Explanation of Investing for future

            For implementing the real options first of explain the basic reason behind developing the organization and how the organization taking part in the development of the economy. My organization the ABC organization that is dealing in the production filed and produces goods of its all customers of high quality. So the company is product oriented and its size is huge in the market which means that the company is capturing a high ratio of market with good share of profit.  The company has medium size and its overall management is having good experience. The primary focus of the product oriented organizations is their product and its development. And also give more attention on the system, knowledge and skills related to their product. Such companies need to understand the changing needs of their customers and further determine its competitors in the market. With the wants and need of the customer the product s going to start but the quality and efficiency of the product consider with the profitability of the product.  Its competitors always try to reduce their profitability and also follow the market trends. But the main thing is that company has to give more focus on the real option f the company for its long term benefits. Now company is investing in its research and development sector to obtain latest and advance knowledge related to product development and for this the investment must be done in such areas that give benefit in long terms and make the reputation of the organization more strong in the market. Basically organization have to updated its technologies and methods according to new requirement of the market and customer to maintain its position and also make good relationship with their customers because investment for the future is most suitable decision for the organization. (businesscasestudies.co.uk)

            Company is decided to invest in the research and development sector for making strong its future and also help in handling the needs and requirements of the customers. for determine whether the results going to be positive or not the company is going to use the decision tree to obtain the opportunities from the managerial decisions and also determine its effects on different levels. This tree structure explains the value adding real option and also its effects clearly elaborate by this tree. The decision tree is normally use the structure of if then else so they have multiple choices related to the their selected option and company give detail working on each option because multiple results provide better decision to organization in selecting and adopting better real option for the company. Company main purpose is to explain the real option that is belong to its research and development sector and it must be responsibility of the management to provide decisions related to development of the company. When the first and major decision is going to take then its roots means further decisions related to different angles must also be explain that show its all possible effects in positive and negative direction. At every new decision the complete effects and its effective areas must be study and observed in depth. Because when company is going to utilize real option then its long term decisions are going to depend on that decision and it long term profitability also going to be effected with such type of decisions. so it also explain that the real option are the future of the company in which company is going to invest for long term results and also  going to helping tool for the company and its development area according to new requirement. (Brid)

            For tangible assets, the real option related to the available alternate decisions. To examine a range of possible outcomes the company is going to use the concept of real options and then on this broad set of alternatives, the company is going to make a choice. The analysis on the real option main focus on the investment period and its effects on the business instead of earning profit and loss. With the study of risk and also implement different models related to risk must be subjected in the real option analysis in the start. In placing large investment bets on  a single probability must be a logical outcome foe real option analysis. But if the small investments are going to make then different outcome will going to be generated and the concept of portfolio investment going to be change in the company in required time because there are many risks that are going to be connected with the available information. This also possible that the competitors also using the dame real option and by using that option they generate small level outcomes with the same conclusion for the organization. The company can also invest in the different option with the small investment because there are many options and Results, Company is going to study when they invest small options instead of long option. So the strategy of the company also going to be alter when they use real option for the investment opportunities and also determine its effects on the company’s performance. With this the investment cost is also very important to determine the best real option for the company and also support the decision of the company that is better for the company in long terms and also explain the beneficial point of view of the real option related to investment point of view. (accountingtools.com)

            When the company is going to select a real option for its productivity then the company must follow a complete process to implement the option and also determine all parts briefly to elaborate that the long term effects of the Implementation of the option is beneficial for the organization and company have to develop proper planning and set strategy to implement because when the study of real option take time and also time utilize to determine its effects than a complete process must be follow for its implementation because there are many people who want to get complete understanding of real option and also give them proper satisfaction with their facts and information related to real options. Normally the stakeholders and senior management of the company has issue on implementation of real options but the management of the company gives them solid reasons and also provides them complete discussion related to real option and its effects and its benefits for the company. Proper planning must be required to implement any new strategy in the company and for real option proper and detail planning must be required because it effects the reputation of the company and also it involve long term investment because the real options are belong t tangible assets so the company bear loss or profit after implementing the real option and also show the long term effects in the financial position of the company. Investment is the main part of financing and the financing department of the organization follow the new and latest procedures and methods that utilize by the company to very come the problems and also give benefit to the company in future in generating revenue and profit for its shareholders and employees of the company. (Tufano)

            In the selection of emerging technology, the financial terms are play very important role as they provide direct understanding and numerically explain the effects of financial ratios on the real options. Price earnings ratio explain that what is the price of the investment and what earning company is going to obtain when they are implement these real options. Low payout ratio explains that the company is paying less amount of dividend to its shareholders and they receive less interest amount at the end of the years. Low debt to capital ratio explain that the debts are going to be high as compare to its savings of the company so the long term investment for future provide opportunities to company to earn additional revenue for the organization and also make its financial streaming strong and smooth because there are many issues arise when the financial condition of the organization going down and it didn’t earn sufficient amount of interest from its investment portfolio. In implementing the real option in the company these different financial ratios play a supporting role for the decision of real options. The synergy and diversifications also effect the company as the synergy means sharing common input to generate potential profit in the organization. Tow type of diversifications are going to use that are related and unrelated product diversification. In related product diversification the new product going to be connected with the existing market and use operational synergy , having excess productive capacity and having earning for reinvestment. In unrelated diversification the development moves beyond the value network and capabilities and having financial synergy enhance the marketing power and risk is going to spread on all the business. So it determines the input of the organization and their role and working to obtain required results for the long term future. (Zhou)

Reference Investing for future

accountingtools.com. Using real options for decision making. 06 april 2018. <https://www.accountingtools.com/articles/using-real-options-for-decision-making.html>.

Brid, Rajesh S. Introduction to Decision Trees. 25 oct 2018. <https://medium.com/greyatom/decision-trees-a-simple-way-to-visualize-a-decision-dc506a403aeb>.

businesscasestudies.co.uk. Operations theory. 2019. <https://businesscasestudies.co.uk/business-theory/operations/market-and-product-orientation.html>.

Tufano, Tom Copel and Peter. A Real-World Way to Manage Real Options. march 2004. <https://hbr.org/2004/03/a-real-world-way-to-manage-real-options>.

Zhou, Yue Maggie. Synergy, coordination costs, and diversification choices. 02 september 2010. <https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.889>.