flexible Capacity Investments and Product Mix: Optimal Decisions and Value of Postponement Options

In this article, we study a firm's interdependent decisions in investing in flexible capacity, capacity allocation to individual products, and eventual production quantities and pricing in meeting uncertain demand. We propose a three‐stage sequential decision model to analyze the firm's decisions, with the firm being a value maximizer owned by risk‐averse investors. At the beginning of the time horizon, the firm sets the flexible capacity level using an aggregate demand forecast on the envelope of products its flexible resources can accommodate. The aggregate demand forecast evolves as a Geometric Brownian Motion process. The potential market share of each product is determined by the Multinomial Logit model. At a later time and before the end of the time horizon, the firm makes a capacity commitment decision on the allocation of the flexible capacity to each product. Finally, at the end of the time horizon, the firm observes the demand and makes the production quantity and pricing decisions for end products. We obtain the optimal solutions at each decision stage and investigate their optimal properties. Our numerical study investigates the value of the postponed capacity commitment option in supplying uncertain operation environments.     

To Preannounce or Not: New Product Development in a Competitive Duopoly Market

In this study, we consider the issue of preannouncing or not preannouncing the development of a new product. Our research is motivated by contrasting views in the literature and varying actions observed in practice. We develop and analyze a game theoretic model that examines the effect of a firm's preannouncement of its product development. Our model is based on a durable goods duopoly market with profit‐maximizing firms. The first firm is an innovator who initially begins developing the product; the second firm is an imitator that begins developing a competing product as soon as it becomes aware of the innovator's product. We assume that consumers are rationally expectant and purchase at most one unit of the product when they have maximum positive utility surplus that is determined by the characteristics of the product, the consumer's marginal utility, and the consumer's discounted utility for future expected products. The innovator firm can release information about its product when it begins developing the product or can guard information about its product until it introduces the product into the market. Our analysis and numerical tests show that, under some conditions, the innovator firm can benefit by preannouncing its product and giving the imitator firm additional time to differentiate its product. We discuss these conditions and their implications for new product development efforts.     

Erfolgsfaktoren bei der Integration von Coaching und Entwicklungsprogrammen

Success factors for the integration of coaching and development programs This article describes possible ways to combine coaching and development programs for managers, that are based on the author’s practical experience. Such a combination can lead to a more intense and more sustainable competence growth than each individual approach. Both coaching and development program benefit from a combination. Adequately, a high level of integration is desirable. Such an integration will be successful if the structure of the program allows for embedding, special characteristics of the target group are considered, non-threatening labels are used, and the coaches/trainers are able to build a coherent bridge between the single elements.     

Opt‐Out Options in New Product Co‐development Partnerships

We study three contractual arrangements—co‐development, licensing, and co‐development with opt‐out options—for the joint development of new products between a small and financially constrained innovator firm and a large technology company, as in the case of a biotech innovator and a major pharma company. We formulate our arguments in the context of a two‐stage model, characterized by technical risk and stochastically changing cost and revenue projections. The model captures the main disadvantages of traditional co‐development and licensing arrangements: in co‐development the small firm runs a risk of running out of capital as future costs rise, while licensing for milestone and royalty (M&R) payments, which eliminates the latter risk, introduces inefficiency, as profitable projects might be abandoned. Counter to intuition we show that the biotech's payoff in a licensing contract is not monotonically increasing in the M&R terms. We also show that an option clause in a co‐development contract that gives the small firm the right but not the obligation to opt out of co‐development and into a pre‐agreed licensing arrangement avoids the problems associated with fully committed co‐development or licensing: the probability that the small firm will run out of capital is greatly reduced or completely eliminated and profitable projects are never abandoned.     

A Learning Real Options Framework with Application to Process Design and Capacity Planning

This paper studies the impact of learning on a multi‐staged investment scenario. In contrast to other models in the real options literature in which learning is viewed as a passive consequence of the delay period, this paper quantifies information acquisition by merging statistical decision theory with the real options framework. In this context, real option attributes are discussed from a Bayesian perspective, thresholds are identified for improved decision‐making, and information's impact on downstream decision‐making is discussed. Using real data provided by a firm in the aerospace maintenance, repair, and overhaul industry, the methodology is used to guide a multi‐phased irreversible investment decision involving process design and capacity planning.     

