Definition: Real Options is a concept by Timothy Luehrman to apply financial options theory into the realm of business strategy and corporate strategy, viewing a business strategy as a series of options rather than a series of static cash flows.
RO capture the value of managerial flexibility to adapt strategic decisions to strategic risks or unexpected market developments.
A company can create shareholder value by identifying, managing and exercising RO, associated with its investment portfolio. For example, the option value in being able to delay, abandon or expand the decision about some major strategic investment.
More on business strategy: 3C's Model of Ohmae, Ansoff Matrix, Business Continuity Planning, Business Model, Business Model Canvas, more on business strategy...
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