Product Outsourcing under Uncertainty: an Application of Fuzzy Real Option Approach

In recent years, in order to decrease production costs and improve competitiveness, outsourcing is adopted by many organizations. Furthermore, outsourcing is considered by more than 90 percent of investigated companies as an important part of their overall business strategy to acquire competitive advantage. Many conventional approaches take no proper account of uncertainty into the evaluation of product outsourcing, and therefore easily result in misevaluating. A new methodology, fuzzy real option approach, can be used to solve this problem. In this article, an empirical study is conducted to obtain the optimum of call price by the joint approach of fuzzy real option, weighted fuzzy real option and fuzzy decision space. The result indicates that the model developed in this study is more stable and flexible, and expected to enable the better decision making for investors.