Evaluation of nested and parallel real options : case study of Ford's investment in fuel cell technology

This thesis explores nested and parallel real options and applies the suggested methodology to the Case of Ford Motor Company's investment in Ballard/Daimler Chrysler's joint venture. After reviewing the different existing methods that could be applied to the evaluation of Ford's investment, an analysis of the previous major applications of the "Real Option Thinking" to real projects was included. A two dimensional approach in the evaluation of a project with uncertainty was introduced, followed by a suggested methodology. Two approaches were considered in the Ford Case: -- The first divides the investment into two parts one associated with Ford Holdings in Ballard Power Systems (Ford holds 15% of Ballard shares) and the other relative to the investment in the research and development of fuel cells for automotive applications. -- The second adopts a more global view and looks at the investment as buying a portfolio of options. Each option is relative to a specific application of the technology. The suggested methodology was applied to the Ford Case using the first approach only. In fact, with the right set of inputs, both methods should yield comparable results. In the last part of the Thesis, a policy analysis that explores other dimensions that could have influenced Ford's decision was included. This analysis went through isolating the problem, identifying all the available options, analyzing external and internal factors and designing a strategy that would have helped implement the best available option.

Department dc:contributor.department

Management of Technology Program.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

1999

Author dc:creator

• Oueslati, Skander K. (Skander Khalil), 1972-

Advisor dc:contributor.advisor

• Richard de Neufville.

• Management of Technology Program.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/9488

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/9488