Example of strategic buckets strategy

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Reference no: EM133336845

Assignment:

An Example: We discussed one specific top-down portfolio management strategy, namely strategic buckets, where firms allocate resource pools to be used by specific type of projects. For instance, a (hypothetical) firm in the toy industry has allocated 40% of their R&D dollars towards radical long-term projects, and the rest of the 60% towards incremental short-term projects. Such decisions effectively eliminates some flexibility in R&D funding, since the allocation decision is now being made before obtaining information about the actual pool of available projects.

As a general principle, we have argued in class, retaining flexibility until the uncertainty is eliminated/reduced is beneficial.

Use the example of 'Strategic buckets' strategy to explain why closing off options and eliminating flexibility may be valuable.

Reference no: EM133336845

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