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An Economic Model for Market Entry Strategies

Hans Sassenburg
Software Engineering Institute, Germany
Egon W. Berghout
University of Groningen, The Netherlands


Abstract
In unpredictable software manufacturer organizations, it is difficult to determine when a software product will be released, the features the product will have, the associated development costs or the resulting product quality. The NPVI-method is presented, enabling a software manufacturer to compare and evaluate different release or market entry strategies. However, information has its price in time and cost, forcing decision-makers to make a trade-off between search costs and opportunity costs. In addition, decision-makers simplify the real world, as they cannot escape the diverse psychological forces that influence individual behaviour. Combined with the potential presence of sources of conflict, this often leads to the situation where different stakeholders experience difference aspiration levels. As such, satisficing behaviour where decision-makers try to find consensus and choose a satisfactory release alternative is a good characterisation of the software release decision-making process as found in practice. Successful adoption of the NPVI-method requires that software manufacturers reach the zone of cost effectiveness for the perfection of information; a zone where numbers make business sense, and can be convincingly used to support informed decision-making.

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Reference:Sassenbrug, H., Berghout, E.W. (2006). "An Economic Model for Market Entry Strategies," University of Groningen, Netherlands . Sprouts: Working Papers on Information Systems, 6(63). http://sprouts.aisnet.org/6-63
Keywords:Optimal Release Time, Maximizing Behaviour, Optimizing Behaviour, Satisficing Behaviour, Decision Making
Item Type:Article - Volume 6 Article 63 (2006)
Language:English
Email: Hans Sassenburg (hanss@sei.cmu.edu)
Egon W. Berghout (e.w.berghout@rug.nl)

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