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Research & Development Text Book
Research and development (R&D) is the generation and application of scientific
knowledge to create a product or develop a new production process, which can increase
the firm's productive efficiency. If successful it leads to new ideas for products and
new methods of production.
For research and development to be of any real value the various ideas and prototypes it
generates must then be turned into a commercial reality. The process of turning an idea
into a saleable product or service is known as innovation. Innovation is defined as the
successful exploitation of new ideas. In some cases the process of R&D and innovation
can take years; in other cases it may be a matter of weeks or months.
The aim of research and development is to
Develop products, which have a unique selling point, allowing a business to
differentiate itself from competition and possibly earn higher profit margins.
Develop better quality products, which meet customer needs more successfully
Develop more efficient ways of producing to reduce the cost per unit.
Successful innovation allows firms to keep ahead of their competitors and to keep
finding better ways of doing things. This is often the key to long-term success in a
market. However despite the importance or R&D many UK firms are criticised for failing
to invest sufficiently in this area. This may be because investors in the UK often want
short-term rewards and are not prepared to wait for the benefits, which R&D might
bring in the longer term. Also spending on research and development can be a risky
investment because so few ideas actually succeed in the marketplace; as a result
managers may be wary of investing heavily in this area.
Sources of Ideas
Firms may generate the ideas for research and development internally or externally.
Internal ideas may simply come from discussion, employee's suggestion schemes or
brainstorming activities. On the other hand a firms own research department may
generate ideas. Externally many new ideas are registered at the Patent Office; firms
may pay a fee to the owner of a patent for the right to use their technology.
Alternatively a firm might buy a franchise to produce under another firms name; in
return for this right a firm pays a fee and/or percentage of its turnover. A firm's
customer's can also be a valuable external source of new ideas. Many firms ask for
customer feedback to discover more about what customers really want.
Research and Development and Quality
The quality of a product depends on its ability to meet customer requirements time and
time again. Can a firm consistently deliver what customers want? This will depend on
How well those needs have been defined to begin with (market research)
How well the firm has designed the process for ease of manufacture.
How well designed the product or service is.
Research and development can therefore be extremely important in terms of ensuring a
firm provides quality goods or services. It can help develop a product, which meets
customer's needs more precisely than the competition and it can help firms to develop a
system, which is cost-effective and helps the organisation maintain quality easily.
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Research and Development and Culture
Unfortunately simply investing in R&D does not guarantee that it will be successful; the
process has to be managed carefully and firms must be prepared for some failures.
The success of R&D is often linked to the culture of the business. Firms that encourage
employees to use their initiative and that are prepared to accept failure along with
success, are more likely to generate new ideas.…read more
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Good research and development will take into account a range of factors such as
How the product or service is likely to be used
Cost constraints (and quality and profit targets)
Ease of manufacture
A well-designed product will not only meet customer requirements it will also be
efficient and relatively easy to produce. By taking into account the production process
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Why Might Firms Fail to Invest in Research and Development?
One reason why firms might fail to invest sufficiently in research and development may
be that they cannot raise the necessary funds. R&D involves investment now in the hope
of future returns. Firms, which lack enough internal funds, may struggle to borrow
money from banks. This may be because the banks are concerned that the research and
development will not be successful and are not willing to take the risk.…read more
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Research and Development Class Notes
Research and Development is the discovery and application of scientific knowledge that
helps create a new product or enhances existing products or the production process.
These things should increase the firm's productive efficiency.
Innovation is taking the development of promising ideas into workable things within the