Universal Product Family Design Valuation in an Uncertain Market Environment

Strategic adaptability is essential in capitalizing on future investment opportunities and responding properly to market trends in an uncertain environment. Customized products or services are an important source of revenue for many companies, particularly those working with in a mass customization environment where customer satisfaction is of paramount important. In this paper, we extend methods from mass customization and product family design to create specific methods for universal product family design. The objective of this research is to propose a valuation financial model to facilitate universal design strategies that will maximize the expected profit under uncertain constrains. Real options analysis is applied to estimate the valuation of options related to introducing new modules as a platform in a universal product family. We use customers’ preferences based on performance utilities for universal design to reflect demand and demographic trends. To demonstrate implementation of the proposed model, we use a case study involving a family of light-duty trucks. We perform sensitivity analysis to investigate the behavior of the estimated option value against chaining system parameters.