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Case Study Product Development Risk

The company has an opportunity to invest 100 billion INR to develop a jet engine over 5 years, with each unit costing 500 million INR and potential sales of 2500 billion INR. However, the engine must pass certification from aviation regulatory agencies in 4 years and meet noise reduction standards to enter commercial service in 5 years. There is competition from major manufacturers also developing new engines. The company must also decide where to produce and develop manufacturing facilities if they proceed. Alternatively, they could invest elsewhere based on past returns.

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138 views2 pages

Case Study Product Development Risk

The company has an opportunity to invest 100 billion INR to develop a jet engine over 5 years, with each unit costing 500 million INR and potential sales of 2500 billion INR. However, the engine must pass certification from aviation regulatory agencies in 4 years and meet noise reduction standards to enter commercial service in 5 years. There is competition from major manufacturers also developing new engines. The company must also decide where to produce and develop manufacturing facilities if they proceed. Alternatively, they could invest elsewhere based on past returns.

Uploaded by

hena khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CASE STUDY-5

Product Development Risks

You have the opportunity to invest INR 100 billion for your company to develop a jet engine
for commercial aircrafts. Development will span 5 years. The final product costing Rs. 500
million / unit could reach a sales potential, eventually of Rs. 2500 billion. The new engine can
be placed in service 5 years from now, but only if it qualifies four years from now for
certification clearing commercial use and only if it meets America’s Federal Aviation
Administration’s (FAA) ever tightening standards for noise reduction. Certification also has to
be obtained from India’s Director General of Civil Aviation (DGCA). There is competition
from world-class manufacturers like Pratt and Whitney and Rolls Royce who are developing
competing engines. If you decide to proceed with the project, you must also determine where
the new engines will be produced and develop the manufacturing facilities.

If you decline to proceed, your company could invest its resources elsewhere and based on its
track record, get attractive returns.

Question 1: What would be your line of action?

Question2: In case of lengthy product design and development time, what kinds of risks are
there?

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