Product Positioning in a Two‐Dimensional Market Space

This paper examines the optimal product portfolio positioning for a monopolist firm in a market where consumers exhibit vertical differentiation for product performance and horizontal differentiation for product feature. Our key results are as follows: (i) Variable costs drive vertical differentiation. In the presence of significant volume‐dependent manufacturing costs, the optimal portfolio contains a mix of vertically and horizontally differentiated products and an increase in the variable cost makes adding vertically differentiated products relatively more profitable; if fixed volume‐independent design costs dominate, the portfolio exhibits solely horizontal differentiation. (ii) Horizontal differentiation is the main profit lever, and vertical differentiation brings only a marginal benefit; this is true even when most of the consumers exhibit low willingness to pay for performance, which is often used as an excuse to offer low‐end products. (iii) There are more low‐quality products than high‐quality ones, and market coverage increases when the willingness to pay for performance increases. In summary, the model shows how portfolio composition decisions depend on the product cost structure and the consumer preferences.     

Reducing Risk Through Real Options in Systems Design: The Case of Architecting a Maritime Domain Protection System

Complex engineering systems are usually designed to last for many years. Such systems will face many uncertainties in the future. Hence the design and deployment of these systems should not be based on a single scenario, but should incorporate flexibility. Flexibility can be incorporated in system architectures in the form of options that can be exercised in the future when new information is available. Incorporating flexibility comes, however, at a cost. To evaluate if this cost is worth the investment a real options analysis can be carried out. This approach is demonstrated through analysis of a case study of a previously developed static system-of-systems for maritime domain protection in the Straits of Malacca. This article presents a framework for dynamic strategic planning of engineering systems using real options analysis and demonstrates that flexibility adds considerable value over a static design. In addition to this it is shown that Monte Carlo analysis and genetic algorithms can be successfully combined to find solutions in a case with a very large number of possible futures and system designs.     

In‐House Globalization: The Role of Globally Distributed Design and Product Architecture on Product Development Performance

Changes in the global economy and technological advances are stimulating increased geographic distribution of new product design and development efforts. For large organizations that design and develop complex products, this geographic distribution has added a new layer of complexity to product development operations. In this empirical study of a large auto manufacturer, we examine the operational performance implications of splitting the design of vehicle subsystems across multiple geographic locations. Our results indicate that global distribution diminishes the chance of completing tasks on time and degrades subsystem design quality. Finally, by examining the interplay between subsystem centrality and global distribution, we found that higher centrality in the product architecture amplifies the impact of global distribution on subsystem error rates.     

Product Design Awards and The Market Value of The Firm

Product design has increasingly been recognized as an important source of competitive advantage. This study empirically estimates the impact of effective design on the market value of the firm. We use a firm's receipt of a product design award as a proxy for its design effectiveness. Based on data from 264 announcements of design awards given to commercialized products between 1998 and 2011, we find that award announcements are associated with statistically significant positive stock market reactions. Depending on the benchmark model used to estimate the stock market reaction, the market reaction over a two‐day period (the day of announcement and the preceding day) ranges from 0.95% to 1.02%. The market reaction is more positive for smaller firms and for firms whose award winning products are consumer goods. However, a firm's growth potential, industry competitiveness, and whether a firm is a first time or repeated award winner do not significantly affect the market reaction.     

收益的定价管理在网络空间租赁中的应用

将收益管理技术引入网络空间租赁领域,通过对网络空间特点的分析,得出影响供应商定价的5种因素:软硬件配置及基础设施建设、服务、租赁空间的大小、租赁时间和技术进步,并通过相关数据说明这些因素对供应商定价产生的影响。将收益管理与网络租赁产品价格设计联系起来,简要阐述了网络产品价格设计的全过程,并针对当前价格设计中存在的问题,提出了几种有效的解决方法。     

