D.Ing. / It is said that the development of innovative new products is set to become the economic battleground of the twenty-first century. Specifically, the innovative identification, development and subsequent marketing of financial products designed in order to allow organisations to manage their financial risk profiles will assume increased importance as volatility within the global business environment and capital markets increases. The discipline responsible for the development of such financial products, financial engineering, will increase in importance as financial services organisations compete to be the first to satisfy the needs of the market. The ultimate aim of financial engineering, as with any product development process, must be to develop the required product in an optimal manner at a minimised economic life-cycle cost to the organisation. Simultaneously, if correctly applied, the process of financial engineering can be a significant source of competitive advantage to the financial services organisation in an industry characterised by intense competitive pressures and exponentially increasing complexity and volatility. The financial services organisation which is able to successfully combine these two elements will have the capability to position itself as a leader in the identification and development of innovative financial products, a capability critical for success within the financial services industry. The science of engineering has within it a special subset devoted to the optimisation of the process of product development. This discipline, known as system engineering, has been extremely effective in the enhancement of product development processes within a traditional manufacturing environment. Tangible benefits of the application of system engineering include a reduced product development cycle, increased product adherence to client specifications, and a reduction in the economic life-cycle cost of the product. Within this thesis the author suggests that the optimal development of financial products in an increasingly competitive environment requires a two-pronged approach. In the first instance the financial services organisation must choose to develop the product which best promotes the medium to long-term strategic aims of the organisation. This is the concept of strategic fit. In the second instance the financial services organisation must have the capability to develop this product more effectively, and more efficiently, than its competitors. As an implementation mechanism the author develops a Financial Product Development Model based on system engineering principles chosen for their applicability to the process of financial product development. Simultaneously, the author develops a Competitive Strategy Framework, a collection of five strategic elements designed to ensure that the financial product development decision displays a measure of correlation to the strategic aims of the organisation. This Competitive Strategy Framework is implemented within the Financial Product Development Model via the use of a Strategic Circuit Breaker, a concept developed by the author and based on the concept of trading circuit breakers as used on the world's major stock exchanges. The aim of the Financial Product Development Model proposed within this thesis is to enhance the process of financial engineering and in so doing provide the financial services organisation with a means of improving its strategic competitiveness within the financial markets. The proposed Financial Product Development Model is validated via the practical application of the model. The results of this validation indicate that significant benefits may be obtained by correctly implementing the model. In addition the author conducts a limited scope industry survey designed to determine the opinion of financial services professionals to the major concepts underlying the model. The favourable results of this survey indicate that (1) the proposed model is practical and applicable within the financial services industry, and (2) the financial services industry in general is unaware of the importance of the process of product development and the manner in which system engineering can be used to enhance this process. By implication the financial services organisation that is able to differentiate its financial product development process from its competitors stands to achieve a significant competitive advantage.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uj/uj:3209 |
| Date | 27 August 2012 |
| Creators | Piquito, Nicholas Paul |
| Source Sets | South African National ETD Portal |
| Detected Language | English |
| Type | Thesis |
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