5.8 Research and Development Flashcards
5.8.1 The Importance of Research and Development (R&D) for a business (A03)
Define ‘Research and Development’
Break it down and define -
1. Research
2. Development
State two ‘Internal’ and ‘External’ Factors that drive ‘Research and Development’
State two ADVANTAGES and DISADVANTAGES of Research and Development
RESEARCH & DEVELOPMENT:
Definition:
The process of creating new products (goods and services) and processes (how things are done), in order to meet market needs. R&D is likely to include : investment, test marketing, prototypes, market research
Breaking it down:
1. Research - the creation of new ideas and new products
2. Development - adapting existing ideas and products in order to commercialize new products in a financially feasible way
Internal factors driving R&D:
1. Source of extra revenue
2. First mover advantage
External factors driving R&D:
1. Changing tastes and preferences
2. Changes in government legislation
ADVANTAGES:
1. First-mover advantage - which lead to a competitive advantage
2. Improved corporate image - firm perceived to be innovative
3. Prolong product life cycle of a particular good
DISADVANTAGES:
1. High Cost - market research, prototypes etc.
2. Failure rate of new products can be significant = waste = increased cost & not as ethical to environment.
3. Time consuming , no guarantee or financial return
5.8.2 Developing Products that address Customers’ Unmet Needs
How can R&D lead to commercialisation of products that address customers’ unmet needs?
What do firms do to reduce the risk of this?
Define the term ‘Prototype’
State two ADVANTAGES and DISADVANTAGES of ‘Prototypes’
In rare and extreme cases, R&D promotes innovation can lead to the creation of products to meet the needs that consumers didn’t even know they had.
As R&D is risky (in terms of high expenditure with unknown results or financial returns), firms will often create a prototype to test whether a product addresses the unmet needs of customers.
PROTOTYPE
Definition:
A test (or trial) version of a product to determine whether it addresses the unmet needs of customers, thereby gauging the chances of commercial success.
ADVANTAGES:
1. Risk Reduction - identifies issues early in the product development process
2. User feedback from consumers = makes it more likely to address needs of customer
3. Visual representation of product - generates understanding
DISADVANTAGES:
1. Cost - towards making it, stock, waste etc
2. Time consuming - making and refining
3. Overemphasis on aesthetics - neglect functionality
5.8.3 Intellectual Property Protection
Define the term ‘Intellectual Property’
Define the term ‘Intellectual Property Rights/Protection’
State, define and give a brief background on the three disparate types of IPR
INTELLECTUAL PROPERTY (IP)
Definition:
The intangible assets of a business through its creativity and capital expenditure
INTELLECTUAL PROPERTY PROTECTION/RIGHTS
Definition:
The legal protection of the intangible assets of an individual or organization.
They are used to protect the intangible fixed assets of a business as such assets have a monetary value to the organization
There are three main categories of IPR:
1. Copyrights
2. Patents
3. Trademarks.
COPYRIGHTS
Definition:
An IPR that gives the registered owner the legal rights to creative works e.g those of authors, musicians etc. Gives the the exclusive right to the commercial use of the product (prevents competitors from using these published works).
Any copyrighted works can be identified with the ‘©’ symbol. Copyrights typically have a limited duration, which varies depending on the country or region and as the nature of the work
PATENTS
Definition:
An IPR that refers to the official rights given to a business to exploit an invention or process for commercial purposes.(PROTECT INVENTIONS).
They give a registered patent holder the exclusive right to use the innovation for a limited time period. During which rivals can’t copy or use the invention.
Often involves bureaucratic processes (apart from cost).
TRADEMARKS
Definition:
An IPR that gives the owner exclusive commercial use of the registered brands, logos, and/or slogans (catchphrases). They can often be identified by abbreviation ‘TM’, or the ‘®’ symbol. The value of a firm’s trademarks can be reported on the balance sheet.
5.8.4 - Innovation: incremental and disruptive
Define the term ‘Innovation’
State the two types of ‘Innovation’
Define the term ‘Incremental Innovation’
State two ADVANTAGES and DISADVANTAGES of ‘Incremental Innovation’
Define the term ‘Disruptive Innovation’
State two ADVANTAGES and DISADVANTAGES of ‘Disruptive Innovation’
Outline the main differences between the two types of innovation
INNOVATION
Definition:
The commercial production of a new idea in order to fulfil existing customer needs or to create an unmet customer wants (desires).
There are two main types of ‘Innovation’:
1. Incremental Innovation (A02)
2. Disruptive Innovation (A02)
INCREMENTAL INNOVATION (otherwise referred to as adaptive innovation)
Definition:
Small but continual/regular adjustments, adjustments, or developments to a product or process that already exists e.g new product features.
No changes or upgrades occur, because these take place gradually and in succession.
Advantages:
1. Lower Failure Rate than one-off innovations
2. Retain Costumers - improved corporate image by being consistently innovative
3. Consistent Improvement on Competitive Position
4. Not Risky - focuses on developing EXISTING products/processes
Disadvantages:
1. Stagnation - inder firms from exploring new opportunities
2. Reduced Impact - only slightly better than the current market
3. Risk of Over-complecating products - adding too many features
DISRUPTIVE INNOVATION
Definition:
Any major innovation that introduces a new good or service introduced into an existing market that is designed to replace an existing one by radically altering the market. This can displace market leaders and transform the industry as a whole.
Advantages:
1. First mover advantage, competitive advantage
2. Change the market in favour of the business - make it market leader
3. Corporate Image because it portrays them as innovative
Disadvantages:
1.High Risk - due to radical changing of the market
2. No guarantee or financial success despite innovation
3. Controversial and have security or safety concerns
MAIN DIFFERENCES:
1. Incremental - same product, small, regular changes that don’t largely impact the market
2. Disruptive - new product into existing market, so radical that it alters the market completely.
