Fact Pattern:

• You are the Chief Program and Project Officer of a diversified technology conglomerate with a portfolio of projects based on recent developments in artificial intelligence, machine learning, and robotics.
• The company has recently expanded into the oil exploration and pharmaceutical industries.
  • The company plans to use its AI, machine learning, and robotics technology to get a competitive edge in oil exploration and pharmaceuticals.
  • This will require investments in R & D, drug development, and oil exploration and extraction projects.

With this in mind, the Board of Directors has asked you to review Modules 1 through 5:

• Module 1: Introduction and Overview
• Module 2: Project Conception and Initiation
• Module 3: Enterprise Analysis & Project Requirements
• Module 4: Project Complexity, Types, and Methodologies
• Module 5: Project Timeline

The Board has also asked you to readReal Options: A New Paradigm

Actions

and to choose at least two of the short case studies discussed in it:

• Expansion and Compound Options: The Case of the Operating System
• Expansion Options: The Case of the E-Business Initiative
• Expansion and Sequential Options: The Case of the Pharmaceutical R&D
• Expansion and Switching Options: The Case of the Oil and Gas Exploration and Production
• Abandonment Options: The Case of the Manufacturer
• Expansion and Barrier Options: The Case of the Lost Venture Capitalist and Compound Expansion Options: The Case of the Internet Start-Up (these two count as one case study)

Questions:

• The Board would like a 4 page memorandum in which you use what you learned fromReal Options: A New Paradigm, the two case studies you chose, and what you have learned in Modules 1 through 5 of the course to answer the following questions:
  • When should a company start a project?
  • When should a company consider changing the timeline of a project?
  • Should a project already underway be abandoned? And if so, should the company switch to another project with the same or analogous project goals?
  • Should a company with a project underway expand the project? How does project complexity affect these decisions?
  • How do market uncertainty and other types of uncertainty affect these decisions?

Please be sure to discuss how real options analysis is relevant to projects involving:

• Research and Development (R & D), as a general matter
• The development of new drugs
• Oil exploration and extraction