Axiomatic Based Decomposition for Conceptual Product Design

This paper describes a structured methodology for decomposing the conceptual design problem in order to facilitate the design process and result in improved conceptual designs that better satisfy the original customer requirements. The axiomatic decomposition for conceptual design method combines Alexander's network partitioning formulation of the design problem with Suh's Independence Axiom. The axiomatic decomposition method uses a cross‐domain approach in a House of Quality context to estimate the interactions among the functional requirements that are derived from a qualitative assessment of customer requirements. These interactions are used in several objective functions that serve as criteria for decomposing the design network. A new network partitioning algorithm is effective in creating partitions that maximize the within‐partition interactions and minimize the between‐partition interactions with appropriate weightings. The viability, usability, and value of the axiomatic decomposition method were examined through analytic comparisons and qualitative assessments of its application. The new method was examined using students in engineering design capstone courses and it was found to be useable and did produce better product designs that met the customer requirements. The student‐based assessment revealed that the process would be more effective with individuals having design experience. In a subsequent assessment with practicing industrial designers, it was found that the new method did facilitate the development of better designs. An important observation was the need for limits on partition size (maximum of four functional requirements.) Another issue identified for future research was the need for a means to identify the appropriate starting partition for initiating the design.     

Product Reuse in Innovative Industries

Most models of product reuse do not consider the fact that firms might be required to innovate their products over time in order to continue to appeal to the tastes of customers. We consider how the rate of this required innovation, which might be fast or slow depending on the product, affects reuse decisions. We consider two types of reuse—remanufacturing to original specifications, and upgrading used items by replacing components that have experienced innovation since the item was originally produced. We find that optimal reuse decreases with the rate of innovation, implying that models that ignore innovation overestimate the optimal amount of reuse that a company should pursue. Furthermore, we show that reuse can be encouraged in two ways—the intuitive approach of increasing end‐of‐life costs, and the less intuitive approach of raising the cost to make items reusable. We also examine the environmental impact of reuse, measured in terms of virgin material usage, finding that reuse can actually increase total virgin material usage in some cases. In an extension, we show how the results and insights change when the rate of innovation is uncertain.     

Mass Customization and Guardrails: “You Can Not Be All Things to All People”

A mass customization strategy enables a firm to match its product designs to unique consumer tastes. In a classic horizontal product‐differentiation framework, a consumer's utility is a decreasing function of the distance between their ideal taste and the taste defined by the most closely aligned product the firm offers. A consumer thus considers the taste mismatch associated with their purchased product, but otherwise the positioning of the firm's product portfolio (or, “brand image”) is immaterial. In contrast, self‐congruency theory suggests that consumers assess how well both the purchased product and its overall brand image match with their ideal taste. Therefore, we incorporate within the consumer utility function both product‐specific and brand‐level components. Mass customization has the potential to improve taste alignment with regard to a specific purchased product, but at the risk of increasing brand dilution. Absent brand dilution concerns, a firm will optimally serve all consumers’ ideal tastes at a single price. In contrast, by endogenizing dilution costs within the consumer utility model, we prove that a mass‐customizing firm optimally uses differential pricing. Moreover, we show that the firm offers reduced prices to consumers with extreme tastes (to stimulate consumer “travel”), with a higher and fixed price being offered to those consumers having more central (mainstream) tastes. Given that a continuous spectrum of prices will likely not be practical in application, we also consider the more pragmatic approach of augmenting the uniformly priced mass customization range with preset (non‐customized) outlying designs, which serve customers at the taste extremes. We prove this practical approach performs close to optimal.     

Struktur und Entwicklung der Controllingforschung — Eine Zitations-und Kozitationsanalyse von Controllingbeiträgen in deutschsprachigen wissenschaftlichen Zeitschriften von 1970 bis 2003

Zusammenfassung  Controlling ist eine vergleichsweise junge Teildisziplin der Betriebswirtschaftslehre, die sich mittlerweile in Praxis und Wissenschaft etabliert hat. Das Wissen über seine Entwicklung ist in weiten Teilen noch unscharf und weitgehend durch „anecdotal evidence” bestimmt. Die Autoren verfolgen daher in ihrem Aufsatz das Ziel, einen Beitrag zum besseren Verst?ndnis der Strukturen und Entwicklung der deutschsprachigen Controllingforschung zu leisten. Hierfür analysieren sie die Zitations-und Kozitationsstrukturen in 643 Beitr?gen zu Controllingthemen, die im Zeitraum von 1970 bis 2003 in sechs führenden wissenschaftlichen Zeitschriften im deutschen Sprachraum ver?ffentlicht wurden. Diese Beitr?ge enthalten insgesamt 18.125 Quellen. Im Ergebnis der Analysen zeigt sich, dass das Zitierverhalten in der Controllingforschung im Vergleich zu anderen betriebswirtschaftlichen Teildisziplinen durch eine Reihe von Besonderheiten gepr?gt ist und dass sich die Strukturen der deutschsprachigen Controllingforschung über die Zeit stark ver?ndert haben.

