Product Development Project Portfolio Prioritization

Abstract

This paper investigates whether financial indicators from investment theory are useful methods to priori-tize a new product development project portfolio. The purpose of this thesis is to analyse the financial decision-making process of product development project portfolio. The aim is to show the benefits of certain financial measurements from investment theory for portfolio managers who make investment decisions under uncertainty.

Investment theory and risk management are presented in this thesis. The main emphasis is placed on studies that have discovered the usefulness of financial methods in capital budgeting process. One objec-tive of this thesis investigates whether is possible to utilize financial indicators and risk analysis matrices together with multi-criteria weighted scoring method. This study is conducted as qualitative and quantita-tive research, and more particularly, as a descriptive case study. The data is collected through structured interviews and available business case documentation.

They key finding of the thesis is that traditional investment theory and its indicators are superior in capi-tal budgeting decision making process. The difficulty of discount rate definition is presented in the re-search section of the thesis. The research of financial investment theory and investment methods is done as a scenario analysis and proposed multi-criteria weighted scoring method. The thesis is a case study conducted for case company’s needs.