Product Development Economics

Product development economics is the topic of the course this week. As a means of breaking the ice Prof. José E. Lugo quickly challenges the students by asking them to think about market availability and product cost. In doing so, the students were tasked to work quickly and answer the question and also explain the course of action they would have taken. The students’ proposals were about 3 to 4, in favor of launching the product to one platform instead of delaying the launch so that it would work for all available platforms. Arguments circled around topics such as copyrights, exposure, and clientele. In the end, they learned that the information provided in the challenge was not enough to accurately justify one decision or the other. In order to accurately determine which path to take we need to take into account the cost associated to each decision.

Pursuing the cost topic further, Dr. Lugo presented different scenarios that they could face such as parts selection (High-Quality custom made v.s. Easily Available Parts) and quantitative vs qualitative analysis. After this, Dr. Lugo presented the steps to follow in order to do an economic analysis process which are:

  1. Build a Base-Case Financial Model
    1. Compute the Net Present Value of the Cash Flows
  2. Support Go/No Go Decisions
  3. Perform a Sensitivity analysis – “What If?”
  4. Use sensitivity analysis to understand project trade-offs
  5. Consider the influence of the Qualitative Factor on Project Success

Each point was considered on a case by case basis using examples from real-life occurrences.

Now, it is Lic. Miriel Perez’s turn to present the Theory behind Contracts and Obligations to all the students in order for them to learn about the different documents they have access to in order to protect themselves. In defining an obligation, she mentioned that there are many different aspects ranging from social to contractual. In terms of what a contract is, she discussed that it arises at the instant one or more persons decide to partake in an obligation. Using written examples of what the students should emulate at the moment they decide to create an agreement, she exhibited the different concepts explained previously. In the Q&A section, as expected, many questions concerning the status of the students’ projects popped up and were answered on a case-by-case basis depending on the standpoint, status and progress of each and every project.

With all this new and exciting information, we can expect a further development of the projects in the presented direction in the near future.

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