---

Structure and development of research on controlling — a citation analysis papers on controlling in German speaking journals from 1970 through 2003

Summary  Controlling is a relatively young discipline in the field of business administration, which has now established itself in practice as well as in theory. Our knowledge about its development is for the most part still diffuse and dominated by anecdotal evidence. In their paper, the authors pursue the goal of contributing to a better understanding of the structures and the development of the German-speaking research in controlling. For this purpose, they analyze the citations-and co-citations structures of 643 articles, focusing on controlling aspects published in six leading Germanic academic journals between 1970 and 2003. These papers comprise a total of 18,125 sources. The results of the analyses show that the attitude to cite in controlling research, compared to other disciplines in business administration, is characterized by a number of features. Furthermore, the structures of German controlling research have changed significantly over time.

     

Customization: Impact on Product and Process Performance

Manufacturing capability has often been viewed to be a major obstacle in achieving higher levels of customization. Companies follow various strategies ranging from equipment selection to order process management to cope with the challenges of increased customization. We examined how the customization process affects product performance and conformance in the context of a design‐to‐order (DTO) manufacturer of industrial components. Our competing risk hazard function model incorporates two thresholds, which we define as mismatch and manufacturing thresholds. Product performance was adversely affected when the degree of customization exceeded the mismatch threshold. Likewise, product conformance eroded when the degree of customization exceeded the manufacturing threshold. Relative sizes of the two thresholds have management implications for the subsequent investments to improve customization capabilities. Our research developed a rigorous framework to address two key questions relevant to the implementation of product customization: (1) what degrees of customization to offer, and (2) how to customize the product design process.     

Failure Modes and Effects Analysis: An Evaluation of Group versus Individual Performance

Failure modes and effects analysis (FMEA) is one of the most frequently used tools in process and product design: it is used in quality and reliability planning, and event and failure mode analysis. It has a long history of use and is a formally prescribed procedure by a number of prominent standards organizations. In addition, it's popular use has evolved as a less formal and widely interpreted tool in the area of Lean/Six Sigma (LSS) process improvement. This paper investigates one of the most important issues related to FMEA practice—the quality of individual vs. group performance in ranking failure modes. In particular, we compare FMEA rankings generated by: (i) individuals, (ii) group consensus, and (iii) non‐collaborative aggregation of group input (a synthesized group ranking). We find that groups outperform individuals and that synthetic groups perform as well as group consensus. We explain the implications of this result on the coordination of the design of products and processes amongst distributed organizations. The increasing distribution of product design efforts, both in terms of geography and different organizations, presents an opportunity to improve coordination using distributed synthetic group‐based FMEA.     

Modelling collaborative product development using axiomatic design principles: application to software industry

Even though collaborative product development (CPD) is considered as a strategic business plan to maintain competitive advantage, the literature lacks a systematic and detailed model of CPD from a strategic point of view. This article aims to develop a CPD model based on an axiomatic design technique by offering a system perspective in the context of software development (SD). Software industry is characterised by a dynamic and innovative nature and it gives a suitable application area in order to detail the proposed model in industry. Three main dimensions of CPD derived from the literature are defined in strategic level: partnership process, collaboration process and PD/SD. These three dimensions are detailed into hierarchy through business feedback and by experts from software industry. The model is evaluated and verified through two interviews. A case study is then conducted to observe the performance of the model. The conceptual model offers a guideline for CPD practitioners to increase effectiveness in collaborative efforts in the development process. The proposed model incorporates the main success factors of CPD in general, collaborative SD in specific, and it can be used as a performance evaluator in collaborative projects.     

Product Design for Life‐Cycle Mismatch

Life‐cycle mismatch occurs when the life cycle of a product does not coincide with the life cycles of the parts used in that product. This is particularly a problem with products that contain electronic components that sometimes have life spans of only two years. The cost of mitigating component obsolescence, which may require redesigning the product, is often considerable. Thus, prudent product design necessitates the selection of electronic components and product architecture, considering the cost of mitigating an obsolete design and other costs related to the design and manufacture of a product. Accordingly, we develop and analyze a model that shows how a product design can be effectively tailored to a particular product's life cycle.